Category: retire

old retirement, not “retire young”

SG government offer=theBest #Aaron

Posted on by tiger40490

“Whenever there are competing products to the Singapore government’s offer, the government one is always the best and the most competitive”.

, my DBS financial adviros Aaron commented. Our conversation was about protective financial “schemes” most Singaporeans would need. We didn’t go through each item:

  • [c] long-term savings — CPF pays the highest interest on the market
  • [c] annuity
  • [c] medishield and eldershield
  • [c] universities — high quality, highest quality/cost ratio
  • [c] mortgage — HDB mortgage is often the most forgiving
  • [c] HDB fire insurance?
  • [c=citizens get the most benefit, followed by SPRs]
  • — some exceptions:
  • ??

Q: can we say the same about U.S.?

MYS ^ outskirt@SG

Posted on by tiger40490

Background 1; I used to focus on d2stadium, d2lib. Now only d2mrt is important. In my older days, even d2mrt would lose its significance to me. Remote parts of SG might be best. See also remote HDB locations.

Background 2: In my retirement planning, My default crbr is SGD 3k. Housing is a $0 net cost, assuming I live in Toa Payoh.

Sugg A: If I choose to live in a remote outskirt of SG (Choa Chu Kang, Yishun, Sengkang,,,), then housing can become a net profit domain, due to lease spread. Suppose this figure is 10% better than the default.

Sugg B: Malaysia retirement is a natural extension of outskirt SG. It should produce even better crbr and brbr, more than 10% better than default. Malaysia retirement remains an important backup option. If feasible, then it is likely to reduce my crbr (couple retirement burn rate) by 20%, partly due to rent, food and transport. In another blogpost, I estimated nutrition as 50% of crbr.

Remember, during retirement, brbr still matters esp if I descend to cash flow low ground.

CPF-IS: FSM,agent bank #2merge with other post

Posted on by tiger40490

Selected FSM-stocks and FSM-funds can use OA under the CPF-IS, but biggest problem is agent bank fees.

For FSM-funds, there’s no upfront no trailer. Essentially free service by FSM.

For FSM-stocks, there’s no trailer but there’s a $10 minimum upfront (transaction fee).

For both, there’s an upfront and a trailer fee by charged by agent bank 🙁

gold^property^annuity : long-horizon

Posted on by tiger40490

This blogpost is mostly long term considerations and focused on (51%) gold, as a long term preservation and diversification. Beware gold is NOT a growth asset

I have done enough (too much?) thinking and discussing on insurance products. This analysis builds on that.

— Different holding periods to realize the partial capital protection
Both gold and insurance are non-growth assets providing reasonable long-term “capital protection”. This partial protection have multiple limitations beyond inflation.

In the “standard” scenario, both require holding power for potentially long period. In special scenarios both can show quick return.

  • Insurance , not gold, delivers non-negative return as soon as you die (or TPD).
  • Gold , not insurance, can show a positive return depending on market

— current income … (long-horizon consideration?)
gold is hopeless. In fact it has negative yield.

Reliability and credit rating is higher with CPF-life than my other non-work income sources. However, rental income tend to grow.

— windfall appreciation:
annuity is hopeless

In normal to good times, properties are promising. In the long run, U.S. properties outside a few special cities, do NOT show strong appreciation.

In very bad times, gold can appreciate hugely.

— long-horizon inflation risk:
Annuity provides a fixed payout that fears inflation.

Globally, annuity returns usually derive from bonds. As global life expectancy grows, there might be increasing allocation to bonds on the global level. Long bonds fear inflation.

I feel rental and dividend assets are an inflation-hedge but increase credit risk (+market risk)..

Gold is the strongest currency over long horizons.

— long-term wealth preservation esp. through black swan crashes
No “asset” is 100% safe, fire-proof, war-proof, everything-proof. Among them, Gold might be the best, if you find a way to store it safely in the local city, and if liquidity remains high.

In war, cultural revolution or famine, your gold (or any asset for the matter) will not buy you food, medicine or air-tickets !

Gold’s long-term appreciation doesn’t depend on local economy whereas property can fail if the local economy fails. Other investments also pose higher (market, credit, country…) risks over longer horizons.

I have very low (below 1%) allocation to stocks currently but when my allocation grows to 10%, gold hedging may become important.

— high maintenance?
annuity is best; property is worst.
Physical gold requires storage. Perhaps some paper gold can be considered.

— liquidate when you must, in X years?
Insurance is the right asset to liquidate when you have an “acceptable” reason to liquidate such as TPD. You are not subject to the market condition in X years.

If you need to liquidate for some other reason, then all three liquidations can be …. unprofitable, poorly-timed, depending on the X. In this scenario, gold has a better chance of being profitable.

— logistics of liquidating:
gold is way better, but still has limits. Consider war time. Your physical gold (and properties) would be hard to liquidate if you happen to be in the war zone.

— difficulty of holding long term. Nothing new here. See items above

— legacy:
legacy depend on many of the factors above.

Gold is the easiest to inherit, or to manage, by inexperienced family members including my wife.

annuity has a bequest amount, which shrinks as I live longer.

 

1M65 plan by MrCPF #w1r2

Posted on by tiger40490

This short CPF site article has some simple insights derived from Loo’s personal story. Loo’s $1M by 65 is more realistic than many other popularized financial targets.

earn/save/invest .. With Loo’s profile unknown, here’s what we can deduce — Loo is good at saving, and his investment skill shines at CPF-SA.

— current income .. Loo puts too much in CPF-SA with $0 current income, but he likes div stocks.
— inflation .. an unspoken risk when you lock away so much cash for so long. Loo basically bets on SG government to contain inflation risk
— OA->SA transfer .. was a major method.
— unpalatable liquidity of CPF-SA … is the price for the extremely competitive riskless compound 4% growth
🙁 He can’t use the SA fund for education or housing, but after 55, he could pledge his HDB and withdraw the free portion above BRS.
— burn rate habits: Loo’s habits are same as mine.

  • “simple holidays”
  • rent-out individual rooms
  • renovations

— Singaporeans’ popular reasons for wanting to be rich:
Loo polled readers on their reasons for wanting to be rich. (Presumably Singaporean respondents.)  An overwhelming majority answered they wanted to be rich so they could retire and not work anymore. The response made him wonder. While there is nothing wrong with wanting to be rich Loo believes the pursuit of wealth should be for the right reasons… not “stop working and wasting life”.

Likewise, Jacob of ERE pointed out “after we solve the free-from problem, we face the free-to problem”.

 

(necessity)big-tickets pre55 #boy20.5@2029

Posted on by tiger40490

Before 55, I can housing refund 150k to cpfOA. This amount will lose liquidity.

Q: … but if there’s nothing to require the $150k, then who cares? This blogpost is mostly about the necessity outlays, rather than discretionary items, that I may need before 55.

Note Any time after 55, I can withdraw everything else after committing BRS to RA.

Note on my 55th birthday in 2029, boy is aged 20.5.

Conclusion — to gain 2.5% interest I give up a few year’s liquidity. Not worth it.

— big-ticket: SG home upgrade. Can use OA not SA.
For the proposed OA->SA top up, This big-ticket is perhaps the only big-ticket.

— big-ticket: stocks or gold? Not necessity nor big-ticket items but yes I might want to invest and build up sizeable amounts.
— big-ticket: Medical cost? I think am taken care of in SG (see the blogpost on Cushions), and will be taken care of in the U.S.
— big-ticket: college funding? Discretionary item, as I don’t want to take it on as my job, _b_u_t_ the more spare cash I have, the more flexibility. More importantly, this expense happens mostly after I turn 55. At 55, my son is only 20.5

— big-ticket: U.S. property investment? Discretionary item _b_u_t_without it my rental cost is quite heavy.
So far, I have preferred Asia properties.

When I move to the U.S. I probably want to invest in properties using USD, not SGD.

 

%%CRBR]SG: improving over past10Y #R.xia

Posted on by tiger40490

see also

Based on a mail to my friend XR, on retirement burn rate in SG.

Q: Inflation hits everywhere including public transport and food, so how come my prospect of Singapore CRBR has improve over the last 10Y?

— expected wellness costs remain unchanged. Insurance cost would increase with age but no surprise.
— food:
I now eat more raw fruits and vegetables.

  • Most fruits are inexpensive and I avoid those rare fancy fruits.
  • The vegetables I eat raw are always cheaper than any cooked food.

There are many low-cost food options that I didn’t notice 10Y ago. For example,

  • frozen food is both healthy and cheaper than fresh.
  • Smoothies are now part of my daily meals and I prepare it at home, at very low cost.

My meals are smaller than 10Y ago.

When I go beyond fruits/raw-veg/smoothies and eat hot food, I eat mostly home cooked, compared to commercial food 10Y ago. I bring leftover of home cooking to office, so I seldom need to buy commercial food.

I have also cut down on fresh bakeries by 70-90%. Most of the bakeries I eat are bought my other people, so I may not know the cost.

If my average meal 10Y ago costs $3, it is now 70% like $2. Therefore, a fancy restaurant meal is now 30 times my average meal cost.

—  transport:
fare inflation is very easy to observe. It has not gone up as fast as I worried 10Y ago.

There are also senior citizen fares that I didn’t notice.

I guess the elephant in the room is car ownership. 10 years ago I often toyed with the possibility of owning a car when I have a bigger family. Most of my Singapore peers, younger or older, seem to drive nowadays. Unlike them, I don’t want a car in Singapore. Am now more comfortable using public transportation and bicycle, because I’m slowly mellowing up, growing more patient with my commutes.

max out CpfLife P2: How #liquidate

Posted on by tiger40490

See also

— @55 is the time to MAX-out on cpf-life

As I confirmed with CPF hotline, let’s compare two twin brothers aged 55 around 2030

  1. AA has extra balance in OA or cash, so he immediately tops up (straight into RA, without split) up to the ERS watermark (eg 500k). Each year thereafter, ERS watermark would rise (by projected 3%), but new ERS watermark would never exceed his 750k balance accruing at 4%.
  2. BB only hits max at or after age 65, to the 2040 ERS watermark. This ERS watermark is most likely far lower than 750k, probably something like 600k.

AA’s plan is the max-out plan i.e. his cpfRA snapshot65 would be the maximum possible.

In terms of the growth of 500k in their wallets as of 2030

  1. AA relies on 4% compound over 10Y by CPF
  2. BB relies on his own investments, which could produce higher return in some years and lower return in other years

In terms of liquidity of the 500k

  1. cpfRA balance has the worst liquidity.
  2. your own investment can also get stuck around age 65, so you are unable to liquidate it for CPF-life

CPF online estimator shows that as of Sep 2020,

  • for someone born 1955 (age 65 in 2020), 275k would immediate generate about $1400/M in basic plan. Assuming 275k is the ERS, then this person is not allowed to top up beyond 275k.
  • for someone born 1965 (age 55 in 2020), 275k (would become some bigger amount) would generate about $1900/M payout
  • Suppose the twin brother of 1965 guy delays top-up by 10 years, and then does a top-up to 275k (not the new ERS), I bet his payout will be closer to $1400 than $1900. By this time, his early-saver brother has grown his 275k to 410k (monthly accrual), generating $1900/M

So the early top-up guy receives significantly more monthly payout due to 10Y loss of liquidity.

— My current plan — grow some 200k in my own investment account outside cpf. Then top up cpfRA only at the last moment.

  1. Before 55, double-check and triple check that green_portion is feasible.
  2. Once confirmed, if I have 500k cash including FLI150k but excluding USD, I might permanently lock up 50k in the RedPortion of cpfRA.
  3. .. (If you top up 50k to cpfRA at age 58, then this 50k would be locked in for a lengthy 7 years until it transfers into cpf-life and starts “producing milk”.)
  4. Before wife reaches 55, we will build up towards her green_portion of cpfRA (unborn). See [25]build up150k]wife’s green portion – dTanbinvest
  5. When wife reaches 55, I will take stock of my SGD liquidity position (600k?), USD cash position (200k?), income security,,,,
  6. Approaching 65, progressively liquidate assets to aside enough cash, not necessarily the full ERS.

— what assets to liquidate
See also ## assets2designate as legacy #after65

  • My 3 annuities
  • My USD idle cash
  • If I live in the U.S. at that time, then liquidate Asia properties. Hopefully they have recovered by then.
  • If I live in Asia, then liquidate U.S. properties.

max out cpfLife P1

Posted on by tiger40490

CPF-LIFE Liquidity is terrible, inflation-protection is limited (i.e. Escalating payout plan), although payout_rate is high (Y cpfLife payout_rate so high). I worry about imported inflation in Singapore. Assuming I have enough reliable non-work income already, I might put in (and lock up) the minimum amount.

— why it’s a plausible idea to do the max-out only close to 65:

If you top up close to age 65, then no waiting-period like the “accumulation phase” in commercial annuity or endowment policies. At age 65, I top up 100k to RA and immediately start receiving payout from this 100k top-up. Too good to be true but I did confirm with CPF. Estimator also shows that for someone born 1955 (65 in 2020), a 275k balance (top-up) would start producing right away.

— compare to other annuities

Allianz annuity as(poor)cousin@CPF-life provides the best argument why I favor CPF-Life among all annuity products.

I have 3 commercial annuity products [FLI2, FLI2PF and LTIS]. How likely am I to hold them past 65? I will avoid giving a biased impulsive answer. IIF I were to hold these till 65, then I should reduce cpfRA top-up due to inferior liquidity of cpfLife. My commercial annuity products are fully liquid. 

— compared to other nonwork incomes

This CPF annuity has the worst liquidity but the best credit rating among all my nonwork income generators. Zero currency risk.

At 65, my risk appetite and risk tolerance are relatively low, so it may be appropriate to liquidate my overseas or local properties to hit ERS for both me and wife, but total sum would be SGD 700k in cash, possibly too ambitious.

— Warning — CPF LIFE return is higher for a person who participates only with the BRS. When you double your CPF LIFE participation amount from 90.5k to 181k, your payout range is not doubled ( $1,390 is less than 2 x $750 ). This can be easily seen from the projection by CPF. Why?

Answer from CPF officer: it’s all due to tiered (non-linear) interest rate. First 30k earns additional 2%; next 30k earns additional 1%. No magic.

So if SGD 700k cash is challenging, we should try to hit lower targets for both of us.