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Elijah Lee

Helping busy professionals achieve their financial dreams and aspirations with sound, logical advice and planning.

Elijah Lee

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Financial Advisory Consultant at Phillip Securities (Jurong East Lite)

721Upvotes

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Helping busy professionals achieve their financial dreams and aspirations with sound, logical advice and planning.

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Financial Advisory Consultant at Phillip Securities (Jurong East Lite)

Elijah Lee

Top Contributor

Financial Advisory Consultant at Phillip Securities (Jurong East Lite)

721Upvotes
  • Answers (157)
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Property

Try to ensure that you maintain the first $20000 in your OA, as the extra 1% interest will be credited to your SA to help fund your retirement. Don't sacrifice your retirement just to own a bigger flat. In a pinch, having $20000 buffer in OA will help you to pay the loan should you go through a period of unemployment.

Insurance

Given your age, I would opt for 20 or 15 years at most. The most important thing is to ensure that you finish paying premiums during your working life. The difference between 25 and 20 is not usually too much, although the difference between 15 and 20 might be steeper. Between 15 and 10, the difference might be too steep. Also, if you took option 1, it may be that you are not having too much for investing now, but your $4100 commitment will end in 10 years, freeing up more budget for investing. So you will likely need to strike a balance. Not forgetting that as you continue to work, you salary will increase and you will be able to have more funds to invest. It is all about striking a balance. Lastly, do ensure you get a quote across multiple insurers in order to ensure you are getting your coverage at an optimal cost. You might want to consult an IFA like myself for this.

Investments

I echo the sentiments of the other answers here and will recommend you seperate insurance from investments. You can do better investing directly or via an advisor without being subjected to the myraid of terms and conditions that come with a policy contract.

Investments

Unit Trust

Equities

Hi Melissa, generally, I would advise you to consider the costs of investing before you start. Equities have brokerage, etc which can add up to a significant cost and reduce your returns. I would try to achieve lower than 0.5% cost, which means that my equity transactions would be at least $5000 at a minimum. Having said that, you can start to put away a warchest to prepare for deploying into equity, while participating in market movements through UT RSP, this two pronged approach ensures that you can start to build an investment position while preparing for buying shares in future. As POEMS has no charges for UT, you may want to consider the platform for this. Some UTs have very respectable returns, beating ETFs over the long term. You can contact me if you need to open a POEMS account.

Savings

Investments

For a start, you will need to ensure that you have an emergency fund in case of emergencies. You will want to ensure that this is at least 6 months of your (estimated) expenses when you start working. After that, ensure that you have at least sufficient critical illness and hospitalization coverage. Your parents might have gotten you some earlier, so you might need to sit down with an independent advisor to see what shortfall you might have and addess the gaps. After this, you will be ready to start investing. As you are still young, spend time to gain knowledge to see what your risk appetite is, and what sort of asset classes may suit you. Again, an independent advisor will be able to guide you through this. Platforms wise, you can consider POEMS as it is a multi asset platform which has most asset classes on board. Savings account will depend on your expenditure patterns, etc. Depending on that, most people will use either OCBC 360 or DBS multiplier. To maximise usage, consider first if you are a cashback or miles person. I have answered several questions similar to yours, so browse my history to get slighty more in depth answers.

Investments

Insurance

Investment Linked Policies (ILP)

Hi Anon, The subject of surrendering is rather tricky to answer, however, I would urge you to ask yourself a few questions here first: 1. Why did you get the policy in the first place? 2. What do you want to achieve from the policy? Are you ok with the risks? 3. Are you able to sustain the premiums? 4. Do you understand the conditions of the policy, especially with regards to the fees and the charges? 5. Did you look at the Benefit Illustration and calculate the real return to you? (A published 4% return will work out to be lower, the only question being what is the return to you as the investor) 6. Are you going to be managing the funds and the rebalancing, or is the advisor going to do it for you? 7. Are there better options for your money given your risk profile and time horizon? You can change the policy to monthly, but then it will only take effect from the next policy year. Without the specifics of your policy, I am not able to give a full opinion, taking into account that fund selection will have an impact on the outcome. If you'd prefer a more in-depth discussion, do drop me an email at [email protected] and we can converse there.

CPF

Money FM 89.3 Show

Savings

An extra 1% interest per annum is currently paid on the first $60,000 of a member’s combined balances (with up to $20,000 from OA). (Quote from CPFB) Hence, extra interest earned is earned on both SA and MA, so as long as you have $40K combined in MA and SA, you'll get an extra 1% on them. There's no need to have $40K specifically in SA, so a 50/50 split will work (i.e. $20K each in SA/MA). The remaining $20K in OA will also earn the 1%, but it is credited to your SA. Beyond those limits, Hariz and Larry have given some options to consider for the excess money. Usually, I don't advise my clients to invest SA, since 4% guaranteed is pretty difficult to beat. I find that I'll have to be getting at least 6-ish percent returns on my SA to have it worthwhile since I'm exposing myself to market risks and volatility.

CPF

Money FM 89.3 Show

Savings

Retirement

No right or wrong answer, but I do advocate ERS if there is sufficient liquidity elsewhere. For example, if you have something like $1 million in liquid assets, increasing your SA to ERS will only require $88K if you are 55 this year, which is a mere 8.8% of your asset base. The trade-off is that it is a one-way thing, so you will only receive the money back in the form of CPF Life payouts. However, a guaranteed life annuity with this kind of payouts backed by an AAA-rated government is practically impossible to find, so it is a trade-off between having control of how you generate income from your assets or relinquishing part of the control to CPF. I often find that if one has easy access to liquid funds, they usually don't last very long since we tend to under estimate our spending patterns. Consider your risk appetite, existing income assets, and ability to manage your investments before taking any action.

CPF

Money FM 89.3 Show

Savings

Hariz has given an excellent answer, but just to add on here: 1. The best time to contribute is at the start of the year. CPF interest is calculated monthly, but credited and compounded annually in December. So $7K contributed in early Jan earns $280 more compared to $7K contributed at the end of Dec. I experimented with this myself and although I can't get the exact figure, contributing earlier seems to result in a little more interest. 2. The faster you hit FRS, the faster you can let compound interest take care of the increase in FRS sum that occurs every year. 3. The tax savings from the contribution can be quite decent. More tax savings = more money for investing. Over time, this builds up.

CPF

Money FM 89.3 Show

Savings

The advantage would simply be the accelerated impact of compounding in SA. I sometimes wish I had done that earlier in my 20s, as 10 years does make a difference. (In my case, I would probably have around 50K more in SA by now if I transferred every cent during the first 2 years of my work) It will help you get to FRS faster, and you will worry less about the FRS going up year on year. If your sum in SA is sufficient, the interest alone will negate the yearly increase in SA, and help build your retirement safety net. Having said that, it is a one-way thing, so you will have lesser CPF OA funds available for housing, education and the like. You will have to weigh your options based on where you are in life now. However, I do advocate leaving at least $20K in OA as that earns 3.5% interest, which is not too far off from 4%, but still gives you the flexibility to utilize for housing payments, etc.
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