Sunday, 13 August 2017

A letter to my new "old" fan....

After my post on "which stage of your life are you at"... I received the following in the comments section. I thought it would benefit more if I share it as a blog post, especially from someone who has taken the time and effort to write to me. 

Hello Mr IPO, 

I recently became a fan of your blog. I am 55 and still working (civil servant). Planning to retire at 60/62 if I can keep my sanity till then:-) 

You mentioned that you have been traveling annually... well taking time off to recharge is how I keep my sanity till now ... 🤣

I hardly traded nor invested since I started working at the age of 20. My savings are all from my salaried income. I am frugal but I have been travelling yearly.  

I must say you had been a great saver! 👍🏻 It was pity that you didn't try investing or trading when you were younger so I am not recommending that you should start now as you are at a different stage of life.  My guess is that your risk tolerance and profile is low hence volatility in the markets is not something that you will "enjoy".  Given your frugal nature, you shouldn't need too much after you retire other than the travels which should increase.

I have two properties- HDB flat I am currently staying in (all fully paid up for) and a condo unit with sitting tenants since 2015. I have returned CPF all the money I withdrew for both properties with accrued interest and paying cash to service the mortgage loan for the condo unit. 

Returning CPF the money drawn for properties to earn 2.5% and paying current mortgage with cash is a good decision since you have no inclination to invest. If you can afford, continue to keep the cash in the RA account to earn a higher risk free return for as long as permitted by CPF. 

My combined CPF balances (OASARA) by the end of the year would be slightly more than $800k (not much I now). I just started contributing to SRS funds like 3 years ago (very late as well). I also have savings parked in 3 different banks amounting to more than $100K earning pittance. I will also be getting a total of $500K once my two endowment policies mature when I am 62/63.

Given you are debt free on your HDB, your basic needs are already covered. Hence, I would recommend selecting a CPF life plan that gives you a stable monthly cash flow needed to cover all your expenses as long as you live so that you can focus on living well. 

Once you retire, if the rental income exceeds the mortgage payment, you are in the pocket, so that would be an additional source of income. If not, you may need to consider how to make it cash flow positive by paying down the principal, extending the loan (which can be difficult) or consider selling it for a profit. 

I am writing you to get some wise counsel as to how/where/when I could do with my SRS funds, CPFOA and/or my bank savings. Dabble in trading/invest/or... Thank you. Kind regards- A newbie investor

I am not sure if you really want to dabble in stocks and shares after you retire 🤣. The reason why I am so focused on creating a stream of passive income is so that I don't have to be glued to the trading screens. These are stocks that I will invest for the long term and i ignore the price movements. If you are considering investments, I would suggest reading more about the subjects and putting small amounts to work subject to a certain limit. I would also consider corporate bonds but you would need to be highly selective and discerning. 

I have not explored this option but there are annuity plans which you can consider given your high savings.. I.e paying one lump sum of cash upfront and then getting a fixed amount for life. This could supplement CPF Life and you are assured a steady income for which you can live a good life and travel around. You may want to start exploring that option now but do remember to assess the counter-party risk and whether they are credible and reliable. 

Do stay away from Chinatown after you retire  as that is the fastest way to lose wealth... 😆

Enjoy planning your retirement. 
Mr. IPO 

Sunday, 6 August 2017

Planning for Retirement - What stage of your life are you at?

Today's Sunday Times ran two articles in the Invest Section which i thought is relevant for young readers. The articles are "A Letter To My Daughter who has just graduated" and "New Grads? Never too early to think of retirement". Do find time to read them as she wrote from a perspective from someone who has been through the journey in life.

For the benefit of new readers, especially those who have became "Mr' IPO's fans" more recently, I have compiled a series of write ups which i have done in the past to encourage you in your journey for financial freedom. 

This post today is written based on the different stages of your life. 


IF YOU ARE STILL A STUDENT AND READING THIS POST

I have to say that if you are currently still a student, below 25 and reading my blog post, you have great potential ahead of you. I started playing IPO and trading the market during my army and university days. I have to tell you that was the best time to learn lessons from the market because you don't have much to lose but in the end, I still paid tons of school fees. The purpose of my blogs is to let you lose less while learning 😁

If you plan it well, you are going to retire a millionaire by the time you reached 62. Time is your friend (for compounding) and if you catch the cycles well, you will do very well. You will have at least two to four big cycles in your life. Time it well (especially the property cycle) and you can retire early. 

Your world will be very different from mine, be inquisitive, focus on doing well in your studies, get a well-rounded education, cultivate good habits and build up your network and skill sets. Education is just a entry ticket to a career but make sure you do well in your chosen field! 


IF YOU HAVE JUST GRADUATED OR IN YOUR FIRST JOB AND IN YOUR 20s to 30s

Focus on building your income through your career - I have mentioned before that your career is very important. Take care of your own career professional and it will take care of you. The relevant posts in sequence are:



Focus on having integrity and a great Emotional Quotient. They will bring you far in your professional life. 

Saving up and keeping track of all your expenses, assets and liabilities - When you just start out and receive your pay checks, don't frivolously spend it. I can't emphasize enough the importance of saving up. Save least 20-30% of your cash each month. Here was a post i wrote previously - It's not how much you earn but how much you save. It is also important to track where you spend your money 😋 as everyone has a little peculiar hobby that will "suck" money away. You can start spending when you are have established your career and have more disposable income (usually for those who crossed 35 years old)

Buying your first property or considering a second one

If you are 25-35, buying the first property is probably on your mind all the time. My advice is to focus on buying the right properties at the right valuation. If you have followed Mr. IPO's blog back in Oct 2008 (when he is still not so "famous"), you could have benefited from his call to buy a property back then in 2008. 😂 If you currently hold a HDB flat, my advice is not to sell your HBD Flat if you can and don't take a naked position in the property market.

Many of you are probably new to my blog but i have documented my property journey and shared snippet of lessons along the way which may still be relevant since I even lost money on a HDB flat. 🤕 If you are new to my blog, you may want to take some time to read them.  I have arranged them in sequence below.










Property is a good levered play and an inflation hedge, so make full use of it. I have made money from my property investments previously but I am at a different stage of my life today. I am focused on being financially free and paying off my remaining mortgage. Buying a property, with the additional buyer stamp duty, is not something that "appeal" to me right now. In fact, since i first blogged about it, i have repaid the CPF drawn to pay for the existing property. 


I am happy with the "unrealised capital gains" from my current place. My downside scenario in the event that circumstance changes (e.g my kids don't want to stay with me or if i can't afford it anymore), will be to "downgrade" and move to a smaller place.

Trading - If you are in your 20s and 30s, you are likely to be trading more than investing. This is because you will want money fast. As such, you are punting IPOs, trading stocks and finding ways to maximize your returns. I have no issues with trading at all. It helped me hone my investment acumen and made me know myself better. Just make sure you know what it entails in trading as cutting losses in trading is absolutely critical. 

Punting IPOs is not going to make you rich, so you have to expand your investment scope - While my nickname is Mr. IPO, IPOs will not make you rich (I repeat) 😂.  You have to move on from punting IPOs and start investing into shares and bonds. Recently, someone I met asked if i believe in IPO stocks and was "shocked" when i gave him a resounding "NO" and the reasons are listed here (see Lesson 3)


IF YOU ARE IN YOUR 40-55 RANGE

You are probably quite established in your chosen career path and have a decent amount of regular income and some savings. The goal now is to become financially free and build up a passive income when you retire. The passive income will come from the assets you hold post-retirement. It is important that the assets are generating enough to cover your regular expenses. I am currently at this stage of my life where i am accumulating assets for retirement.

CPF should form part of your retirement plans

I have previously shared with you about using CPF for retirement. You should read the post together with very helpful comments from a reader here

How much cash will be in my CPF when I turn 55? 

Here is a post by Wilfred Ling on whether it is possible to get $1m in the CPF by 57. 

Assuming I stop working today and CPF Ordinary Account still pays 2.5% and CPF Special Account pays 4% annually, thanks to the effect of compounding, my combined OA and SA balances will be $908,164 when i turn 55. As such, i will definitely hit $1m in my CPF when I turn 55 since i am still contributing to CPF now. So don't hesitate to use CPF as your retirement plan tool.  Tools to consider including topping up your own account voluntary if you have yet to hit the minimum retirement sum, so stop thinking that the government is out to take your CPF money away (ok probably i will get a few opposing whacks here) ... 😀 ... need to wear mask again. 👺


Other tools and assets to consider

In addition to CPF, you should probably consider using your SRS account for both tax reduction and retirement planning (for which the purpose of this blog). You should then accumulate assets using all the different accounts, CPF, SRS and Cash.  Some assets you can consider will be properties, shares and bonds. I am documenting my progress as we speak and hopefully you will be able to gain some knowledge from it. 

Start Investing and into global stocks - Once i past my 40, i slowed down my trading activities and started investing more seriously. As such, you will see investments that are more long term. One of my aim is to start investing in US companies (such as the likes of FANG - FaceBook, Amazon, Netflix and Google) in small amounts. With the advance of technology now, there is no reason (or excuse) why we cannot be global in our investment approach.

Passive income - My target is to be able to retire well and have a passive income that will enhance or maintain my lifestyle. My latest passive income chart is here and my target is to reach >$120,000 per year when I retire. You can track my progress at this blog. 


IF YOU ARE AT 55 YEARS OLD AND BEYOND

Here is a booklet from CPF when you turn 55 this year and needs to decide what to do with the CPF.

Life after retirement - I would like to retire before 55 and take on some advisory role. Maybe i might even start a fund management or financial planning firm.  (Don't be shy - I am sure you will want to sign up to be my client after eating my free chillis all these years right?) 😂  I hope that after retirement, i can start traveling around the world, probably using AirBnB to stay a few months in the warmer countries. I will eventually update my travelogue blog ...hahaha. just be patient ok...  provided you still want to see a not so young man blog about his travel exploits.

Here is a toast to retirement and I hope you will reach your target too! If you plan for it, i am sure you will reach there sooner rather than later.

Related image


Friday, 4 August 2017

Net - LinkedIn

A further update to my earlier Netlink Trust post where i managed to add another 25,000 shares of Netlink Trust to my SRS account at 81 cents on 2 Aug 2017.

This bring Mr. and Mrs. IPO shareholding in Netlink Trust to 100,000 shares and based on the projected yield of 5.73% in FY2019, the annual income will be around $4,641

The passive income will reach $44,886 using the higher projected yield and the monthly "distribution" is presented below. Still having gaps for Feb and August.


On a non-related note, i have finally set up a LinkedIn account for Mr. IPO ! 😂 I have never found the need to create one for my "real self" and ironically, now i have one for Mr. IPO.

You can find my LinkedIn profile here. If you want to add me to your professional network, please feel free to do so 😁. I promised you won't be "turned down" 


Happy LinkedIn Networking! 








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