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===== Extracted from an e-newsletter from CPF =====

Sure beat FD

In continuation to Another FD Beater, I went on to inquire about the historical performance of the previous tranches and this is what I got as a summary:-

a) There have been 4 tranches of "5 year term" plans so far and the average yields have been 3.17% p.a;

b) There have been 2 tranches of "7 year term" plans so far and the average yields have been 3.83% p.a;

c) There have been 7 tranches of "10 year term" plans so far and the average yields have been 5.13% p.a;

As such, the latest projection of 3.21% p.a in the promotional-period "5 year term" tranche is likely within reach of 3% p.a to 3.15% p.a.

I'll be touching on this in my "We Talk We Share" session on 30Aug2008, 1.30pm @ 3, Shan Road.
See http://www.waynekoh.com/2008/08/we-talk-we-share-aug-sept08.html

Email Amos or Wayne to register

The 500 dollar plan

As a mini round-up to a few of my recent articles, namely:-

• BTITR-Part2
• Annuity Plan
• Drip in new money (Part 3)

I decided to piece them together to produce a plan that may well be suitable for everyday people. If you still cannot figure out what the above 3 articles were about, here's a diagram that somewhat combines them together:
Here's what is in the $500-per-month-plan for a 35-year old male with a 30-year time frame:-
a) S$87 per month into a term insurance plan that provides $150,000 coverage for Death/TPD/Critical illness for 30 years;
b) S$213 per month into a "drip in money" strategy at 8.0%p.a target returns;
c) S$200 per month into a 25-year savings plan that converts into a perpetual annuity plan after age 65.

Rationale:-
a) Term insurance to cover this "project" in case the "money-making machine" (the 35-year old male subject) contracts critical illness;
b) S$213 x 12 = $2,556 may be channeled towards Supplementary Retirement Scheme (SRS) to further save on income taxes;
c) The purpose of the "perpetual annuity plan" is to provide an "anchor" into the predictability of the cashflow (after age 65).

The estimated monthly payout at retirement is S$1,029 per month til age 100 (and beyond), double the S$500-per-month "invested cost".

I have also included CPF LIFE and assumed the example (minimum $40,000) given in CPF's website. You can click here to estimate your monthly payout under the National LIFElong Income Scheme (CPF LIFE). CPF LIFE is a new scheme that will provide CPF members with a LIFElong income from age 65.

Other things that should not be overlooked:-
a) "As-Charged" Shield Plan;
b) Personal accidental plan. (for its low-cost-high-coverage feature)

Seminar by CPF

Seminar by CPF
===========================
Financial responsibilities, when not managed well, could result in stress. Make a date with us on 16 August, Saturday, and hear from the experts on how you can break free from financial stress. Learn how to embrace changes leading to a positive mind and sound finances. Let this day be the start of a better tomorrow.

Hurry, register by 6 August (Wednesday) to qualify for the early bird promotion!

Read more details and register for the talk here.

Details

Date	16 August 2008
Time	9am to 1pm (morning session) 2pm to 6pm (afternoon session)
Venue	Singapore Management University Administration Building, Conference Hall 1 81 Victoria Street Singapore 188065
Early Bird Registration	25 Jul 2008 - 6 Aug 2008 (Early Bird Registration Fee: $8.00)
Normal Registration	7 Aug 2008 - 15 August 2008 (Registration Fee: $10.00)

Regards,
CPF Events
==================================

Another FD Beater

If you are "scared" of the equities market (or at least for now);
If you find that fixed deposit returns are not good enough;
There is still something to look at.....

I received info from "N" company on this promo that they are running til 31 Oct2008. Did my usual stuff, and plotted the results on this spreadsheet:The "best case scenario" of 3.21% is slightly better than NestEgg's 3.08%, both non-guaranteed.
I'm not asking that everyone make the rush to sign this up now. Look at the Guaranteed and Non-guaranteed portions and make an informed decision.
This may offer a good alternative to the "Fixed Deposit" part of a portfolio. In a nutshell, this may be good for:

1) people who put mid to long term in fixed deposit; Even the "worst case scenario" of 1.0%(normal)~1.2%(promo) p.a 0ver 5 years is slightly better than fixed deposit returns;

2) people who allocate 20% to 50% of portfolio into low-risk instruments;

Available using Cash, CPF-OA & SRS. My personal opinion on using these three:-
a) Cash: as per points 1) & 2) above
b) CPF-OA: It's a fairly good chance that the end results would be better than the 2.5% CPF interest.
c) SRS: as per points 1) & 2) above

On the side, the "extras" would be the 125% insurance coverage on death/TPD and "2 times sum assured+bonus" coverage on accidental death. Like I said, this is just "extras" and should not be the anchor of any informed decision.

Fixed Deposit rates reference: MAS

Feel free to contact waynekohwg@gmail.com / 8288.9005 (mobile) for details and clarifications.

Shield Plan Cost Age 30 to 85

Q: How much does it cost to have an "As-charged" Shield plan from age 30 to 85?

A: $32,311 + $46,563 + $24,034 = $102,908
(Enhanced Incomeshield Preferred Plan + Assist Rider)
Among which $32,311 comes from CPF Medisave & the rest from cash. The cash portion is high due to the CPF ruling that one can only use up to a maximum of $800 per year for such shield plan.

I have developed an Excel spreadsheet that calculates the cost in any given age range (age 1 to 99, 20 to 65, 30 to 85 etc).
These are namely the four insurers that I have put side by side in my spreadsheet: Income, Aviva, Prudential, Great Eastern.

A sample can be found here:-

click on image to enlarge

Though the figures stated look intimidating, the actual fact is that we have a "friend" called "CPF interest"; If one aged 30 now has $10,105 in his/her CPF Medisave account, it will be sufficient to cover the premiums til age 85 (provided CPF Medisave interest maintain @ 4.0%-4.5% and the premiums do not increase substantially over time) based on today's calculation.
And for the cash portion, he/she can start saving NOW for it, for example, saving up part of annual bonus or on a monthly regular basis, i.e my favorite "drip in money" way. To top it up, do it via SRS and save on income taxes as well.

If you like to find out how much is your own shield plan (projected cost), you can fill out this form with your details, and I can calculate and email to you within 48 hours of your submission.
p.s: This is free "national service" for residents of Singapore, including PRs.

References to my previous articles:
http://www.waynekoh.com/2008/04/do-you-have-s9k-in-your-medisave.html
http://www.waynekoh.com/2008/05/post-retirement-hospitalization-and.html
http://www.waynekoh.com/2007/11/as-charged-medical-plan-takes-load-off.html

Inspired by this article

Making Sense of Unit Trust

In my search for an answer for a friend, I chanced upon this "Making Sense of Unit Trust" guide, which spells out the ins and outs of things to do with unit trusts in Singapore.

click on image to download the guide (pdf) / size: 556kb

Seminar on ElderShield Supplements

We will be having a seminar on Aviva MyCare. Details as follow:
Date: 2nd Aug 2008 (Sat) 12.00pm to 2.00pm
Venue: The Stage @ Phillip Investor Hub, 3 Shan Road
Admission: Only for registered Guests. (60 seating only, first come first served)

If you are interested, pls reply to this email waynekohwg@gmail.com with your name, contact number and age by 24Jul2008 so I can reserve a seat for you.

Investing CPF-OA before and after 1Apr2008

From 1st Jan 2008, the first SGD60,000 of your combined CPf balances (up to SGD20,000 from CPF-OA) earns an extra 1% interest. Click the thumbnail below for a cartoonised explanation.

With that in mind, here is my approach towards investing CPF-OA:-


Assuming Mr A has SGD40,000 in his CPF-OA as of 1Jan2008 and wants to invest in CPFIS approved funds. Let's say he is a Balanced Risk investor (i.e 50% Cash/ Bonds & 50% Equities).

Before 1April2008, Mr A can invest based on the following allocation:-
Risk Profile: Balanced
Allocation (Generic):
i) Cash/ Fixed Income/ Bond Funds = 50% (SGD20k)
ii) Equities Funds = 50% (SGD20k)






After 1April2008, Mr A can invest based on the following allocation:-
Risk Profile: Balanced
Allocation :
i) (No choice but to) Leave in CPF-OA (3.5% p.a guaranteed) = 50% (SGD20k) (treat it as Fixed Income)

ii) Equities Funds = 50% (SGD20k)




In both scenarios, the risk profile is still balanced. It is therefore important to view your investible monies as a whole when planning your investments.


note: The example above is made using a straightforward assumption and does not take into consideration other situations such as servicing house mortgage payment using CPF-OA.

Pace your SRS

Just like running a race, it is good to know how far you have run versus how much time you have got left to complete the race.

The "race" distance: Contribution cap

• The SRS contribution cap for a Singaporean or a SPR is SGD11,475, calculated as 15% x 17 x SGD4,500 CPF monthly salary ceiling.


• The SRS contribution cap for a foreigner is SGD26,775, calculated as 35% x 17 x SGD4,500 CPF monthly salary ceiling.

Example of how to "pace your SRS" savings:-
1) Profile: Singaporean & SPR with monthly salary SGD3000

Suggestion: keep aside min 10% (max SGD1,043.18) of SGD3,000 = SGD300 into "money market fund"; In Nov 2008, calculate your esimated income for entire year of 2008 including Dec 2008, and calculate your YA2008 taxes using IRAS's spreadsheet calculator. (link to be given after IRAS has it uploaded)

It will probably look like this:

2) Profile: Foreigner with monthly salary SGD6000

Suggestion: keep aside min 15% (max SGD2,434.09) of SGD6,000 = SGD900 into "money market fund"; In Nov 2008, calculate your esimated income for entire year of 2008 including Dec 2008, and calculate your YA2008 taxes using IRAS's spreadsheet calculator. (link to be given after IRAS has it uploaded)

It will probably look like this:

Email me for details. :-)

..............Extract from www.mof.gov.sg..............
Q2: Is MOF conducting educational sessions on the scheme?

A: The SRS is for the private sector to drive. As financial institutions market SRS products to the public, they will also familiarise the public with SRS. MOF will not be involved.

..............Extract from www.mof.gov.sg..............

Start planning to pay less taxes for YA2008 NOW!

First, let's exammine the benefits of SRS:-
a) Tax deferment until retirement (tax-free); if you feel that your personal income tax is "too high", then consider setting up a SRS to defer these taxes.
Refer to my previous blog for details:
http://www.waynekoh.com/2007/12/zerolise-or-reduce-your-tax-using-srs.html

b) See it as a "2nd CPF", in these days and probably into the future years, retirement amount required would be higher; Let's say you need SGD1.0 mil for a **comfortable retirement (most people below 40 years as of now), and CPF minimum sum scheme only caters for SGD120k, you would be potentially facing a 88% shortage in your reitrement years if you rely solely on CPF for retirement. Can you drink 88% less coffee or can you eat 88% less during retirement years? But really, do you want to have 88% less?
**comfortable means same standard of living as compared to pre-retirement days.

c) Combining (a)+(b)= Pay less taxes and compound your 2nd CPF
A sum of SGD6000 contributed annually into SRS will get the following sums at the following compounding return rates:-

Email me for the calculation spreadsheet.

In the year 2008, it may be wise to start planning your srs right from the beginning. The biggest "enemy" is of course, procrastination.

..............Extract from www.mof.gov.sg..............
Q2: Is MOF conducting educational sessions on the scheme?

A: The SRS is for the private sector to drive. As financial institutions market SRS products to the public, they will also familiarise the public with SRS. MOF will not be involved.

..............Extract from www.mof.gov.sg..............