*Official* BBCWatcher club

[highsulphur]

Even if expense ratio is lower, does it make sense to sell and convert from one global equity etf to another? Probably no right ？

Eg from isac or vwra to fwra

 

[BBCWatcher]

Even if expense ratio is lower, does it make sense to sell and convert from one global equity etf to another? Probably no right ?

No, it's not worth it among these particular funds. They're adjusting (generally lowering) their expenses anyway.

 

[BBCWatcher]

For what it's worth Parliament recently discussed the long delayed CPF Lifetime Retirement Investment Scheme. The LRIS was proposed and accepted by the government nearly 10 years ago in 2016. Manpower Minister Tan See Leng said the government is in the "final stages" of studying its response to the CPF LRIS.

 

[tehhalia]

I wonder if or when LRIS is rolled out, is it going to be even better global equity+bond ETFs in terms of cost and diversity.

 

[highsulphur]

I wonder if or when LRIS is rolled out, is it going to be even better global equity+bond ETFs in terms of cost and diversity.

i doubt it will be more cost efficient unless they are able to negotiate a cheaper rate with the etf providers. They probably has to allocating to global equity and bond etfs as underlying products utimately

 

[BBCWatcher]

i doubt it will be more cost efficient unless they are able to negotiate a cheaper rate with the etf providers.

If CPF Investment Account fees don't apply to the CPF LRIS, that'd help particularly among "low dollar" investors. Simple "target date" index funds with institutional fee levels would also help.

 

[highsulphur]

If CPF Investment Account fees don't apply to the CPF LRIS, that'd help particularly among "low dollar" investors. Simple "target date" index funds with institutional fee levels would also help.

Not sure how useful it is for those near retirement age

 

[BBCWatcher]

Not sure how useful it is for those near retirement age

If the LRIS is constructed sensibly, it'll still be fairly useful.

 

[ericcsn]

If the LRIS is constructed sensibly, it'll still be fairly useful.

I do wonder how useful.

I would gladly have the SA 4% back for above 55. Can this beat it? I doubt.

 

[BBCWatcher]

I would gladly have the SA 4% back for above 55. Can this beat it? I doubt.

The LRIS doesn't have to beat 4% SA because 4% SA doesn't exist from age 55.

 

[manlymanly]

Hi! Seeking some perspectives on my "exit plan." Just got retrenched from a middle-mgmt role (9k/m). Given a long notice, so I’m out by end 2026. I intend to stop formal work to focus on volunteer work (zero income).

Profile: middle-aged, no dependents
Expenses: ~4K/month (includes 1K living expenses, 1.6k mortgage, 500 to mum, 900 donations)
Assets:
[Blah blah... I got the help I need ]


Q1: SRS withdrawal optimization
I have 16 years until the penalty-free withdrawal age 62.
If I leave the 500k SRS to grow at 7% (rule of 72), it hits ~1.4M by age 62.
Drawing down 150k/year over 10 years at that point would lead to a massive tax bill, even with the 50% tax concession.
Since I’ll have zero earned income from 2027 onwards, does it make sense to start withdrawing 20k pa from age 46? I thought I’d drain the SRS slowly to avoid a 15% tax bracket later.

• Pros: Reduces the principal early to avoid a "tax bomb" at 62. Since I have no income, the 20k is effectively tax-free
• Cons: 5% penalty (1K) per year

I’m an “equities gal” and, coupled with low living expenses, I can accept some volatility. Even if the market drops 40% in my early retirement years, I have a 150K cash buffer that can last me at least 3+ years. I’ve considered moving the SRS to more bonds after 62, but on average it will still grow 5% pa. Also, it feels a bit of a waste to deliberately stunt the portfolio to save on taxes. Not sure if I’m missing some key considerations.

Q2: De-risk from IBKR
2M in a single platform is significant, and I wonder if I should move at least 30% out to FSMOne, POEMS, or one of the other local brokerages. The risks I’m considering include cybersecurity and scams. I’m really not sure whether this is something I should worry about or spend significant effort on.

Q3: Optimising SRS vs CPFIS-OA vs cash – will these points work?
Percentage wise, my portfolio is now 86% equities, 14% CPF and cash.

• I’ll keep the 150K cash in UOB One (1.9% pa) as my life needs cash.
• I intend to keep to a 80/20 portfolio after retirement, with SRS bearing the bond component increase of ~5%.
• I’m not sure if I should gradually sell down the equities in CPFIS-OA to pay my mortgage, or pay by cash (i.e. sell down cash portfolio). The opportunity cost of CPF is risk-free 2.5%, but the cash pot has done better historically due to less restrictions (XIRR: cash 15% vs CPFIS-OA 8%)

Thanks in advance, good Sir

 

[highsulphur]

Hi! Seeking some perspectives on my "exit plan." Just got retrenched from a middle-mgmt role (9k/m). Given a 10-month notice, so I’m out by Q4 2026. I intend to stop formal work to focus on volunteer work (zero income) and Buddhist studies.

Profile: 46F, single, no dependents
Expenses: ~4K/month (includes 1K living expenses, 1.6k mortgage, 500 to mum (she’s financially-independent), 900 donations)
Assets:
Cash: 150k (UOB One)
IBKR: 2M (Equities heavy)
CPF: OA 33k, SA 263k (FRS reached), MA 79k
CPFIS-OA: 360k
SRS: 500k (Equities heavy: ES3, Amundi funds, Keppel/ SembCorp/ SIA. XIRR ~9%)
Property: 15-yo HDB resale (Own stay with mum & sibling, no intention to monetise). Value ~1.3M.
Liability: Mortgage 305k @ 2% (20 years left).

Q1: SRS withdrawal optimization
I have 16 years until the penalty-free withdrawal age 62.
If I leave the 500k SRS to grow at 7% (rule of 72), it hits ~1.4M by age 62.
Drawing down 150k/year over 10 years at that point would lead to a massive tax bill, even with the 50% tax concession.
Since I’ll have zero earned income from 2027 onwards, does it make sense to start withdrawing 20k pa from age 46? I thought I’d drain the SRS slowly to avoid a 15% tax bracket later.

• Pros: Reduces the principal early to avoid a "tax bomb" at 62. Since I have no income, the 20k is effectively tax-free
• Cons: 5% penalty (1K) per year

I’m an “equities gal” and, coupled with low living expenses, I can accept some volatility. Even if the market drops 40% in my early retirement years, I have a 150K cash buffer that can last me at least 3+ years. I’ve considered moving the SRS to more bonds after 62, but on average it will still grow 5% pa. Also, it feels a bit of a waste to deliberately stunt the portfolio to save on taxes. Not sure if I’m missing some key considerations.

Q2: De-risk from IBKR
2M in a single platform is significant, and I wonder if I should move at least 30% out to FSMOne, POEMS, or one of the other local brokerages. The risks I’m considering include cybersecurity and scams. I’m really not sure whether this is something I should worry about or spend significant effort on.

Q3: Optimising SRS vs CPFIS-OA vs cash – will these points work?
Percentage wise, my portfolio is now 86% equities, 14% CPF and cash.

• I’ll keep the 150K cash in UOB One (1.9% pa) as my life needs cash.
• I intend to keep to a 80/20 portfolio after retirement, with SRS bearing the bond component increase of ~5%.
• I’m not sure if I should gradually sell down the equities in CPFIS-OA to pay my mortgage, or pay by cash (i.e. sell down cash portfolio). The opportunity cost of CPF is risk-free 2.5%, but the cash pot has done better historically due to less restrictions (XIRR: cash 15% vs CPFIS-OA 8%)

Thanks in advance, good Sir

I don't think you need to preempt a large srs balance in advance. Since you have decided to overweigh equities even in your SRS account, just ride it through. Might be a bit presumptuous to assume a 7% return all the way to 63 years old.

However if you wish to rebalance from equity into bonds, srs balance may be a good place to start

As for ibkr, I think it's fine to continue to hold majority of your portfolio there but if it gives you a better peace of mind, just transfer some to fsmone.

 

[BBCWatcher]

Q1: SRS withdrawal optimization
I have 16 years until the penalty-free withdrawal age 62.
If I leave the 500k SRS to grow at 7% (rule of 72), it hits ~1.4M by age 62.
Drawing down 150k/year over 10 years at that point would lead to a massive tax bill, even with the 50% tax concession.

No it wouldn't. The income tax on $75,000 of chargeable income (let's suppose) at current rates/brackets would be $3,000, an effective tax rate of 2% on a ~$150,000 SRS withdrawal. If you merely deposit $3,500 per year into MediSave (let's suppose; it'll depend on medical spending from age 65) you can reduce that $3,000 income tax bill by $245, dropping your effective income tax rate down to 1.84%.

I don't think most people would describe a 2% or 1.84% effective income tax rate as "massive." In short, don't worry about it.

Since I’ll have zero earned income from 2027 onwards, does it make sense to start withdrawing 20k pa from age 46? I thought I’d drain the SRS slowly to avoid a 15% tax bracket later.

No, it doesn't make sense. A 5% upfront penalty is a lot.

I’m an “equities gal” and, coupled with low living expenses, I can accept some volatility. Even if the market drops 40% in my early retirement years, I have a 150K cash buffer that can last me at least 3+ years. I’ve considered moving the SRS to more bonds after 62, but on average it will still grow 5% pa. Also, it feels a bit of a waste to deliberately stunt the portfolio to save on taxes. Not sure if I’m missing some key considerations.

I agree with highsulphur. If/when you adjust your overall investment portfolio allocation to tilt more toward bonds, make that adjustment within your SRS account. But that's only a "Step 2" consideration, after you decide what the appropriate allocations should be at particular ages. That is, decide the allocation first (without regard to tax optimization), then you execute that allocation in the most tax-efficient way possible (SRS dollars as the first dollars to tilt toward bonds).

Q2: De-risk from IBKR
2M in a single platform is significant, and I wonder if I should move at least 30% out to FSMOne, POEMS, or one of the other local brokerages. The risks I’m considering include cybersecurity and scams. I’m really not sure whether this is something I should worry about or spend significant effort on.

I'd vote no. You have reasonable diversity of asset custodians already.

There's also a weird aspect of increasing the number of asset custodians: you increase the statistical risk that you will have at least one of your asset custodians fail. For this class of long-tail risks you want to aim for a "Goldilocks" number: more than one asset custodian but not too many. In terms of commercial airline safety for example the optimal number of engines seems to be 2. Aircraft that have 4 engines are statistically about twice as likely to experience an engine failure.

Q3: Optimising SRS vs CPFIS-OA vs cash – will these points work?
Percentage wise, my portfolio is now 86% equities, 14% CPF and cash.

• I’ll keep the 150K cash in UOB One (1.9% pa) as my life needs cash.

That's 37 months at $4K per month. That's too much, IMHO. How about 12?

One potential option starting in 2027 is $37,740 per year into OA and SA (via a "VC3A," and assuming you make a VCMA ahead of it). You can earn 2.5% on OA and 4.0% on SA, and you've got a 2% mortgage you can service out of 2.5% OA. You've got gobs of liquidity, and you'll be less than 8 years away from the magic CPF age of 55. Not necessarily the best option, but I think it'd be better than dragging so much cash at 1.9% (likely heading down).

• I intend to keep to a 80/20 portfolio after retirement, with SRS bearing the bond component increase of ~5%.

OK. The "textbooks" say that's edgy, but some people do it. Do you plan to boost RA above the FRS at age 55?

• I’m not sure if I should gradually sell down the equities in CPFIS-OA to pay my mortgage, or pay by cash (i.e. sell down cash portfolio). The opportunity cost of CPF is risk-free 2.5%, but the cash pot has done better historically due to less restrictions (XIRR: cash 15% vs CPFIS-OA 8%)

These days A12S via POEMS exists, so the gap between what you can do inside versus outside CPF has narrowed. And at age 55 you have the option to close your CPF Investment Account and transfer assets to the "outside" if you wish, although you still might not want to do that.

....I think you can do both: funnel some of that cash pile into CPF OA via VC3A (mostly, although SA is great too until age 55), then pay your mortgage from OA. Which then expands your future OA cash (re)deposit option that might be comparatively attractive.

 

[tehhalia]

Just curious, if not for the retrenchment, how long more would you want to work before calling it a day?

If you feel that your liquid assets are more or less sufficient for FIRE already at your current age, perhaps you may want to rebalance and weigh a bit more towards bond/bond-like assets for preservation.

I think probably not but if there is any chance your 2M equities in IBKR are concentrated on a few individual stocks, you may wish to diversify a bit to spread risk.

Anyway my port nowhere near yours and I am the more conservative type. Hope whatever working for you thus far continues to work in your favor.

 

[manlymanly]

@BBCWatcher @highsulphur thanks very much. Roger on the SRS drawdown, and good with not switching from IBKR because the logistics is such a PITA. I'll just BAU

And thanks for the suggestion on VC3A. I like to hold cash because I'm heavy on equities, and I've encountered cycles where stocks and bonds both dropped. (COVID? or Trump?) So I thought I'd just treat CPF as bonds and call it a day. I haven't really thought whether 150K is too much cos it's just the max amount that qualifies for higher 1.9% interest lol... auntie is like that one. I'll reduce it to 100K Not lower because cash is security.

I haven't thought about boosting RA above FRS at age 55. I don't understand the nuances of CPF and find it too complex, even after watching popular YouTube teaching videos. Would it be beneficial to boost? I think I should because my profile - single, no dependent, fairly introverted - is prime target for scammers. I'm not confident my mind won't degenerate as I age.

 

[manlymanly]

Just curious, if not for the retrenchment, how long more would you want to work before calling it a day?

@tehhalia I was going to resign in Dec. The grind is relentless, [edited: deleted for privacy, thanks to reminders from kind forummers] and outsourcing to lower cost countries has made the work environment hyper-competitive and performative.

But I need to say this, which is perhaps contrarian to popular belief. FIRE looks good. But practically it's hard in many ways. Society doesn't understand why one will leave a "good job". (The best thing about getting retrenched is not the package, but it saves me from having to explain.) You can't really tell anyone you have enough $ as it'll just stir jealousy. Or they think you don't know how to count money cos how can an average person earn enough at 45. And I have a big extended family and close friends. When I took a sabbatical, I ended up running a shitload of errands for other people, cos you not working what -- medical appointments companion, gatherings organizer, researcher for everyone's random interests, default holiday planner. Actually I just want to be home and do my stuff, and was glad to go back to work as I had MORE time. I'm under no delusion that FIRE is all sunshine and rainbows, but it's what I'm dealt with now.

 

[CrashWire]

Q2: De-risk from IBKR
2M in a single platform is significant, and I wonder if I should move at least 30% out to FSMOne, POEMS, or one of the other local brokerages. The risks I’m considering include cybersecurity and scams. I’m really not sure whether this is something I should worry about or spend significant effort on.

I wonder what would happen if someone tries to withdraw from IBKR to a third-party, because IBKR doesn't allow that. If they did allow it, would MAS clamp down on IBKR for negligence?

 

[BBCWatcher]

I haven't thought about boosting RA above FRS at age 55. I don't understand the nuances of CPF and find it too complex, even after watching popular YouTube teaching videos. Would it be beneficial to boost?

Yes, I think that'd work very well for you. It's not complicated: deposit $X, get $Y/month higher retirement income for life, however long it lasts. (The Y versus X is very attractive.) You can start payouts at any time from age 65 to 70. I suggest 70 unless you're in poor health.

I think I should because my profile - single, no dependent, fairly introverted - is prime target for scammers. I'm not confident my mind won't degenerate as I age.

Understandable.

I wonder what would happen if someone tries to withdraw from IBKR to a third-party, because IBKR doesn't allow that.

That's overstated. Interactive Brokers certainly facilitates account resolution upon the account holder's death, for example.

 

[manlymanly]

I wonder what would happen if someone tries to withdraw from IBKR to a third-party, because IBKR doesn't allow that. If they did allow it, would MAS clamp down on IBKR for negligence?

A friend of mine had horror story from her 20s. She was an expat finishing a two-year stint in the US and had saved $100,000 in Microsoft shares. One day, she logged into her brokerage account and her balance was gone.

It turned out she was the victim of identity theft. A scammer forged a passport with her ID and used it to open a brokerage and bank account in Thailand. They initiated a transfer of all her shares from the US to Thailand, sold everything and vanished.
She went though so much trouble to investigate, flying from US to Thailand to file police reports and to track down the money, but the accounts were already closed so there was nothing anyone could do. The bank let the police sight a photocopy of the fake passport, so they figured that was what happened.

This was around 2011 when Microsoft was only about $30 a share, it would’ve been 1.5M today. She was also so traumatised she didn’t dare to invest anymore.

 

[CrashWire]

That's overstated. Interactive Brokers certainly facilitates account resolution upon the account holder's death, for example.

I mean in the case of withdrawing to a bank account NOT in the brokerage account holder's name, like the abovementioned example of account hijacking.