[25]cpfRA top-up till 65

Posted on Sat, 16/Jan/2021Mon, 24/Feb/2025 by tiger40490

Every year, you can top up cpfRA_bookVal to the ERS watermark. All cpfRA accrued interest goes to your cpfRA not the pool, but excluded from cpfRA_bookVal.

After startOfPayout (age 65 to 70), under the Standard plan, your interest accrual would be redirected into the pool. (cpfRA emptied.)

— compare to cpfSA .. in Feb 2025, CPF hotline told me this bookVal rule is different from cpfSA top-up, where the engire cpfSA balance is compared to the FRS watermark. I think this is the rationale:

PAP government encourage citizens to top up cpfRA and cpfSA but there has to be a per-capita quota for top-up, not unlimited top-up. Government provides more encouragement to cpfRA than cpfSA top-up.

roaming retirement

Posted on Sun, 10/Jan/2021Sun, 02/May/2021 by tiger40490

Roaming retirement means “a few months in Malaysia, a few months in China (warmer months), then a few months back in SG”

This is now increasingly relevant.

— financial implication
By default, more financial resources are required than single-home retirement. However, what if we convert our home to short-term rental property?
— convenience factors

clean water
internet, phone
Chinese food

— weather factor .. see https://1330152open.wordpress.com/wp-admin/post.php?post=26025&action=edit&classic-editor
— Chinese community .. is a prerequisite

satiation income_level=USD 75k #Newport,SunsetWay

Posted on Sun, 03/Jan/2021Thu, 27/Jun/2024 by tiger40490

cpfLife strength against inflation@@ 2phase analysis

Posted on Sun, 03/Jan/2021Fri, 21/Feb/2025 by tiger40490

As of 2021, my default retirement destination is Singapore ( roaming_retirement as a viable 2nd option). So there’s a real, valid question, raised at the recent DBS seminar:

Q: is CPF-life payout sufficient against Singapore inflation

My fundamental stance — I’m betting on Singapore government to manage inflation and sustain CPF-life pay out.

— Phase 1: now till 65 — Government bumps up ERS amount by about 3% annually to match inflation.
I’m basically confident to meet ERS, perhaps by liquidating some property assets.

— Phase 2: from 65 to my twilight years — Vance Chhoa pointed out that monthly payout amount won’t increase year after year and will suffer from erosive inflation.

Given that I plan to live 30 years in Phase 2, this erosion will be significant.

Basically I choose to put it out of mind for now. I will surely think about it in the future. No hurry.

See recreational_investing_for_retirees and MOETF

[19]typical401k balance~USD 200k #CPF

Posted on Sat, 02/Jan/2021Fri, 18/Feb/2022 by tiger40490

https://www.investopedia.com/ask/answers/101215/what-size-average-retirement-nest-egg.asp says

end of 2018 average (not median) balance in 401k was $95,600, based on 30+ million 401k accounts. Are zero data points excluded? Yes I assume your account gets created only when a contribution is made.
.. The median is likely much lower than average due to large outliers. See [2]
zooming into a subset, the average among corporate-sponsored 401k was $104k at end of 2018
zooming into another subset, those with household income above 100k, the estimated household(not individual) median retirement savings is 215k,
zooming into another subset, those with some post-grad education[1], the estimated household median retirement savings is 225k

[1] this Investopedia article makes distinction between “some college education” vs “colledge graduates”. The nest egg sizes are very different !

Comparable — CPF RA balance is typically SGD 200k. The typical 401k sums are not a lot in the U.S. given the high burn rate in the U.S. (Melvin3++).

— https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/ has a chart showing the Median value of retirement equtity among households with retirement assets [2] in 2019. Note negative data points are excluded 🙂

among white households with househead head >= 55, that median was USD 66k, regardless of education or income.
among black households with househead head >= 55, that median was USD 27k

[2] “retirement assets” in this survey may include more than the 401k. I will assume “little more”. So Median 401k among all races might be [50k->60k]

— Bob Wells (cheapRVliving.com) said 25% of Americans have “$0 saved towards retirement”. Did he include non-working individuals, such as children?

These “25%” Americans may have savings for other purposes, not retirement.

PLIP{Markus; ReadyLifeIncome{Aaron #risky decision

Posted on Sun, 29/Nov/2020Sun, 01/Oct/2023 by tiger40490

k_FLI2

— this project should not affect my daily life

Should I spend (far) more time on MOETF? I think the absolute amount invested will be much smaller in MOETF.
Also remember SRS 15k

If I can easily and quickly get to 200k then I may want to buy the 28k. At the moment

🙁 am not fully comfortable about the negative aspects
🙁 not so easy to hit 200k. I need to liquidate many assets, over a period of time … Right now my FSM positions require baby-sitting, and mostly underwater, creating anxiety, which would be reduced if I can wait till Feb.

== PLIP (PruLifetime Income Plus) #Markus

The PremFinancing is a double-edge sword. It enhances DYOC when SORA is low. When SORA exceeds 2.4%, DYOC would drop below 5% and I would have to accept the low DYOC over decades for SVBE.

Non-guaranteed 3.55% p.a. monthly payout from Pru after 36M prison term, till age 110.

For breakeven .. Surrender value starts at (guaranteed) 80k + 2k (non-guaranteed). It inches up after a few years. Far inferior to FLI2, but total premium (100k) is better.

%%Q: non-guaranteed return smells bad
A: Prudential has always declared 4.25%. After consecutive years of double-digit returns, Prudential once declared a bonus in the form of surrender value bump.
A: If they declare below 4.25% perhaps it would hurt their reputation. I think this is similar to OCBC’s aversion of mass layoff.

— My new perception of the deal is a long bond with a tapering clawback schedule over the initial 30 years. I have a 15-20Y ideal holding window. For the first N years, Sora would stay below 2.4%.

* I hope N > 8. In this happy scenario, I tie up only 28k of liquidity to hold this long bond until it hits BreakEven.

After that, I have a painless exit route available to me whenever I need the 28k.
But it’s not ideal to exit right after BreakEven, because my end-to-end total return would be 0%. Instead, I will try to hold 15-20 years in total

* N could be less than 8 years. In this scenario, let’s suppose Sora goes above 2.4% after 72 months (6 years).

By default, I would pay off $72k loan, and then tie up 100k of liquidity to hold this long bond until BreakEven.
.. After that, I have a painless exit route available to me whenever I need the 100k.
Overall, default solution is unsatisfactory. You would probably advise me on other solutions at that juncture. At this moment in 2021 I don’t know how I would feel.
I am likely to relocate/emigrate to the U.S. in a few years and therefore prefer simple solutions. I don’t like babysitting any asset in my portfolio.

— unlike rEstate, gold, SP500, time is not necessarily on your side if you buy this product… See time is on your side if…
Given the long prison term, I wish to hold forever, but I won’t be able to when (not if) SORA goes up within a few years or decades. During the current window before SORA moves against us, we can earn some leveraged return… picking up pennies in front a bulldozer. It’s a Stress situation even if you work out a solution to the IR hike. Kun.H pointed out that I may need to monitor Sora when it starts moving against me.

Also remember that non-guaranteed payout is Low-n-nonGuaranteed, esp. over the long horizon.

Third problem is long-term SGD inflation. See FLI2

— biggest concern is IR hike
I said I could pay off the 72k loan and just earn the 3.55% payout while waiting till the 30th anniversary for SVBE (BE on surrender value). 3.55% is not bad and won’t be a pain. That’s the default plan.

Edmund said a cusotmer could deploy the 72k in a riskfree investment and earn the now-higher interest to offset the increased financing cost on the 72k loan. If the interest income can exceed the interest cost, then this is better than paying off the loan.

— key variables to monitor

how soon I need the 28k .. the smaller 28k reduces this variable’s impact compared to previous products.
SORA .. likely to move against me within decades
insurer payout rate.. Could they keep it up forever?

— Prem financing Loan .. 72k collateralized loan. LoanIntRate = SORA+0.6% ~ all-in 0.75%pa, at the moment.
The 0.6%pa is a nonFloatingSpread written into the contract. Subsequent customers could get a different nonFloatingSpread.

Over the holding period (10-20Y), SORA could rise .. to 3%. I guess this is one of the biggest market risks.

It’s easy to be blown away by the current low SORA (giving the 10% current yield), and forget that it will eventually move against me. This is a time bomb (a stress situation). When it happens, this product won’t offer any option of easy exit. The surrender value is growing very very slowly towards 100%, much slower than SORA.

Q: given that I have too much SGD, why do I want to pay for prem financing?
A: actually I have “too much” only in the short term. Consider 3 directions:
* Direction F: pass up PLIP. Leave 100k in FSM earning 1.5% but liquid.
* Direction 1: no PFL.. the 3.55%, the 36M prison term and breakeven timeline are dismal and worse than Direction F
* Direction 28: 28k locked in + my 72k left in FSM earning 1% but highly liquid. Beside the income on 72k and the PFL interest cost, I earn the same $3552/Y as Direction 1.

Q: Why is Direction 28 better than Direction 1?
A: Main benefit is the liquidity of 72k over decades.

— four promotions
* 0.6% spread and $300 sign-on bonus for the PLIP
* $2k bonus paid out in May
* 1% IR for 12M

== manulife ReadyLifeIncome #Aaron
I don’t find any joy, brain stimulation in this product, even worse than mufu. Control tcost !

🙂 long payout term — 110 years, longer than CPF-life
- 🙁 but pay out rate is only partially guaranteed
- 🙁 pay out rate much lower than CPF-life
🙂 smaller commitment (than previous products) — 42k in total
🙂 shorter wait (than previous products) — 60M
🙂 some death/TPD payout — worth something
🙁 surrender value is not so good within 20Y (break-even after 10Y). The longer the sweeter, like wine.

— what if my kids don’t care about this $100/M payout? I think this is unlikely when they become mature enough. For centuries, all consumers in all countries like freebies.
The longer I live, the more tangible and visible is this payout.

— how it compares to T:US

🙁 illiquid
🙁 lower yield
🙁 5Y wait
🙁 bigger commitment
🙂 capital protected, though you may need to wait 10Y for break-even.
🙂 a stabilizer in my portfolio, but why don’t I get $42k in T:US first?

— possible reason for regret

🙁 there might be better ways to “leverage” the 42k, such as T:US (above), or more properties in Asia or U.S., or HY/PE
Remember the Mindchamps 40k “investment”. This 42k is surely more fruitful.

— my reply (slightly modified)
Hi Aaron,

Thanks for spending the time on the RLI ( ready Life Income) product features etc. I have several reservations but I will focus on the show stoppers. You don’t need to reply.

My sister gave me some tough questions on RLI and in the end I told her my own observation that my blue-chip dividend stocks represent a favorable alternative in terms of 1) payout wait time, 2) liquidity, 3) minimum amount, and 4) payout rate in the form of dividends.

On the other hand, RLI offers principal protection, some death/TPD payout (which i don’t appreciate), and an interesting 110Y stream of payout. For the last few days after I spoke to my sis, I have put a lower value on the amounts-that-pay-out-during-the-decades-After-my-passing. I think my daughter would appreciate $1200 (projected) annual pocket money, but I don’t feel so sure how much that would mean to her life .. might mean a lot to her or not much.

In fact, the uncertainty over the payout rate is a bigger uncertainty due to the super long horizon. $1200 might increase to $1500 or drop to $800, sometime after I pass away. Singapore inflation may also deteriorate, say, 90 years from now, when the 7th generation of leadership comes to power, perhaps very different from the last 3 generations of PAP leaders. In 110 years, my daughter is long gone and her grandchildren may live in a very different world so would they appreciate a pocket money of $1000/Y or $1400/Y or whatever?

It’s like giving someone a big present without knowing how much she needs it. ( In contrast, what if I leave them a kilogram of pure gold? )

RLI is not the first product presented to me that would pay out long after I pass on. Now I recall that I have considered or “bought” several life insurance (including annuity) products over the years

A) TokyoMarine tri-generation
B) Manulife Universal life
C) Axa critical illness 20Y

Each time I spent many hours, many sessions with multiple consultants on the product team. In the end I didn’t commit to any of these products due to
* long wait time for payouts
* sizable commitment, well above $1k
* long break-even hold time — the combination of slow growth (in “surrender value”) and low payout rate means that I lose my principal if I quit during break-even period. So I must hold it long enough.

I think in total I spent more than 10 hours analyzing and discussing each product, so I was serious. The time spent was so very high, precisely because of the high commitment level. In contrast, I would spend possibly less than 10 hours on some $99k property deal, even though the commitment level is higher. That’s because break-even is faster, and because payout (rent) rate is higher and starts within months.

CPF-life is the only annuity I have considered good enough. It has possibly zero wait (if I top up at age 65). Payout rate is around 7% compared to 3% for RLI. Break-even is probably faster if I add up the payout and bequest, though I won’t see the bequest in my grave. CPF-Life is a very competitive offer, so I’m willing to commit the maximum , around 300k.

So RLI (along with Tri-gen and Universal life) is no match for cpf-life in my humble opinion. The strongest competitor to cpf-life is Allianz Income Protector but still pales against cpf-life in my humble opinion.

DBS multiplier is great due to low commitment, extremely high liquidity, no waiting. That’s why I don’t mind 2% return.

In conclusion, I have mentioned 5 “better” products than RLI
1) blue-chip dividend stocks — to be increased
2) CPF-life — heavily analyzed… cumulative 50 hours spent over 3 years
3) rental properties — already bought a few
4) DBS multiplier — used for a year
5) gold — to be increased

I’m always open to consider new products including insurance. You can see I hold many medical insurance plans, with no surrender value. In contrast, I think life insurance products are always too safe, too slow growing, too much waiting required, too much commitment, too rigid, too illiquid for me.

your deposit amount=bank’s risk capital #ownership

Posted on Thu, 26/Nov/2020Sun, 21/Aug/2022 by tiger40490

A physical gold transfer from BankA to BankB within the asme vault .. gold bars are physically relocated from one room to another room.

A 9b (or 100k FAST) transfer from SCB to BOC .. I feel there should be some physical movement. With both banks’ written agreement (persisted on immutable storage), some assets should be physically moved. The amount of assets controlled by SCB must reduce by 9b. Which system controls and enforces the amount of assets owned by SCB vs BOC vs other banks? We can’t let SCB control it, so a third-party is needed… how about the central bank?

Opening eg: If you are planning retirement, then ask yourself how soon you need to withdraw your deposit. If some amount might remain indefinitely in the bank, to be passed down the generation, then don’t worry about that amount. If a big amount (say, 700k) would be withdrawn in your lifetime, then you need to assess how soon you need it. If you need 100k fairly soon, then some of the institutions are unsuitable, including hedge funds. You would need something closer to a safe_deposit_box.

(I will use POSB or citibank as the stereotypical bank.)

— simple case: gold necklace stored in a bank’s safe_deposit_box. It’s not “usable” by POSB productively, so POSB pays you no interest.
— bank savings account.. the most common (and important) case.
For a bank, risk capital is any money to be lent out at some prime rate. In another simple example, risk capital can also be invested in stocks. Risk capital can also go into a FX inventory, which is required for a FX dealer desk.

Every 1k deposited in a simple savings account can be withdrawn any time, so by right POSB can’t invest it as risk capital. Based on statistics, most (like 90%) of the deposit amounts “stay” with the bank for a month or longer. Therefore, POSB does invest (bulk of) those deposit amounts as risk capital, but it really doesn’t matter, because there are many layers of buffers/contingencies whenever POSB receives a large withdrawal request — POSB can borrow in the overnight market; POSB can liquidate certain securities; Central bank could step in;;;

These well-developed “resources” basically mean that there’s zero chance that your withdrawal would fail. Given the high confidence everyone has in the system, we can safely assume that your 1k is as liquid as in a safe_deposit_box like gold coins, and available whenever you need it.

When you earn and deposit 1k to POSB, both POSB and you see a 1k increase in available asset. This is one example of how 1k multiplies to 2k
* Whether you add to time deposit or savings account, your net worth increases by 1k. This new 1k is ultimately owned by you but you let POSB use it productively [i.e. lending to people who need it].
* POSB has up to 1k additional risk capital for lending, so its balance sheet increases by (up to) 1k. If the 1k is in a 3Y time deposit, then POSB would be even more confident using this risk capital. This confidence is based on statistics.

Another important example of how 100k multiplies to 200k+… An investor/immigrant earns[1] and deposits 100k into citibank, to set up a company. Her immigration visa basically requires her to keep the money invested in a local business for a few years. Given this commitment, the local economy expands by (at least) 100k. The investor herself is obviously 100k richer due to [1]. citibank balance sheet also expands by 100k.

— CPF .. your “deposit” is held long term at the cpfBoard, similar to a time deposit. Therefore, your 1k is invested by cpfBoard as risk capital in risky assets. Thanks to similar “resources”, there’s zero chance your withdrawal would fail. Therefore, you can safely assume a time-restricted safe_deposit_box

Beside individuals, a family can be owner of an asset. A company can be owner of an asset. A government can be owner of an asset. Some may argue that the GIC or Temasek assets are ultimately owned by citizens, but I would say “not so simple”. There are constitutions governing the ownership and control of these collective assets.
— tenant deposit .. landlord is supposed to keep it in a safe_deposit_box, but I don’t think any country’s tenancy law has that requirement. Landlord can and do use the deposit as risk capital. At move-out, if the withdrawal amount is large, then this “bank” can fail.

“Ownership” is important concept here — the deposit is tenant’s asset.

— hedge fund .. as client, your money (not “deposit”) is risk capital, and there is a contractual understanding that you could lose most or all of your risk capital, esp. if you withdraw too early. If you commit for 5Y, then there is often contractual promise (not “guarantee”) of a minimum return. If there is a promise, then you can assume a safe_deposit_box, similar to the CPF scenario.

When you earn and invest 1M with a hedge fund, both you and the fund see a 1M increase in asset.
* your net worth increases by 1M. This 1M is ultimately owned by you, but you give control to the hedge fund for a few years.
* the hedge fund’s AUM increases by 1M
— Mufu .. your 1k buys, say, 88 units of the fund. Those 88 units are held in a digital safe_deposit_box bearing your name. However, the unit value fluctuates, so you can lose all your money.

every SGD dollar=backed by hard asset #ownership

Posted on Mon, 09/Nov/2020Thu, 10/Oct/2024 by tiger40490

As of 2020, the total currency in circulation was S$57 billion.^[6] This figure was 29 billion in 2012. All issued Singapore currency in circulation (notes and coins) are fully backed by external assets in its Currency_Fund to maintain public confidence. Such external assets consists of all or any of the following:^[9] (a) gold; (b) foreign exchange in the form of time deposits; Treasury Bills; (c) securities of (or guaranteed by) foreign governments or international financial institutions; (d) equities; (e) corporate bonds; (f) futures; (g) other asset.

As at 31 March 2017, MAS’s assets (S$395 billion) were more than seven times larger than the assets of the Currency_Fund (S$55 billion).

Official Foreign Reserves (mas.gov.sg) shows similar history levels for end of 2017. By the way, the end-2019 level was below end-2018, possibly due to covid19 preparation

As part of the MAS total assets, Singapore’s foreign reserves officially stood at over US$288.2 billion, as of July 2022 according to the MAS.^[11] This is confirmed by the monthly query result on MAS Monthly Statistical Bulletin – IV.7 Official Foreign Reserves

2022 Q1 gold.org/IMF data shows similar numbers:

SG total reserve [sum of the below] = USD 434.4 billion
SG FX reserve = USD 424.8 billion
SG gold reserve = 153.74 tonne = USD 9.6 billion, or 2.2% of total reserve

MAS assets including OFR+gold add up to S$580b as of Feb 2022, but excludes assets managed by GIC and Temasek. All of them are owned by the the SG gov, operated by the PAP administration. See “oil money” below. Comprable to the Nobel memorial fund, or the Harvard endowment fund, it is not owned by any SG citizen. The private money held by SG citizens would add up to a separate amount. In contrast, the assets in CPF is 100% owned by individual citizens (simplest case), not owned by SG gov; the assets of IBM is 100% owned by shareholders. One shareholder could be Intel, another could be SG MAS.

Each (portion) of the SGD 29b was created exclusively by MAS, either physically or (presumably) electronically. Electronically means deposite into a bank account. Every physical note has a serial number. Either physical or electronic, a new SGD 1 represents a kind of “claim” on the $55b CurrencyFund.

— owernship of CPF money

Backgrounder: In general, every amount has an owner. (A central bank and a government is also a kind of owner.) MLP managed 40b but each dollar has a known owner. When Intel invests $100m free cash, that 100m is “owned” by Intel, but Intel stocks are owned by millions of investors including institutional investors. Ownership is complicated by holding companies and investment trusts.

1. CPF money belongs to individual Singaporeans, and not government’s money. This ownership difference must be understood first. If $200m CPF money (including my money) is managed by GIC, then this $200m is not “government’s money”. See MOF | Is our CPF money safe? Can the Government pay all its debt obligations?

2. CPF money is invested with a fund manager — GIC. GIC also invests “government’s money.” The dual mandate of GIC is extremely confusing until you understand the ownership. Similar to GIC,

GSAM, was managing client’s money, employee’s money and Goldman’s house money.
MLP was managing client’s money and founder Izzy’s family money

— oil money .. when oil appreciates, many gulf countries became richer. Basically, the central banks and treasuries became richer with a bigger OFR.

Q: Who have the ultimate ownership of the oil assets (+ the derived cash)? Some say the king, some say the citizens, but I would say “not so simple”. The government is the proper owner, as stipulated in the constitution.

minimum population required for an independent country

Posted on Thu, 05/Nov/2020Fri, 20/May/2022 by tiger40490

The minimum could be half a million, but such a country would be overdependent on “externals”. The survival of the country would become more sustainable if the population approaches 10M. I can understand the PAP gov is hoping to grow Sg population beyond the current 5M.

Citizens making more babies — is better (than immigration) in terms of loyalty.

Skill-based immigration — is better in terms of gene improvement in the implicit global competition.

For a small national population (like 700,000), internal unity is extremely important. One element is racial harmony.

— unskilled national population .. Some subset of the national population would be low-skilled. If left to their devices, a portion of them could become a dead weight. Dead weight is heavier to a small nation than a big nation like Australia.

The government need to encourage them to upskill, get their children educated, and still provide jobs for them, so they don’t become dead weight — unemployed and reliant on welfare.

##2007 OFR per capita: SG=top2

Posted on Thu, 01/Oct/2020Sun, 26/Jun/2022 by tiger40490

Note data below includes OFR + gold holdings of each central bank.

https://www.nationmaster.com/country-info/stats/Economy/Reserves-of-foreign-exchange-and-gold-per-capita 2007 data shows

#1 SG at USD 35k/citizen
#2 HK at USD 22k/citizen

https://www.citypopulation.de/en/world/bymap/financialreserves/ has 2016 data.

Small countries like Sg and HK need big OFR to defend their currencies, and prevent imported inflation.

— per country .. (less important for this blogpost)

https://data.worldbank.org/indicator/FI.RES.TOTL.CD?most_recent_value_desc=true 2021 data shows total OFR

#1 Chn
#2 Japan
#4 USA
#5 India
#7 HK .. USD 497B
#10 Sg .. USD 425B

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Category: retire