Drawdown Strategy

[Mecisteus]

How much interest you're getting? maybe put it into CIMB StarSaver for the time being. Earning 0.8% interest of 1.5 Mill is $1000 / month. pretty good money. Until you know what to do with it.

With 1.5M, I think it is prudent to spread into a few more banks.

 

[BlueRobin]

Some of the less riskier instruments I could think of...
Singapore savings bonds
Singapore government securities
Abf sg bond fund
CPF voluntary contribution
99 years or lifetime annuity policies

Thanks for the suggestions!

I would reccomend putting into Singapore Bonds, either savings bonds or SGS bonds. You are so close to retirement, I do not think you should be putting into stocks and since you are retiring you will be looking at your stocks daily and worrying. You should be enjoying your retirement.

Granted Govt bonds, (no junk bonds) do not give great interest rates, but they are better than leaving it in the bank.

I have not investigated SGS Bonds.

After some googling I was able to see some of the past coupon rates and it can go as high as 4%! Thanks for the suggestion!

 

[BlueRobin]

How much interest you're getting? maybe put it into CIMB StarSaver for the time being. Earning 0.8% interest of 1.5 Mill is $1000 / month. pretty good money. Until you know what to do with it.

You are right. I shop around and spread it in few places. For short term while figuring out my next step, this is acceptable.

With 1.5M, I think it is prudent to spread into a few more banks.

I agree.

 

[xtwis7]

50% into SG bonds held over 10 years for that stability.

20-25% spread into various savings accounts that aim to give out 1.5-1.8% in the near short term.

5-10% into a lifetime annuity as this will take care of your medical insurance (assuming that you still have one in place).

5% cash. 1-2% gold and the balance in ETFs.

 

[Mecisteus]

Thanks for the suggestions!



I have not investigated SGS Bonds.

After some googling I was able to see some of the past coupon rates and it can go as high as 4%! Thanks for the suggestion!

Coupon rate is high but you need to see the yield to maturity if you intend to hold till maturity. The YTM is the one that you will be concerned with.

 

[raysdad]

I have also seek others' opinion elsewhere and the "bucket" approach was mentioned. Far more complicated and require more complex instruments as each bucket would mature in different time horizon and will take on different risk levels.

Ideally I would love to hear from people who have already "been there done that" but I don't have any friends in my circle that is in similar situation that is why I am expanding my homework to this forum.

I saw the "bucket" approach too. Think it is a good way of thinking/allocation but best I think if you have at least 15-20 years before retirement. Some instruments need time to yield / hit average historical returns. Based on the "bucket" method, I am now starting to buy annuities with 10 year accumulation so that it will "yield" in 10 year.

This forum seems to favour stock: bond portfolio ... an area I am now exploring to understand the risk & return..

 

[Hwsemb]

I have not investigated SGS Bonds.

After some googling I was able to see some of the past coupon rates and it can go as high as 4%! Thanks for the suggestion!

For SGS bond, should examine the current 'yield‘, rather than 'coupon rate'.

For eg: the current 10-Year SGS bond (NZ07100S) has coupon rate 3.5%. But as at 22/3/2018, it is trading at a price of 108.89 (i.e. $8.89 more expensive above the par value of $100). Hence, the actual yield-to-maturity is only 2.39%.

Note that you pay $108.89 to buy the SGS bond, but will only get back $100 par value upon maturity 10 years later. Hence, the loss of $8.89 'compressed' your yield to 2.39% from 3.5%.

 

[Retribution]

HI,

Here is just an opinion. Two ways to approach it.

First way:

It would be good before you invest on anything, to identify your needs and spending.

How much do you think you will need when you retire at 65?

Is your lifestyle and expenses going to remain the same? or different?

Would you traveling around the world for the first 5 years? and then slow down?

So basically, think through what you intend to do when you are retired.

Different scenarios will lead to different budget requirements. It might be high expenses for the first 10 years and then a drop down after that, .

If you could write down your retirement story and then forecast the budget you will need for them, it will you plan what is the best way to invest and withdraw them.

Another way : A very fast simple way. Identify the maximum you think you will ever use monthly and add it buffers for unexpected expenses. This could be for the first 10 yrs , this budget for the next etc... Then you would have an idea of how much you will need and then decide the best investment strategy.

Without this, it is often hard to figure out what is the most appropriate way to invest your money.

Most of what people are discussing here are the investment instruments and the pros and cons of each and how to use them to get the best results.

Before you use these instruments, you must understand your needs well or else you won't be able to use the most appropriate instruments that meets your needs.

Hope this helps.

Regards.

 

[doody_]

I would put the money into safe investments like fixed D, govt bonds. It will help to grow your balance as you slowly draw down over 20 years.

Since you didn't go into equities, best to stay out.

 

[raysdad]

HI,

Here is just an opinion. Two ways to approach it.

First way:

It would be good before you invest on anything, to identify your needs and spending.

How much do you think you will need when you retire at 65?

Is your lifestyle and expenses going to remain the same? or different?

Would you traveling around the world for the first 5 years? and then slow down?

So basically, think through what you intend to do when you are retired.

Different scenarios will lead to different budget requirements. It might be high expenses for the first 10 years and then a drop down after that, .

If you could write down your retirement story and then forecast the budget you will need for them, it will you plan what is the best way to invest and withdraw them.

Another way : A very fast simple way. Identify the maximum you think you will ever use monthly and add it buffers for unexpected expenses. This could be for the first 10 yrs , this budget for the next etc... Then you would have an idea of how much you will need and then decide the best investment strategy.

Without this, it is often hard to figure out what is the most appropriate way to invest your money.

Most of what people are discussing here are the investment instruments and the pros and cons of each and how to use them to get the best results.

Before you use these instruments, you must understand your needs well or else you won't be able to use the most appropriate instruments that meets your needs.

Hope this helps.

Regards.

Yes, share similar thoughts. Monthly needs, retirement capital, the legacy one intends to leave behind possibly are considerations. Not advisable to "maximise" return for / work every single penny by taking on higher risk. Higher risk would likely have an impact on the quality of retirement life should adverse scenario happens.

Most of my passive yield currently concentrate around 1-5%. Currently enough to generate sufficient cash for expenses without touching capital and income.

SGD FDs - 1-3%
MYR FDs - 3-4% (due to personal retirement option/scenario)
China wealth management products (highly diversified)- 4-5.5%
SGD Endowments - 2+%
SGD SSB Bonds - 2+%
SGD Annuities (yet to complete accumulation): 3-5%
MYR property rental: 3% (tax deducted)

Most in SGD; majority protected by SDIC.

 

[turtle2018]

Hi BlueRobin

You should explore & maximize CPF first.

(1) You may want to top up your/ wife's RA to the Enhanced Retirement Sum, so that the combined monthly payout becomes $4k.

(2) If you have previously used CPF-OA to pay for your dwelling house, you may want to repay the sum used (incl. accrued interest) to CPF-OA. This is possible without the need to sell the house. Since you are already >55, you can easily withdraw the sum (from SA first, then OA) if you really need the funds in future.

Regards

 

[turtle2018]

You can also simplify the "buckets" into 3:

Bucket No. 1: Usage expected within coming 6 months
- Bank Deposits

Bucket No. 2: Usage expected within 6 months to 5 years, or for unexpected emergency
- Singapore Savings Bonds
- ABF Bond ETF
- CPF OA & SA

Bucket No. 3: Usage not expected within next 5 years
- ETF of Stock Indices (e.g. STI)
- ETF of REITS

You should do some rebalancing between Bucket No. 2 & No. 3 either once a year, or whenever there are major market corrections.

Regards

 

[BlueRobin]

Think about it, depending on when one retires, the retirement period could be as long as 20 to 30 years!!

Even if one "build" a brand new bucket on year 1 of retirement, it is foreseeable that the bucket won't mature until 20 years later.

I saw the "bucket" approach too. Think it is a good way of thinking/allocation but best I think if you have at least 15-20 years before retirement. Some instruments need time to yield / hit average historical returns. Based on the "bucket" method, I am now starting to buy annuities with 10 year accumulation so that it will "yield" in 10 year.

This forum seems to favour stock: bond portfolio ... an area I am now exploring to understand the risk & return..

 

[BlueRobin]

Appreciate your reply.

I completely agree with you on what you have posted. As for myself, I have done the planning surrounding what I will do and what to spend on during my retirement, the challenge I have is the lump sum of cash I have received that I would like it to be evenly spread over my retirement period.

There will be travelling, replacement car, etc that has been allocated outside of the money I mentioned in this thread, so I'd say the replies I am getting here focusing on the investment instrument and allocation is quite relevant to what I am asking.

HI,

Here is just an opinion. Two ways to approach it.

First way:

It would be good before you invest on anything, to identify your needs and spending.

How much do you think you will need when you retire at 65?

Is your lifestyle and expenses going to remain the same? or different?

Would you traveling around the world for the first 5 years? and then slow down?

So basically, think through what you intend to do when you are retired.

Different scenarios will lead to different budget requirements. It might be high expenses for the first 10 years and then a drop down after that, .

If you could write down your retirement story and then forecast the budget you will need for them, it will you plan what is the best way to invest and withdraw them.

Another way : A very fast simple way. Identify the maximum you think you will ever use monthly and add it buffers for unexpected expenses. This could be for the first 10 yrs , this budget for the next etc... Then you would have an idea of how much you will need and then decide the best investment strategy.

Without this, it is often hard to figure out what is the most appropriate way to invest your money.

Most of what people are discussing here are the investment instruments and the pros and cons of each and how to use them to get the best results.

Before you use these instruments, you must understand your needs well or else you won't be able to use the most appropriate instruments that meets your needs.

Hope this helps.

Regards.

 

[BlueRobin]

I would put the money into safe investments like fixed D, govt bonds. It will help to grow your balance as you slowly draw down over 20 years.

Since you didn't go into equities, best to stay out.

My inclination is also putting it into something lower risk and beat inflation. I am taking notes and compiling all the suggestions here so that I could consolidate and hopefully put a plan together.

Thanks for your suggestion.

 

[BlueRobin]

One area that has not be suggested here, in which you may have touched on is private annuity plan. I have not investigated this area and not sure how much it has matured over the years.

When CPF life was first introduced, I recall most private annuity plans were hardly worth taking a look, I hope the market has progressed and hopefully I can speak to a few insurance persons to get an update.

Yes, share similar thoughts. Monthly needs, retirement capital, the legacy one intends to leave behind possibly are considerations. Not advisable to "maximise" return for / work every single penny by taking on higher risk. Higher risk would likely have an impact on the quality of retirement life should adverse scenario happens.

Most of my passive yield currently concentrate around 1-5%. Currently enough to generate sufficient cash for expenses without touching capital and income.

SGD FDs - 1-3%
MYR FDs - 3-4% (due to personal retirement option/scenario)
China wealth management products (highly diversified)- 4-5.5%
SGD Endowments - 2+%
SGD SSB Bonds - 2+%
SGD Annuities (yet to complete accumulation): 3-5%
MYR property rental: 3% (tax deducted)

Most in SGD; majority protected by SDIC.

 

[BlueRobin]

You can also simplify the "buckets" into 3:

Bucket No. 1: Usage expected within coming 6 months
- Bank Deposits

Bucket No. 2: Usage expected within 6 months to 5 years, or for unexpected emergency
- Singapore Savings Bonds
- ABF Bond ETF
- CPF OA & SA

Bucket No. 3: Usage not expected within next 5 years
- ETF of Stock Indices (e.g. STI)
- ETF of REITS

You should do some rebalancing between Bucket No. 2 & No. 3 either once a year, or whenever there are major market corrections.

Regards

Thanks! Appreciate you taking the time to reply.

 

[BlueRobin]

For SGS bond, should examine the current 'yield‘, rather than 'coupon rate'.

For eg: the current 10-Year SGS bond (NZ07100S) has coupon rate 3.5%. But as at 22/3/2018, it is trading at a price of 108.89 (i.e. $8.89 more expensive above the par value of $100). Hence, the actual yield-to-maturity is only 2.39%.

Note that you pay $108.89 to buy the SGS bond, but will only get back $100 par value upon maturity 10 years later. Hence, the loss of $8.89 'compressed' your yield to 2.39% from 3.5%.

Thanks for the info.

I was looking at a website that publishes the issuance calendar of SGS Bonds. Those would consist of new and reopen types. In those cases, would the coupon rate be the one I should be looking at?

Also where could I find the coupon rate for new issue? For example for issue code / SIN code of NX18100A/ SG31B7000002. Thanks!

 

[shareholder]

Thanks for the info.

I was looking at a website that publishes the issuance calendar of SGS Bonds. Those would consist of new and reopen types. In those cases, would the coupon rate be the one I should be looking at?

Also where could I find the coupon rate for new issue? For example for issue code / SIN code of NX18100A/ SG31B7000002. Thanks!

There is no coupon rate for T-bill, the price is discounted when you buy it.

 

[Hwsemb]

Thanks for the info.

I was looking at a website that publishes the issuance calendar of SGS Bonds. Those would consist of new and reopen types. In those cases, would the coupon rate be the one I should be looking at?

Also where could I find the coupon rate for new issue? For example for issue code / SIN code of NX18100A/ SG31B7000002. Thanks!

For NEW bonds insuance, you will not know the coupon rate upfront. This coupon rate will be determined by our government/MAS during the 'auction date' of the new bond. However, although you do not know the rate, you have the option to select what is the min. coupon rate that you are willing to accept. Meaning, you key in, for example 3.1% minimum, during application at ATM/bank website. So if the actual auction result is a coupon of 2.75%, then you will not get any allocation of the bond. Even if the actual coupon rate is 3.25%, you still may not get it due to oversubscription.

As for re-opened Bond, the coupon rate is already known. However, the bid price for the re-opened bond can be above the par value of 100, for eg. 104. Hence, you will be paying extra premium of 4. This premium will hence, compress your actual yield to be below the coupon rate.