*Official* BBCWatcher club

[BBCWatcher]

I will love to shop around but it is quite confusing and I do not have close friends from aia and aviva.

You don’t need close friends at AIA or Aviva. You simply make two phone calls, and you ask for quotations on AIA’s Premier Disability Cover and Aviva’s Ideal Income. You’ve probably done far more research on buying the smartphone that you’re holding.

The age to 99 is just there for comparison purposes. Do ignore it. I'm looking at age to 80 specifically. My life insurance are a sort of protection for my parents' retirement.

OK, so here’s the first question: are either or both of your parents going to be financially dependent on you at any point in their lives? I’m sure they will be sad if you were to depart this planet before they do, but would their lifestyles be materially negatively impacted because your financial support would not be available?

If the answer to that question is no, then they are not your dependents, and you do not need life insurance.

If the answer to that question is yes, then here’s the next question: is there anything you can and should be doing now to prepare better for the future when you will be supporting them financially? Yes, probably, but please let me know if that’s the situation.

Next question: Let’s assume your youngest parent is 25 years older than you are. (You can adjust that figure accordingly.) If you buy a life insurance policy that runs until your age 80, then that youngest parent will be age 105. Which might happen (very slight chance), but I see two problems here. First, if you were to die at age 78 (for example), you wouldn’t leave behind some modest wealth to help that parent for his/her (probably her) very few remaining years? Yes, you would, surely. The point I’m making is that this math does not compute. If your purpose is to support a parent as a dependent, then life insurance to age 80 is too long. You really don’t want to overbuy insurance if you can avoid it. You want to deploy precious premium dollars as powerfully and efficiently as possible, and put other dollars to good work saving, investing, and building wealth, including residual wealth you leave to dependent survivors.

....So, what are you thinking with age 80 here? I’m not following that part.

I think I currently have close to 1m coverage for death.

Why? If you’re fully financially supporting both your parents now from your income, and expect that to continue for the rest of their lives, then that sort of figure could make a great deal of sense. Is that your and their real situation?

 

[BBCWatcher]

My spouse and I in our early 40s have medical (including. rider) and life insurance.... Is DII or CareShield Life or both appropriate for us?

DII likely is quite appropriate, yes.

It’s fairly likely there’s overlap between your life insurance (and its “Total and Permanent Disability” coverage) and CareShield Life. Since your wife has ElderShield she’ll want to consider carefully whether it makes sense to switch over to CareShield Life when the time comes.

So, the thinking is to insure our ability to make hay while the sun shines, and DII is most targeted for this need.

Correct. Your joint 20+ years of future earning potential is probably your single most valuable asset, and its partial or full loss would be a true calamity. And that’s a job for insurance, the only job, really: to help cope with calamities you cannot really cope with on your own.

....Is this correct, and have I missed anything?

It’s a fair summary, I think.

Do DII plans keep paying for as long as we are unable to work, up to 65?

Yes.

That sounds like it could be a lot of money in your bus example!

Oh, yes.

Do they, for example, require you to take up whatever work you can do, and then pay the difference?

It depends on the policy, and you have to read the policy definitions carefully. Aviva seems to have a somewhat less generation definition, and their premium may reflect that.

I wonder how many years someone can get vertigo for... Because if it can be gamed, it is unsustainable and we will eventually be bitten by premium increases.

Not really. These insurers all require expert medical assessments, and they also won’t insure more than 75% income replacement in order to cut down on moral hazard problems. DII has been available in Singapore for quite a long time now, and there doesn’t seem to be any particular market problem.

Ok, Someone told me that estate taxes of US assets for N.R.A. might be mitigated by opening joint accounts, bit also to check with a tax advisor. Do you know anything about this?

It probably doesn’t help. The most it could possible do is effectively double the exemption ($120,000 instead of $60,000), but even that might not be the reality if you’re gifting your spouse/partner his/her “half” of the assets.

You don’t really have to jump through hoops. The popular Irish domiciled/London traded ETFs work just fine. Keep your cash at your U.S. broker at or below $60,000 as well, and that’s that.

 

[Shiny Things]

Have you guys seen this interview?

It's long but entertaining. The guy makes some pretty big claims: America heading for an even bigger crash than 2008, countries will be returning to gold standard, encourages people to invest in Singapore lol.

Lol, it's Peter Schiff. Schiff's been saying "there'll be an even bigger crash than 2008" since about 2009. He's never going to be able to admit he's wrong.

 

[w4rdsg]

I eschewed CORP for LQDA for the same reason... So the question I have is, why did you pick LQDE instead of LQDA? I believe it's the same fund, just accumulating and with a smaller unit value.

I prefer distributing ETFs (I hold VWRD too) to use the coupons/dividends to maintain my desired allocation. If you are regularly DCAing then it gives you a few percent more flexibility to avoid having to sell to rebalance between stocks and bonds.

If your only USD asset is International Stocks then ignore that and buy an accumulating ETF like IWDA.

While I dislike selling to rebalance, I hate doing currency conversions. Commissions to banks and brokers compound too!

 

[Maeda_Toshiie]

Lol, it's Peter Schiff. Schiff's been saying "there'll be an even bigger crash than 2008" since about 2009. He's never going to be able to admit he's wrong.

He'll be right one day; maybe within the next 100 years.

 

[peipei1]

Hey BBC! What are your thoughts of using something TVIX to hedge against the ETF Indexes? The time for recession is closer and closer.

It feels like easy money now the price only 37 but it can go as high as tens of thousands in a market crash! Got such thing or not? Still i see that even for some small tariffs war news, it swing up to the 50s and 60s. Who iare the winners and losers for this product?

 

[mmchaisi]

NX16100F reopened SGS bond with 2.125% coupon. Any idea what the effective rate of return is going to be? I believe it’s 7 years to maturity.

 

[BBCWatcher]

NX16100F reopened SGS bond with 2.125% coupon. Any idea what the effective rate of return is going to be? I believe it’s 7 years to maturity.

It should be ~2.25% yield, meaning that the reopened bond should sell for something less than face value. To figure out the likely yield, just look at the daily statistics and interpolate between the 5 and 10 year maturities. Take one last look before the auction closing deadline at your bank. (The deadline at your bank is substantially BEFORE the deadline at MAS.)

Noncompetitive bids (the only kind you should make, I strongly advise) tend to get filled at slightly higher than the market data suggest, from what I’ve observed. So ~2.3% is possible. All assuming market interest rates don’t change much between now and the auction.

 

[BBCWatcher]

What are your thoughts of using something TVIX to hedge against the ETF Indexes? The time for recession is closer and closer.

If you’re trying to time the market in certain ways — which is short-term speculation rather than long-term investing — then usually the options and futures markets will be useful tools. However, there are some convenient, prepackaged tickers that are listed and traded like individual stocks. So you can make some “standard” speculative bets that way.

I still think the options and futures markets are better if you want to do that sort of thing, but not everyone has access to those markets.

I’m just not into speculation, though. It’s not for me. I cannot predict the next Trump Tweet, and I’m not going to try.

 

[belgarathc]

Hi BBCWatcher,

I am trying to optimise CPF contribution for maximum tax relief. I already performed 7,000 contribution to my own SA account and 7,000 contribution to my parents' RA account for 14,000 tax relief. I have not reached FRS yet. Currently below 40 years old.

I have both employment and trade income.

Let's say 2018 employment income is SGD 7,000 each month for 12 months, SGD 7,000 13th month bonus, SGD 7,000 performance bonus.

Let's say 2018 trade income is SGD 30,000.

I have made voluntary contribution of SGD 2,500 to medisave account under self-employment at start of this year to hit the new medisave cap of SGD 54,500.

CPF annual limit is SGD 37,740 for 2018.

Is the amount I can still perform voluntary contribution = 37,740 - 0.37 * ( 6,000 * 12 + 7,000 + 7,000) - 2500?

This is SGD 3,420.

Thanks!

 

[BBCWatcher]

Is the amount I can still perform voluntary contribution = 37,740 - 0.37 * ( 6,000 * 12 + 7,000 + 7,000) - 2500?
This is SGD 3,420.

Your math looks exactly correct to me. What you can do, for example, is to top up Medisave immediately after there’s a withdrawal, such as a withdrawal for your 2018 base Integrated Shield premium payment. That additional Medisave top up will also be eligible for tax relief.

Well played.

To simplify matters for you and for anyone else who earns $6,000 or more per month from employment in Singapore, just remember that you won’t have any room below the CPF Annual Limit unless your bonus income from employment totals less than $30K. Since your expected bonus income totals $14K, you have room below the Annual Limit. And that room is 37% of $16,000, which is $5,920. You’ve already consumed $2,500 of that, so you get to that same $3,420 figure remaining. Just another way to get to that number, if you like.

 

[belgarathc]

Your math looks exactly correct to me. What you can do, for example, is to top up Medisave immediately after there’s a withdrawal, such as a withdrawal for your 2018 base Integrated Shield premium payment. That additional Medisave top up will also be eligible for tax relief.

Well played.

To simplify matters for you and for anyone else who earns $6,000 or more per month from employment in Singapore, just remember that you won’t have any room below the CPF Annual Limit unless your bonus income from employment totals less than $30K. Since your expected bonus income totals $14K, you have room below the Annual Limit. And that room is 37% of $16,000, which is $5,920. You’ve already consumed $2,500 of that, so you get to that same $3,420 figure remaining. Just another way to get to that number, if you like.

Thanks BBCWatcher.

 

[MrHighlander]

Hi BBCW,

I have some queries about CPF OA to SA transfer and CPA SA transfer.

For CPF OA to SA transfer, I understand that the amount transferred (say 50K) will attract the 4% interest in the month of transfer. And the transfer from OA to SA does not make any difference at all to the amount one can withdraw from CPF at the age of 55.

For cash top up to SA though, when will the cash top up (up to $7000 per calendar year) be computed at the 4% interest? Is it in the month of top up itself or the subsequent month? Also, I understand that the cash top up can never be withdrawn at age 55 and will instead be counted towards the FRS but won't be computed in any way as part of the BRS.

Does the above accord with your understanding?

In addition, I think that the best way to play the full withdrawal at the age of 55 (if I choose to) is to do SA cash top up and transfer from OA to SA, so that FRS can be reached faster. I doubt that my SA cash top up can ever hit the FRS on its own since I am 35 already, so I am effectively aiming to use the SA cash top up to form as much as possible the FRS sum (and reduce taxes along the way). Do you agree?

Thank you.

 

[Newmaxi]

Hi BBCwatcher

I am new to SGS t bill. How do I see what I rate of return for July 19 T bill? TIA

 

[BBCWatcher]

For cash top up to SA though, when will the cash top up (up to $7000 per calendar year) be computed at the 4% interest? Is it in the month of top up itself or the subsequent month?

The subsequent month. Consequently it’s best to make cash top-ups toward the end of the calendar month. Allow enough time for CPF to credit the top-up within that month, so don’t cut it too close.

Also, I understand that the cash top up can never be withdrawn at age 55 and will instead be counted towards the FRS but won't be computed in any way as part of the BRS.

That’s correct. That distinction only matters if you’re aiming for CPF LIFE participation at the Basic Retirement Sum. You shouldn’t be, in my view.

In addition, I think that the best way to play the full withdrawal at the age of 55 (if I choose to) is to do SA cash top up and transfer from OA to SA, so that FRS can be reached faster. I doubt that my SA cash top up can ever hit the FRS on its own since I am 35 already, so I am effectively aiming to use the SA cash top up to form as much as possible the FRS sum (and reduce taxes along the way). Do you agree?

If you can combine techniques (partial or full OA to SA transfers, and SA top-ups for tax relief), that’s great. The 4+% compound interest is attractive and works well as a bond-like part of your savings. Don’t forget your spouse, of course (if applicable).

 

[BBCWatcher]

How do I see what I rate of return for July 19 T bill?

I don’t think it’s been issued yet, so you don’t. That’s what the auction will decide. However, you can look at statistics on outstanding SGSes here. And you can safely conclude that the upcoming t-bill will yield about 1.7% if you place a noncompetitive bid (the only kind of bid individual investors should be doing, I strongly recommend).

 

[MrHighlander]

Hi BBCW,

I have some queries about CPF OA to SA transfer and CPA SA transfer.

For CPF OA to SA transfer, I understand that the amount transferred (say 50K) will attract the 4% interest in the month of transfer. And the transfer from OA to SA does not make any difference at all to the amount one can withdraw from CPF at the age of 55.

Hi BBCW, does this part accord with your understanding ? TQ

 

[BBCWatcher]

Hi BBCW, does this part accord with your understanding ? TQ

Yes. I didn’t comment because there was no question mark in the paragraph you wrote about OA to SA transfers, and what you wrote is correct.

 

[MrHighlander]

The subsequent month. Consequently it’s best to make cash top-ups toward the end of the calendar month. Allow enough time for CPF to credit the top-up within that month, so don’t cut it too close.


That’s correct. That distinction only matters if you’re aiming for CPF LIFE participation at the Basic Retirement Sum. You shouldn’t be, in my view.


If you can combine techniques (partial or full OA to SA transfers, and SA top-ups for tax relief), that’s great. The 4+% compound interest is attractive and works well as a bond-like part of your savings. Don’t forget your spouse, of course (if applicable).

Thank you BBCW. Just to clarify a bit more, SA cash top ups will form the *first* amounts of one’s FRS up to as much as possible, and then the rest will be from employer/employee contributions? Is that correct ? Using an example, so if my OA is 150K and SA 200K (out of the SA 200k is 40K cash top up) - based on the currrent FRS of 171K, one can withdraw anything above 171K (I.e. 179K at age 55) ? The SA cash top up will definitely from the FRS sum (i.e freeing up the *non* top up monies to be withdrawn)?

In addition, what do you think of SRS? I am thinking of opening SRS to buy ES3 through Vickers to earn on tax relief. I know there is a 5% penalty on early withdrawal but the tax relief sounds great. And if am unemployed for whatever reason for a period of time later on I can withdraw those funds (full tax I know at that time but may easily slot into much lower tax brackets since I am unemployed). Any views ?

 

[MrHighlander]

Thank you BBCW

Yes. I didn’t comment because there was no question mark in the paragraph you wrote about OA to SA transfers, and what you wrote is correct.