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SeedlyTV S2E08

4M65: Be a CPF Multi-Millionaire By 65! Live on Wednesday, 10 June 2020, 8pm

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SeedlyTV S2E08

Retirement

Insurance

What are your views on those retirement plans sold by insurance companies for retirement income?
Hi anon, It's true that your first line of retirement income should come from CPF LIfe. Currently, CPF Life is the best annuity in the market and it will likely remain that way. As you mentioned, the returns are risk free and high (although the 4% interest is reviewed quartery and one has to wonder how long it can be sustained) However, the payouts are meant for a very basic level of retirement and if one wants to have a little more payout to have a better quality of life, then this is where a private insurer's annuity will come in to supplement CPF Life. One should use CPF Life as a baseline (unless you are not SC/PR) and then private annuities stack on top of that. As a guaranteed source of retirement income, there is simply no other asset class that can compare to an annuity (we'll leave CPF Life out this portion for discussion). All other asset classes have some form of risk, and we've seen dividends cut or deferred in uncertain economic times (just look at HSBC). In a retirement scenario, it's about knowing that month to month, you will get a payout that will afford you a decent standard of living. That is why guarantees are so important. Anything non-guaranteed can be used for non-essentials in retirement such as holidays, but you will need a guaranteed pay cheque to ensure your essentials are met. Thus if your basic needs are not met via CPF LIFE, then the other option is to use a retirement plan. About the projected returns, I would suggest you start by looking at the guaranteed yield as well. I have seen guaranteed yields of more than 2.5% which is very decent beyond CPF. Considering that bonuses are guaranteed once credited, I would say that 3%+ in the long run is likely possible, and if the yield does reach 4%, that's a plus. So we do need to have a realistic view of what's achievable with a retirement plan. Yes, the contributions to a retirement plan may be 'forced', but with good planning, then the amount one contributes does not have to be an excessive amount of one's cash flow and should be sustainable for the duration of the premiums. There are also single premium retirement plans which are akin to topping up one's SA/RA when you have excess cash. I do contribute to CPF myself as a self employed, but I am wary that the goalposts could move. CPF LIFE may start later than 65 by the time I approach retirement. Thus I also have my own private retirement plan, which allows me a measure of certainity that when I reach 60 (at least, for myself), I have a guaranteed stream of income to look forward to. What's better than one guaranteed stream of income? Two guaranteed streams of income.
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CPF

Savings

SeedlyTV S2E08

Loo said that when you're young, there's no need to show off. Do you agree? And if you have a kid, will you choose to use a $1 diaper or a zero cost napkin to wrap around your kid?
Sudhan
Sudhan
Level 6. Master
Answered 5d ago
Hello Clara, I agree with Loo that there's no need to show off. There's no point on being asset-rich but cash-poor. On the point about diapers, while there's the option of the cheaper napkin, we have to weigh the pros and cons of it too. Using napkins may mean more time spent on cleaning the baby plus napkin. I would go for value-for-money diapers that takes into account comfort for baby, diaper rash possibility, etc. I can't believe we are having a convo about diapers, but that's the beauty of this forum!
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SeedlyTV S2E08

CPF

Supplementary Retirement Scheme (SRS)

Investments

Online Brokerages

Would you recommend the same investment strategy for aa SRS account?
Cedric Jamie Soh
Cedric Jamie Soh, Director at Seniorcare.com.sg
Level 9. God of Wisdom
Answered 4w ago
I use SRS for the sake of saving income taxes. And since its for the sake of long term, i deploy it in ETF or stocks at the highest risk level, for long term, this will allow me to have a higher returns, and I can stomach the volatility (since its for long term).
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SeedlyTV S2E08

CPF

AMA 1M65

Savings

Is 1M65 really that desirable? I would rather have $1M cash than have the government give $5k~ monthly payouts till I die (in which I may not even receive the full sum). What are your thoughts?
No doubt, attaining wealth in the form of cash is the most satisfying as it is as real , as cold, as hard as money gets. If you're comparing $1M in cash vs $1M in CPF then for sure, one would rather go with the $1M cash option. One should not think of 1M65 as the sole retirement strategy but rather, a sure-win safety net for retirement. Here are some points to note about CPF: 1. The repayment of accrued interest when selling your property financed with your CPF OA is so that you are still on schedule to saving for your retirement through CPF. This accrued interest that you top up back to CPF still belongs to you. 2. Not everyone has the financial prudence to save and plan for retirement with cash. Some squander it away on gambling, others splurge the moment they get hold of a sizeable sum of money. CPF is supposed to make it stupid simple for anyone to have a decent retirement plan based on their financial standing (BRS, FRS or ERS). 3. Topping up to your own or loved ones CPF SA up to a max of $7k is tax-deductible. This could be a proposition for some to save on some income tax yet ensuring their loved ones hit a comfortable retirement goal. 4. Amount in excess of BRS can be withdrawn from 55 onwards. It is not as illiquid as you imagine. CPF is designed to make sure you are on track to a decently comfortable retirement where restrictions on withdrawals are there to ensure you do not overdraw on your retirement savings and deplete it before you leave this world.
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SeedlyTV S2E08

CPF

Savings

How would you weigh the pros and cons to the idea of CPF?
Malvin Tan WP
Malvin Tan WP
Level 5. Genius
Answered 2w ago
A great system albeit its "one size fit all" structure, but not everyone will fit into their mold. If you are like most people dont have time or interest in finance to plan for their retirement then relying on CPF is the perfect solution, but if you feel like you belong to the latter group then by all means design your own system to achieve your goal.
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SeedlyTV S2E08

Retirement

Savings

CPF

Savings Accounts

Once you reach 65, how would you use the CPF you have accumulated?
Malvin Tan WP
Malvin Tan WP
Level 5. Genius
Updated 2w ago
My tendency to save and invest money should not change after 65 years old, i guess i'll be a happy guy with a little more silver on my head when I sit back and watch the zeros increase.
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Resale HDB

Savings

CPF

CPF SA

Savings Accounts

Property

SeedlyTV S2E08

How much cash and amount in CPF (OA or SA) is required for resale HDB for a SPR married couple?
Anson Chew
Anson Chew
Level 4. Prodigy
Updated 3w ago
Hi Anon, I use an excel to help me with my planning. You have to consider: Potential Cash Upfront: - Initial Downpayment (10% of resale price) - Application Fee - Option Fee - Buyer's Stamp Duty (Link Below) - Legal Fees (Link Below) The Grants - Enhanced CPF Housing Grant - Family Grant - Proximity Housing Grant Once you have the template setup, you can adjust the amount to use from your CPF OA. Useful links for your calculations: Buyer Stamp Duty - https://mytax.iras.gov.sg/ESVWeb/default.aspx?target=MSDBuyResidentialProperty Max. Housing Loan Est. - https://services2.hdb.gov.sg/webapp/BP27MaxLoan/BP27PMax1.jsp Legal Fee Est. - https://services2.hdb.gov.sg/webapp/BB14LFEESENQ/BB14POpenForm.jsp
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SeedlyTV S2E08

CPF

CPF SA

HDB BTO

Property

Home Loan

Loans

I am getting my house in 2 years time. Do you recommend if I throw my OA into SA and pay off my monthly mortgage using the OA I got every month from my pay? Should I leave some OA in case I lose my job?
Ng Wei En
Ng Wei En, Analyst at Mastercard
Top Contributor

Top Contributor (Jun)

Level 6. Master
Answered on 11 Jun 2020
Should definitely leave some OA as buffer in case you get retrenched or become unable to work due to unforeseen circumstances. You could be looking at 6, 9 or 12 months of monthly mortage depending on the margin of safety you desire.
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SeedlyTV S2E08

CPF

Insurance

Investments

AMA 1M65

Savings

Would joining insurance be the fastest way to reach 1M? Or would joining a 9 to 5 and investing still allow me to reach the same end goal with the same time frame?
Loo Cheng Chuan
Loo Cheng Chuan, Founder at 1M65 Movement
Level 6. Master
Answered 4w ago
Using insurance to achieve investment goals is one of the lousiest way to get financial returns. Insurance is meant for protection not investment. And when you mix both objectives together, you will get fleeced by the very expensive insurance cost. Just look at the flashy cars and luxury suits that many showy insurance agents don on... who do you think pays for that?
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