Sunday, 9 April 2017

Using CPF for retirement

The Sunday Times ran a two-part series on CPF last Sunday and today. It's definitely worth spending some time to read through those articles and ponder on them regardless of your age. ๐Ÿ˜„

This will allow you to make informed decisions on CPF and whether you want to take "irreversible" actions when you are younger, such as topping up your CPF or transferring cash from OA to SA. (I didn't do any of the above when I am young, as I was not "well informed" or didn't bother to. ๐Ÿ˜†) 

CPF should form part of your retirement planning and help enhances your life after you retire. Since each one of us has different plans and uses and are at different stages of lives, I will touch on areas that affect me more. 



Setting aside the retirement sum in exchange for a lifelong "passive income"

When I turn 55 (based on current rules), I have to set aside the prevailing Full Retirement Sum of $166,000. I can start "withdrawing" monthly payout of between $1,270 and $1,410 for life from aged 65 till my demise. 

If I want more monthly payout, then I can set aside more cash, up till the Enhanced Retirement Sum of $249,000 for a monthly payout of between $1,850 to $2,050. 

๐Ÿ–๐Ÿป (I haven't yet to find out what happens to the "cash" if I die early ่‹ฑๅนดๆ—ฉ้€. This will be quite important in my decision in selecting the different plans!) ๐Ÿค”

How much can I withdraw from CPF at age 55?

You don't have to protest at Hong Lim park really. You will be able to withdraw part of your CPF at aged 55 or anytime thereafter if you choose to keep the cash in the Retirement Account. 



For simplicity, you can withdraw the higher of $5,000 or amount in excess of $166,000. 

๐Ÿ‘‰๐Ÿป Implication: If you already have combined OA and SA balances above $166,000, you can treat CPF as a long-term fixed deposit bank (provided the rules or FRS amount don't change ๐Ÿ˜‚). 

Example - if i already have the FRS and I have withdrawn $50,000 from CPF to pay for my monthly mortgages, I can consider "repaying" CPF the $50,000 from my savings and year end bonuses. This will allow me to get that $50,000 back when I am 55 and allow me to earn 2.5% p.a. In addition, I don't have to pay myself "interest" back to CPF on that amount drawn! 

Example - if I have sufficient cash or passive income to cover for my daily expenses, I can consider keeping those cash in the Retirement Account. After I turn 55, the first $30,000 earns 6%. See graphics below on the interest earned. 

How much interest does balances in CPF earns?


Interest in CPF balances earns "risk-free" returns of between 2.5% to 6% depending on your age group. 

Topping up CPF accounts 

As you can see from the graphics above, there are a few things which you can do for retirement to earn a higher interest rate. 

Example - you can top up your own Special Account with cash each year or you can transfer cash from OA to SA. This earns you 4% interest instead of 2.5% each year. Over the long run of more than 10 years, the compounding effect of that extra 1.5% can become very material! 

Example - I top up $3,500 cash each to the Retirement Accounts of my parents every year. I get a tax deduction and they earn a higher interest and get a monthly payout ($3,500 divide by 12) ! Win-win situation ๐Ÿ˜‚

Example - if your spouse isn't working, you can also consider transferring your CPF savings to him or her. This will ensure both have higher "life-long" passive income! I always believe that retirement planning is not just for you alone, but for all your loved ones. 



Example - during CNY, instead of putting red packets of your kids into meager earning bank account, you can consider depositing the cash into their special accounts. A $500 contribution when your child is 5 years old can turn into $3,553 after 50 years at 4%! Meaning a $50,000 will turn into $355,300. I will probably start depositing their Ang Pow money into their special accounts from this year onwards. 

Medical expenses 

Medisave account balance will remain to pay for future healthcare expenses. The current Basic Healthcare Sum we need to set aside is $52,000. 

The Sunday Times provided the graphics for using your medisave. 



That's it for today. Happy CPF planning. 

Saturday, 8 April 2017

SRS March 2017 update

There is not much update in March except that UMS holdings has actually gone "crazy"! The price started moving after some analysts tout it as the next privatisation candidate. My only "regret" is that i didn't load up on it when i intended to in Jan this year. Procrastination is bad in this case!  


My SRS portfolio is doing well due mainly to UMS holdings and is up 22%. I have blogged about my purchase of Starhill and Fraser in Feb 2017.


In case you are wondering, for the non SRS portion, i am still holding on to the Hyflux Perps (yielding 6%), the Aspial bonds (yielding 5.3%) and the Perenial Bonds (yielding 4.65%).

Happy SRSing.



Saturday, 4 March 2017

SRS Feb 2017 update

On Valentine's Day, I used the cash in my SRS portfolio to buy presents - 2 REITs for myself. My criteria was pretty simple:

1.  Yield of REIT is more than 6% (both yield more than 6.5% at my purchase price)
2.  Price/NAV is less than 1.0x (both trading around 18-20% discount to its book value at my purchase price)

From that list, i bought 30,000 units of Fraser Commercial Trust (yield of 7.6%) at $1.29 and Starhill Global (yield of 6.9%) at $0.755 each on 14 February.

The addition helps bring my projected passive income to around $40,717 each year. Based on my historical cost of $610,349 (without accounting for revaluation gain), the portfolio is yielding around 6.7% and you can see from the chart below that i have some cash coming in every month except for Feb and Aug.

 

I have in my goal for 2017 to reach $60,000 per year by end of this year and at $40,717, i am close to the 68% mark. Assuming I am able to utilize my cash of $75,000 cash in the SRS account, i should be able to hit the 75% mark. My eventual target is more than $100,000 per year, so i still have some way to go. I will continue to add on to dividend or interest paying counters when the opportunity arises.

Happy SRSing ^_^



Monday, 16 January 2017

Moolahsense / Trading Update - Jan 2017

I first blog about Moolahsense in May last year. My blog post is here.

Since then, I have met up with the management team of Moolahsense and decided to increase my allocation to $75,000.



My interest earned for 2016 was around $4,335. Having said that, the potential delinquency has gone up in recent weeks and currently, i have about 3 cases of late/no repayments currently.

Let's see if it turns out well eventually but with the economic downturn, i am expecting higher delinquencies in the coming months. 

Goal 2 - Generate trading income of $1,000 per month

I mentioned that one goal of 2017 is to generate about $1,000 per month. My blog post is here. January has turned out to be a good month so far.  Let 's see i can meet the goal by end of the year. As of mid Jan, i am slightly higher than my $1k per month goal. This is a 12 month journey so let's hope i can keep this up.



I haven't shared my trades as i am still not sure if i should but my current trade is in SGX made a few days back.



Happy swinging. Make the hay while the trump rally last! 

Saturday, 7 January 2017

Passive Income Update - Goals for 2017

I spent the first weekend of January setting the goals for 2017. I do track my goals regularly and 2016 was a mixed bag where i managed to hit 50% of the goals set (quite an achievement already! lol)

Your goals will depend on the life cycle which you are in and i have set some very "stretched" goals for myself for end 2017 (not all are listed here):
  • Achieve passive income of $60,000 per year
  • Achieve trading income of $1,000 per month 
  • Travel to 3 new places or cities 
Goal 1 - passive income of $60,000 per year

My eventual target is about $120,000 per year so i am still a long way from this. The idea is to build up a portfolio of bonds and dividend paying stocks. My existing portfolio is projected to generate around $36,000 for 2017 on a blended yield of 6.6%, so i still have some way to go. 

I will probably add more dividend paying stocks and REITs as well as some corporate bonds. I may consider using leverage to achieve this. This is probably a stretched goal but i need to "just do it". 

Goal 2 - generate trading income of $1,000 per month

This is just to keep me in tune with the market. I will use a $100,000 portfolio to trade anything under the sun. Stocks, Futures, Forex. This is of "moderate" difficulty. The difficulty is that i hardly have time to monitor the market due to my travel and work commitments. Let's see if i can meet this target.

Goal 3 - Travel to 3 new places or cities

I aspire to travel round the world one day (need to build up that stream of passive income still) so in the meantime, i will try to visit 3 new places or cities every year. This should be an easier goal. 

CPF Accounts and Mortgage Repayments

I have decided in December last year to stop using CPF for our mortgage repayments. From this year onwards, I will use cash to pay down the monthly mortgages.



You must have read about AK47's CPF account balances. The inspiring post is here. I too, have decided that it is probably better for my CPF balances to earn that 2.5% from government then to "pay for it" myself. As you can see, the interest is $17,933.23. 

Come to think of it, it is probably better off to pay down the amount drawn from CPF then to pay off the bank. Otherwise it is a "double whammy" since bank interest rate is lower and doesn't require you to "pay back" the interest. Wifey's withdrawal from CPF is almost similiar. I will try to pay off my CPF portfolio if i have excess cash and can't find a good use on them.


Ok, that's it for today. 

Happy CPFing

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