*Official* BBCWatcher club

[foozgarden]

Let me ask my crystal ball....

I assume there will be another recession at some point, and the drift toward a U.S. Treasury yield inversion (not quite there yet) is one classic leading indicator. My guess (only that) is that the current expansion still has a few more quarters to run.

haha.. fair nuff..

anw, next topic.. (which i believe is one of your favourite.)
CPF.
either love it or hate it, but the fact is, its here to stay.
so might accept the devil, and maximise it.

whats your strategy to continue to make the govt work harder for our cpf money?
the avg sinkie will accumlate during the working years to reach FRS ( i think? though some may argue that BRS will suffice)

eg, if the person has already hit FRS for SA and BHS for MA (< 55 years old) what else can he/she do? assuming house is paid for.

eg, if the person is > 55 years and has reach FRS , and BHS for MA.
should he/she move the OA money to RA? assuming house is paid for.

 

[Extech]

Are you talking about the HDB Fire Insurance (Etiqa 5 year policy), which costs a whopping $2.50? Or something more than that? (What?) Or both?

Looking at FWD for their affordable home insurance. Mainly is because did renovation for him about 15k and paid 70k for the unit too. He is old, not so frail but worry that something might happen to the house (pipe burst etc). He also have chance to uplorry too due to chronic illness :/

 

[tangent314]

eg, if the person has already hit FRS for SA and BHS for MA (< 55 years old) what else can he/she do? assuming house is paid for.

eg, if the person is > 55 years and has reach FRS , and BHS for MA.
should he/she move the OA money to RA? assuming house is paid for.

If you believe in the concept of life annuity, then yes, moving money into RA up to the ERS would be your best option after 55.

Otherwise, BBCW would probably recommend that you do the SA shielding trick just before you reach age 55.

If you have an appetite for a bit more risk which should get you a dividend yield higher than 4% to supplement your retirement income, you can look at a high yield bond ETF like QL3 which has the convenience of being in the SGX and denominated in SGD.

 

[a4973]

Hi all if you all don't mind, please revisit Post 56 & please give comments on whether the policy is decent enough to continue or not. thanks

Sent from Motorola NEXUS 6 using GAGT

 

[tangent314]

Hi all if you all don't mind, please revisit Post 56 & please give comments on whether the policy is decent enough to continue or not. thanks

2.16% interest. I don't think I have to say more.

 

[Panerex]

Thanks for sharing

 

[revhappy]

That's not a fair statement to make imo. There are lots of people in the credit card threads that posted specific hacks that can lead to rebates/savings, I would argue that their contributions are substantial as well.

I think the difference is both Shiny and BBCW bring a global perspective and have managed to convince people to think like a global person and invest globally instead of just Singapore and Asia.

Local experts especially those bloggers you see favour heavy local allocation. Even Fundsupermart, I find it surprising how long they have been bullish on China and Asia and bearish on US and missed out the entire US bull run. This is criminal to me. FSM has been like the largest self service unit trust platform and instead of educating people about global allocation based on market cap, they have tried active management and scared people about high valuations in western markets etc and have failed. It is only after coming to this forum I learnt about ETFs and marketcap based allocation.

Sent from Xiaomi REDMI NOTE 4 using GAGT

 

[foozgarden]

If you believe in the concept of life annuity, then yes, moving money into RA up to the ERS would be your best option after 55.

Otherwise, BBCW would probably recommend that you do the SA shielding trick just before you reach age 55.

If you have an appetite for a bit more risk which should get you a dividend yield higher than 4% to supplement your retirement income, you can look at a high yield bond ETF like QL3 which has the convenience of being in the SGX and denominated in SGD.

sorry, but what is this SA shielding?

 

[a4973]

2.16% interest. I don't think I have to say more.

hi there tangent314
thanks for the illustration
so just to clarify the illustration is showing that based on the planned progression of the policy the return is 2.16%?
ie i just continue pay the premiums , the cash coupons keep on coming. at the absolute end the return is 2.16%?

 

[BBCWatcher]

Looking at FWD for their affordable home insurance. Mainly is because did renovation for him about 15k and paid 70k for the unit too.

The last time I looked at this question, which was years ago, there was/is a basic difference in coverage that essentially broke down into "all-risks" versus "named risks" (a.k.a. "insured perils"). And I always prefer "all-risks" insurance assuming the premium is reasonable, since I (as a policyholder) don't care why I experience a loss, if I experience a loss.

"All-risks" is in quotation marks because there are still a very few policy exclusions in such insurance, for example war. If a foreign power invades Singapore and razes his HDB building, the insurer won't cover that. Intentional damage (e.g. arson) is another typical exclusion. But, if I have to accept any such list, I want it to be a short list of exclusions rather than a list of inclusions. "We will cover you, except if (short list)" is best.

I ended up choosing QBE's Home Plus policy -- their most basic one -- which costs $101.65/year. That was the best value all-risks coverage I could find at the time, but perhaps there's a better value in all-risks home insurance now? (Anybody have any other all-risks home insurance candidates?)

 

[tangent314]

sorry, but what is this SA shielding?

SA shielding comes into play in two situations

1. At age 55, your OA and SA is combined to form your RA up to the FRS. You want the money to be moved from OA not your SA, so that you can enjoy the higher interest rates of SA.

2. After age 55, you may want to top up your RA up to the ERS. Again, you shield your SA so that the top up monies will be taken from OA instead of SA.

This shielding is achieved by using CPFIS to invest your SA just before you reach 55, then liquidate the investment back into SA after everything is done.

 

[BBCWatcher]

SA shielding comes into play in two situations

Yes, and you can combine these actions into one "shield" event if you wish.

Step 1: Raise your "SA shield" strictly before your 55th birthday. (Also one last chance for OA to SA transfers, if your SA has not yet reached the Full Retirement Sum.) That'll let you shield all but $40,000 of SA funds.

Step 2: Celebrate your 55th birthday. Your Retirement Account is created, starting with the ~$40K of unshielded SA funds followed by OA funds.

Step 3A: Withdraw funds (optional, not necessarily recommended unless you need the money). This withdrawal will all come from OA since your unshielded SA will be depleted to create the Retirement Account.

Step 3B: Top up your Retirement Account with cash (and/or with withdrawn funds, which CPF can do for you as a transfer transaction), up as high as the Enhanced Retirement Sum (ERS) if you wish. (Optional, recommended.)

Step 4: Lower the shield.

Spouses/partners can also do this, with your assistance perhaps and around their 55th birthdays.

 

[tangent314]

hi there tangent314
thanks for the illustration
so just to clarify the illustration is showing that based on the planned progression of the policy the return is 2.16%?
ie i just continue pay the premiums , the cash coupons keep on coming. at the absolute end the return is 2.16%?

This is simply based on the current projected surrender value $20857 and the projected maturity value $69843. The cash value is D+F+G which assumes you don't take the cash coupons and instead leave it inside to generate interest.

Based on these assumptions, then yes your effective interest rate is 2.16% from today until maturity. Of course, the projections are not guaranteed, so you could get more or less.

 

[BBCWatcher]

This is simply based on the current projected surrender value $20857 and the projected maturity value $69843. The cash value is D+F+G which assumes you don't take the cash coupons and instead leave it inside to generate interest.

This is looking pretty grim as an investment product, which is not surprising. The insurance company has to pay its overheads, provide a modicum of insurance value, and collect a profit.

I think it's very safe to conclude that it's not wise to reinvest the cash coupons in that policy. If you're going to take some investment risk, you might as well cut out the expensive insurance company middleman at this point. Or take less or virtually no risk, e.g. put the coupons into SSBs. Or some of both.

Tangent314, are you able to run a simulation which involves simply leaving the policy running and taking the cash coupons as cash, to be reinvested elsewhere?

 

[a4973]

This is looking pretty grim as an investment product, which is not surprising. The insurance company has to pay its overheads, provide a modicum of insurance value, and collect a profit.

I think it's very safe to conclude that it's not wise to reinvest the cash coupons in that policy. If you're going to take some investment risk, you might as well cut out the expensive insurance company middleman at this point. Or take less or virtually no risk, e.g. put the coupons into SSBs. Or some of both.

Tangent314, are you able to run a simulation which involves simply leaving the policy running and taking the cash coupons as cash, to be reinvested elsewhere?

so its a bad investment product.
how about the protection aspect of it?
is it a policy worth keeping? or is this only clearer after simulating continuing with the policy & withdrawing the coupons?
thanks so much for helping me

 

[foozgarden]

SA shielding comes into play in two situations

1. At age 55, your OA and SA is combined to form your RA up to the FRS. You want the money to be moved from OA not your SA, so that you can enjoy the higher interest rates of SA.

2. After age 55, you may want to top up your RA up to the ERS. Again, you shield your SA so that the top up monies will be taken from OA instead of SA.

This shielding is achieved by using CPFIS to invest your SA just before you reach 55, then liquidate the investment back into SA after everything is done.

Yes, and you can combine these actions into one "shield" event if you wish.

Step 1: Raise your "SA shield" strictly before your 55th birthday. (Also one last chance for OA to SA transfers, if your SA has not yet reached the Full Retirement Sum.) That'll let you shield all but $40,000 of SA funds.

Step 2: Celebrate your 55th birthday. Your Retirement Account is created, starting with the ~$40K of unshielded SA funds followed by OA funds.

Step 3A: Withdraw funds (optional, not necessarily recommended unless you need the money). This withdrawal will all come from OA since your unshielded SA will be depleted to create the Retirement Account.

Step 3B: Top up your Retirement Account with cash (and/or with withdrawn funds, which CPF can do for you as a transfer transaction), up as high as the Enhanced Retirement Sum (ERS) if you wish. (Optional, recommended.)

Step 4: Lower the shield.

Spouses/partners can also do this, with your assistance perhaps and around their 55th birthdays.

RA is also 4% right?
so whats the difference to have it in SA or RA? or even to move from SA to RA?

also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?

 

[w1rbelw1nd]

Local experts especially those bloggers you see favour heavy local allocation. Even Fundsupermart, I find it surprising how long they have been bullish on China and Asia and bearish on US and missed out the entire US bull run. This is criminal to me. FSM has been like the largest self service unit trust platform and instead of educating people about global allocation based on market cap, they have tried active management and scared people about high valuations in western markets etc and have failed. It is only after coming to this forum I learnt about ETFs and marketcap based allocation.

Sent from Xiaomi REDMI NOTE 4 using GAGT

The local "experts" are not fiduciaries. If you are talking about bloggers, frankly, how many of them are even adequately educated on financial matters?

There is nothing criminal about how FSM and these bloggers work. I think as responsible retail investors, we need to at least know if the party that we are relying on has conflict of interest with us, and are adequately informed of both what they know and what they dont know.

I do have friends (the one or two odd exceptions) that are fairly well-versed in financial matters, but we gotta realise the people with a real understanding, the investment bankers/fund managers/listed-co middle/snr managers are not likely to share online, and hence we get a very limited understanding on the risks of certain investment types.

 

[BBCWatcher]

RA is also 4% right?
so whats the difference to have it in SA or RA? or even to move from SA to RA?

Yes, the interest rate is the same. RA is set aside for your CPF LIFE payouts, and of course that's perfectly fine. Remaining, and any additional, SA funds can be withdrawn from age 55. (They shouldn't be withdrawn, though, unless and until you actually need them. On demand funds earning 4% are absolutely lovely.)

also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?

All CPF LIFE levels are great values in lifetime annuities, the very best value Singapore dollar lifetime retirement annuities available. They're so good that they rival the best Wall Street has to offer, and Wall Street isn't really offering the same thing.

The only question, really, is how much longevity insurance you want. None of the CPF LIFE payout levels are lavish, so I'd just opt for ERS-level CPF LIFE (and for my spouse/partner too), and most likely pick the Escalating Plan and start payouts from age 70. For relatively well-to-do and higher people, that's the smartest and best play available. I certainly wouldn't downgrade from FRS-level with a property pledge, even if I could.

One exception: if you already have excellent or better longevity insurance (guaranteed lifetime annuities). As it happens, I/we do. So my decision is more complicated, but at the moment I'm aiming for FRS-level CPF LIFE across the household (still Escalating Plan, age 70).

To net it out, in my view you make CPF LIFE the best it can possibly be as longevity insurance, and that's FRS-level (or preferably above if CPF LIFE is your only longevity insurance), Escalating Plan, age 70. If you can afford it, of course, and most people in this forum can (or will).

Then...and here's the truly magical part...go have FUN, lots of it, knowing that you've got a guaranteed stream of lifetime retirement income that'll take you all the way to the end, even if that's age 108. Money is only useful to exchange for goods and services, at some point in time. That's the only thing it can do. So nail down the long tail well and best, and then have fun.

 

[Maeda_Toshiie]

The local "experts" are not fiduciaries. If you are talking about bloggers, frankly, how many of them are even adequately educated on financial matters?

There is nothing criminal about how FSM and these bloggers work. I think as responsible retail investors, we need to at least know if the party that we are relying on has conflict of interest with us, and are adequately informed of both what they know and what they dont know.

I do have friends (the one or two odd exceptions) that are fairly well-versed in financial matters, but we gotta realise the people with a real understanding, the investment bankers/fund managers/listed-co middle/snr managers are not likely to share online, and hence we get a very limited understanding on the risks of certain investment types.

Wilfred Ling is one of the few.

 

[tangent314]

also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?

Yes the first 30k gets 2% bonus interest and the next 30k gets 1%, so the payout won't be proportional compared to the principle. It's unlikely you will get a better life annuity plan elsewhere though. Of course, if your spouse does not have much CPF it makes sense to ensure he or she has RA topped up to at least 60k.