The_Davis said:
why escalating plan? at 72 and 70 got maybe 10 yrs on average till death. don't think the escalating would result in a big diff in payout.
For a very, very basic reason. The
only value CPF LIFE has for such individuals is its primary value: longevity insurance. Nothing else matters for that amount of money for such individuals. So, when you absolutely don’t need the money, you maximize the insurance value. Which means backloading the CPF LIFE income stream as much as possible. That’s the Escalating Plan. It’s an easy decision.
If you don’t have $13+ million of assets, you might not understand.
I supposed you'd recommend topping up to ERS using their cash rather than transferring over the money from their OA?
Cash, yes — I would. For them CPF is that longevity insurance plus a 2.5+ percent bond. So sure, just max it out, for both.
This looks like a very nice bond etf, 0.10% cost and all very high grade! I supposed this would be bought to hold just for dividends? Any idea where I can find information on the dividend payouts?
Yes, it is quite lovely. I’d purchase it through Interactive Brokers to keep the costs low. At this level of investment IB won’t charge a penny in holding/servicing fees, and that’s lovely, too. (IB waives monthly minimum commissions once an account reaches US$100K.)
As other posters have mentioned, the specific ETF I suggested is accumulating, and I knew that — it’s a good feature in these circumstances. The approximately S$4 million of other bond holdings in that hypothetical mix I suggested would generate coupons, i.e. income. I’m assuming having 80% of that approximately S$5 million generating coupons, plus their cash flow from real estate holdings (rental income), would be more than enough for their day-to-day cash needs for living. So they wouldn’t touch the $1 million in that accumulating ETF. It’d just be a safe, medium-term to long-term place to park assets with reasonable yields, excellent safety, and some protection against Singapore dollar depreciation — and against Singapore-specific national calamity. It’d be “fire and forget,” just chugging along and growing over the medium to long term.
That hypothetical $1 million in a low cost global bond ETF would still be less than 10% of their total net worth — much less, actually. Maybe more would make sense. So one possibility is to start with that $1 million (20% of the current investible funds) and then gradually increase that amount if/as they have excess cash flow. Or start with $2 million. Or whatever.
Anyway, we could certainly quibble about the percentage allocation in non-Singapore bonds, but I think “some” is quite prudent for them. It’s just a little extra safety, to protect against the “What the $#T%() happened to Singapore?” possibility. (Not very likely, but possible.)
At this level of wealth there’d be no problem having some allocation in stocks. But you said they’re just not interested in that, so I’m honoring that preference. I, personally, would feel quite comfortable with, say, 20% in a low cost global stock index fund (at these ages with this level of wealth). Symbol IWDA is an excellent example. But that’s me. One way to think about this part is that their heirs would have a longer time horizon, so if they plan to bequeath assets — hopefully a long time into the future — then maybe some portion of that bequest should be invested in ways that are consistent with the longer-term time horizon of their heirs, while of course protecting their lifestyles in the custom and manner they wish for all the rest of their years. Basically, “Well, $10 million of wealth is plenty for us under any/all conceivable circumstances — and with the lovely lifestyles we enjoy — so the rest we’ll invest as if we were 40-something year old heirs. So, some IWDA or VWRL looks good.”
Congratulations to them — nicely done! I hope they’re enjoying life to the fullest, and with the kids and grandkids (and great grandkids?) for many, many years to come.
