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Retirement

Making sure you have enough for the later years

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SG Budget Babe

Family

Retirement

You can write a will as long as you are above 21. Unfortunately, most people will not have written one yet. Once you have assets, you should ensure that in the event of your demise, they are distributed the way you want them. If you didn't write one, you die intestate and the Intestate Succession Act takes over, distributing your assets according to the 9 rules (and the last rule, if reached, means your assets goes to the government...do you really want that happening?) The sole exception is if you are of Islamic faith, then my understanding is that different rules apply (I am not trained in this area. Even more reason for you to have a will to make sure your beneficiaries get what is intended by you, not the state) Additionally, to start to distribute the assets, you'll need to apply to the court for a Grant of the Letters of Administration if there's no will, or a Grant of Probate if there is a will. Guess which takes longer? Now, even with a will it doesn't mean things will go smoothly. I've seen complex cases when it comes to estate accounts and in-fighting within the beneficiaries...and that's with a will in place. The distribution of assets dragged for 3 years . Imagine if there wasn't any. It would be far worse. Beyond just having a will, the Lasting Power of Attorney is equally important, it is basically the instruction manual for someone (donee) in the event that you are alive, but unable to manage your affairs any more. And the Advanced Medical Directive is also another factor for consideration.

Retirement

CPF

Supplementary Retirement Scheme (SRS)

Hi LH, SRS as a scheme was conceived to encourage Singaporeans to save more for retirement. To attract people to contribute, tax relief on SRS contributions was introduced. My thoughts and the key things you need to take note are: - You can open an SRS account online with a local bank. Just put a dollar in. There's no need to go down to the branch - Contributing to your SRS will 'lock in' your future withdrawal age at the prevailing retirement age when you contribute (currently age 62). So just lock it in first, even if you don't intend to contribute - Contributions are voluntary , subject to a cap (Cap amount is depending on whether you are SC/PR or foreigner). Even if you have high income tax to pay, but you need the cash flow (e.g. due to family expenses), then it might be better not to contribute even though you won't be able to reduce your tax, as your cash is needed for day to day matters - Your SRS contribution will reduce your income tax as it confers tax relief. If you don't have any income tax or low income tax to pay, it may not be worth contributing . If you have a lot of reliefs (I see this often with working mothers), it may also not be worth contributing too. Generally, I'd recommend looking at SRS if you are in the 7% bracket, and definitely contribute if you are in the 11.5% bracket. - Your SRS monies can be used to invest (please don't leave it lying in the bank) in various asset classes, and you will need to know the pros and cons of each asset class to see what suits you, along with how this ties into your overall retirement planning. - Your SRS can be withdrawn prematurely but with a penalty, unless under exceptional circumstances. Foreigners may withdraw if they leave Singapore for at least 10 years. - After you reach retirement age, your first withdrawal will trigger a 10 year withdrawal period whereby you should withdrawal your SRS holdings by the end of this 10 year period - Half of your withdrawal is considered your income stream (still subjected to income tax calculations). If you don't withdraw, you can keep your assets in the SRS account. A complete analysis of SRS and how it fits into your financial situation will be possible if you are able to provide more information, or if you sit down with an advisor to discuss. But those key points should provide you with some information to start. Due to practical limitations and to prevent this answer from turning into a novel, I can't elaborate on all the points above in writing. To answer your second question on how many people actively claim the tax relief, I was able to find the number of SRS account holders at end Dec 2018 to be 156820, so I can hypothesize that the number will be around there. ( https://www.mof.gov.sg/docs/default-source/mof-for/individuals/srs/compiled-srs-statistics-2019.pdf ) Incidentally I am conducting an SRS seminar in Dec, and you might want to drop by to hear more. I'll put the link in my profile soon.

Investments

Retirement

For singles without a need to leave a monetary legacy, you can do an active drawdown retirement. Just make sure you have your downsides protected with insurance for both pre retirement and post retirement. I would suggest to have 50 to 70% of your retirement income be from a guaranteed income source (coupon and annuity payouts) and 30 to 50% from a variable source (rent, dividends). And do not under estimate your life expectancy. Either prepare for a lifetime income or at least till 90 years old.

Personal Finance 101

CPF

Retirement

Hi Michelle, In theory, MA has more uses. You can use it for your medical expenses, pay for your medical insurance, etc. SA is really for the sole purpose of retirement. Coming from that angle, some people will want to top up MA first. However, you may want to consider the fact that MA has a hard ceiling (the basic healthcare sum) and if you're working with regular CPF contributions, you will eventually reach that. From that standpoint, topping up SA will accelerate your retirement fund, and in the end, your retirement fund produces tangible payouts in the form of CPF life. MA monies are pretty much untouchable. So from that angle, topping up SA becomes attractive. Personally, i do both. MA because it's mandatory for self employed people, and SA because my retirement is important to me.

Investments

Retirement

Hi anon, If you have $385K as cash savings, be sure to segregate your emergency expense fund first; this is usually at least 6 months of your expenses, and 12 to be safe. I'm going to presume that you have also settled your insurance coverage. Any amount over and above that emergency fund can be used to invest; I'm going to use a ballpark figure of $350K for illustration purposes. You'll have to earmark an amount as a warchest for market opportunities, but there should be no issues to start to deploy anywhere from 25%-50% of your cash. If you wish to get passive income to give you the option to stop working, then you will want to invest in income producing assets. These take the form of both guaranteed income and variable income. As you still have the capacity to work, add on to your investments over time so that you can grow your investments to something more. At 4%, $350K generates $14K/yr, which, depending on your lifestyle, needs, etc, may not be quite sufficient enough. The exact composition of your portfolio will depend on your preferences, so take some time to understand the various asset classes available to you, before you create a portfolio. An independent financial advisor can assist you on this. Once your passive income flow from your investment portfolio exceeds your basic expenses, you'll achieve your goal. Hopefully my answer will give you an idea of what to look out for, I can only give a general guideline based on the information you have provided, but if you need a little more analysis, feel free to reply to this post.

Stocks Discussion

Investments

Insurance

Savings

Family

Retirement

Career

Lifestyle

Depends on your area of concern. If you are referring to investment, I have compiled a list of financial crisis and reasons not to invest since early 90s. But year after year, the market outperforms the critics. Therefore, it has no impact on my investment, unless I am a speculator and not an investor. If you are referring to career, unemployment is everywhere. Likewise for recruitment. The only way to stay in a job is to stay relevant. So long as I have skills, knowledge, and experience, I won't be jobless. In summary, regardless of market movement, life goes on. Just do proper planning for myself and stay focus on my long-term goals. At the sae time, remind myself not to be distracted by short-term obstacles.

Investments

Savings

Retirement

CPF

Insurance

Hi anon, AIA SWB is a perpetual endowment plan. First, you'll have to ask yourself: What do you need this plan for? If it doesn't fit your need, then there's no need to get a plan If you are planning for a definite timeframe goal (e.g. future children's education), whereby funds must be needed, then such a plan might fit into your needs. If you are planning to accumulate a portion of your wealth with a floor (the guaranteed component) that grows over time, then such a plan might fit into your needs, since you are cushioned from negative market impact. If such a plan fits your needs, then you'll want to consider comparing across multiple insurers to see your options (many insurers carry perpetual endowments), and evaluate factors such as the guaranteed component and non-guaranteed component to find the most effective plan for your money. An independent financial advisor can assist you here. I had a client get this type of plan recently because she wanted to set aside money for her new born son's future education, but wasn't sure if he'd go through the JC or poly route, and thus no idea of when he would enter university. She needed a guarantee on her monies with a decent return and flexibility to draw down when the time came. Please note that I wouldn't classify such plans as passive income, because you'll have to manually draw on the policy value each time you need to withdraw funds, if you don't, you don't get any income from a plan like this. Contrast this with an annuity which will pay you automatically on a monthly basis when the time comes. Is CPF top up better? Yes and no. RSTU will give 4%, but you are not in control of when you can get the money. If policy changes occur, you might end up waiting longer than expected. Also, you can't take anything from SA till 55, which might be a little too far away for your liking. However, in such cases, I'd divide and conquer. Nothing wrong with locking up some monies in CPF SA for a higher guaranteed return, but having your own perpetual endowment for easy access to monies down the road. I'd normally recommend just a short payment term, as the guaranteed returns only start becoming apparent when the premiums have ended and the plan is running for 5 to 10 years.

Retirement

CPF

Hi anon, None of your monthly contributions will go to RA. Even if you don't have BRS, your contributions won't be transferred there. They will still be allocated to the 3 accounts. Once past 55, you can always withdraw from your OA and SA accounts, but not your MA. Take note, the order of withdrawal is SA first, so you won't be able to touch your OA monies until SA is completely depleted. FRS is not a number to be 'calculated', rather it is a prevailing number that is set for that year's cohort. Your payouts will be entirely dependent on the amount you have set aside in RA before you enroll in CPF Life.

Insurance

Savings

Retirement

Investments

Hi Shulingg, Most insurers have their version of a retirement plan, so to start off, you would want to ask yourself what kind of plan you would want. Some key considerations include: - The duration of the payouts - The guaranteed and projected returns (and hence, how much you would need to set aside in premiums to achieve your minimum requirement of $1000) - The death benefit remaining should you not live to the full duration of the policy - Any additional provisions or benefits in the event of severe disability You would want to work with an indepedent financial advisor such as myself in order to ascertain the options available, and get a customized comparison specific to your request. Incidentally, I was just giving a seminar on retirement plans yesterday evening, it might have helped you understand the options better.

Insurance

Investments

Retirement

Before you decide, you should have a clear understanding about your risk appetite, capital, as well as on the investment horizon (i.e. years to retirement). AIA Platinum Wealth Elite is a bespoke investment-linked policy. Accordingly, the returns are non-guaranteed - depends on the yield from the underlying fund. Therefore, you must be comfortable with the non-guaranteed returns in your portfolio. Unlike traditional policies, AIA Platinum Wealth Elite covers up to age 122 (instead of age 100 by industry standard). Accordingly, it can be used for legacy management in your later years. Like some of the investment-linked policies available in the market, there is a feature of income withdrawal from the 11th policy year onwards - this does not reduce the current sum insured. A unique feature of AIA Platinum Wealth Elite is the selection of its fund managers: 1. Baillie Gifford - one of UK's largest and oldest investment maangement firm with US$252Billion in AUM 2. Wellington Management - Private, independent investment management firm to more than 2,200 institutions over 60 countries with US$1Trillion in AUM 3. BlackRock - operates from 25 primary investment centres globally with US$6.5Trillion AUM From their experise, three custom portfolios are created for your selection based on your risk profile. All in all, it can potentially be a solution for your retirement and legacy needs. However, the best way to find the best fit is to know your current portfolio and see if AIA Platinum Wealth Elite fits into your portfolio and needs. Here is everything about me and what I do best.
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