Cory Diary : CPF Top-Up

Last year, due to a rate hike, savers had a field day scooping up Fixed Deposits, Singapore Savings Bonds, and Singapore T-Bills. In the Singapore context, these options offer almost guaranteed returns, are SGD denominated, and provide strong interest rates ranging from 2.7x% to 4%.

Unfortunately, last year, I only managed to top up 5K into my CPF Account. I believe free cash is better invested elsewhere. That year marked the last two-year period during which I could benefit from a good SA allocation to my CPF account, enjoying higher CPF rates, as indicated in the table below.

At age 54, this is the last year to top up and get the most out of it before the Retirement Account (RA) is formed at age 55. What makes this year special compared to getting good rates in the age 55-65 band?

This is the window that allows me to hide most of my SA account funds, which enjoy a higher rate than OA, when Full Retirement Sum (FRS) deduction to form RA. Personally, I believe this should not be allowed to happen, but it does in today's scenario. Going back to Age 55-65 bands topic, there's compounding delay as it will start from age 55. Not only that, there is a larger allocation into the Medisave Account (MA), which is locked for medical use.

So, should I maximize my Voluntary Contributions to the Retirement Account (VC3AC) this year? Something to ponder about especially how's the rate will look like for next 10 years compared to OA, SA and MA accounts.

Cory Diary

2024-01-15

CoryLogics Invest Chat - No Coin, No Porn, No Penny ( Limited to Invitation )

Telegram CoryLogics <= Link to Telegram Chat

Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.

Cory Diary : How much is Enough in CPF ?

With the Popularity of 1M65 movement where we become CPF Millionaires by Age 65, people starts to realize that it can go much higher if one top-up their CPF to Max in their early years. Then this beg the question is how much is really enough before we forego our current living and outside CPF returns.

Don't get me wrong. CPF returns and Capital are kind of "Protected". The risk is vastly different from Equity or Private Bond Markets of varying Risks. However, to get 2.5% to 4% returns, the amount may not be sufficient for a lifestyle retirements that one's wish to have unless the capital is significantly more and if that is the case, you are rich anyway to manage it up to 2M65 or 4M65 in a low return environment, does not really matter because of the huge capital base.

To put into perspective, for a person who invest in 4% vs 8%, after 20 years the gap can be $2.4M !

We need to be rich enough to forego.

To add to this into another perspective, inflation is another killer. 1M today is very different from 1M in 20 years time.

Lastly, the risk is different and the gap of $2.4M is not free to take. One could also lose a big chunk of their investment in risky asset and perform much worst than CPF returns. It maybe better not to do anything or much outside CPF too. The answer probably lies between but where we can be ?

Cory

2022-0714

CoryLogics Invest Chat - No Coin, No Porn, No Penny

Telegram CoryLogics <= Link to Telegram

Articles in this Blog is personal take and sharing purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Growing Kiddo Wealth

One of the famous concept today movement I heard past months is 1M65. And if we are to inject 65k into our baby account and let it compound for 65 years, the account will grow to 1M. 

From Mr Loo,

"To make baby millionaires, you first need quite a sum of money: S$64,350 to be exact for each baby at birth, to be contributed into their CPF SA."

For Cory that will be 130k. Ahem ! Even for a millionaire, to cough out this sum is not like a walk in the park. This sounds more like headline grabbing rather than practicality riches of wealth. After 65 years, $1M probably be good enough after inflation, if we still have the purchasing power to pay full for a 2 room BTO if such unit still exist.

I could also use that money to pay for the down payment for another investment property increasing my alternative income. However in this environment, the idea of ABSD, TDSR... etc will kill it.

Maybe it will be way faster if I spend the money now on 1 BTC which could grow to 1M in 2 years if BTC supporters expectations are met. Or it could go to zero if the governments start to ban them. Turkey ban moves shade few percentage off BTC value just this week. Imagine this is by EU or US.

On another perspective, 1M65 looks like modern way of saving for children. If 4% compounded is not sufficient to attract my money which is almost riskless, not many investment could anyway. One thing likely could happen is my vote will be biased against any political party that try to rock my Kiddo 1M65 boat for the next 65 years. LOL.

If we take this movement as an idea, 1M is just Mr Loo idea of compounded saving. We need not necessary have to narrow the concept and kill ourselves. We can start with any amount and build it up over their years and have it topped up as kiddo grows up. For a start on accountability, after talking to my wife, we have their Ang Pao money thrown inside matched 1 to 1 by their father. It takes some work to tear up their packets .... but topping up SA for the kids are a walk in the park through PayNow. They now have 1K each.

Cory : "Honey, there is some anypao money I forgot to top up into their SA accounts. Anyway I have done 1 on 1 matching. I should keep this balances."

Bee : " What you matched is theirs. The balances is still theirs."

Cory : " ... ... ... "

Cheers

Cory

2021-0418

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : CPF - My First VC3AC

As remembered, after completed all my Voluntary Housing Refund (VHF), the money goes into CPF OA. ( VHF is to return all the money loan from my CPF OA account to buy housing ) .

To get higher interests, I have it moved to CPF SA which has Max limit of 186K (FRS). This is through CPF OA to SA Transfer. There is still a little room for more and as earlier blogged, after selling my Singtel discounted shares, the money also go to CPF OA. I have it moved to max out to current CPF FRS allowed.

Then after, to increase my SA further allowed other than through Salary Income, I will need to proceed with Voluntary Contribution to my 3 Accounts (VC3AC). There is no tax benefits for this step. The key benefit is to get access to CPF SA 4% Interests. The ratio distributed to my CPF accounts are as follows.

Now at age 51, I am in golden age group where my top up matters if I want to focus on CPF SA. The max limits allowed is $37740 including Mandatory Contribution (MC) from income such as salary. With SA allocation as above chart at 31.08% of every dollar top-up. I can do this for 5 years till age 55.

And I did my first VC3AC as follow.

The ratio is as expected. And this can be seen when we login to the CPF website from above chart. So my CPF SA will now be 186K + 1473.19 = 187473.19.

One thing to note is that if CPF MA hits BHS limit, the excess of it will flow in CPF OA per my understanding. "Once CPF members reach age 65, their BHS will be fixed for the rest of their lives. The prevailing BHS is $63,000, and will be adjusted yearly. "

Final note if we exceed annual limit of $37740 due to VC3AC, it will be refunded without interests. So if we are still getting MC for rest of the year, you will exceed if Top-Up already maxed.

Cheers,

Cory

2021-0127

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary: Year 2021 Portfolio Strategy

Building Up of CPF and The End of Bonds Age

With the portfolio growing, emergency funds filled and cash increased, and finally the focus of CPF returns supporting retirements, is time to slowly phase out Bonds managed in the portfolio. As CPF is not tracked in active portfolio, we will be expecting higher yield moving forward with higher volatility.

So why the focus on CPF.  Stability of the returns, and roughly 4% XIRR. This beats many bonds.

Furthermore, with locked mechanism or restrictions in CPF, I view it as positive. In-addition to that, it can also be a good holding place for extra cash in OA to be withdrawn as needed after 55. Yes, rule will change but usually is for the better or rational reason. Nevertheless, is prudent not to solely depend everything on it.

This will formed a solid base and a release of 1/4 M to more active investing. The plan is to do more cash top-up via VC3AC for the next few years as I hit FRS.

Investment Accounts

Fixed Deposit is so yesterday especially in foreign currency as there aren't much good ones after AUD/NZ dramatic reductions over the years. For local currency, the only place will be temporary holding. So basically cash is best placed in investment holding accounts subject to safety of assets consideration. I hold the view that we should not be fully invested unless we are really good in stock picking. I am not there yet.

Most of equities invested are cash flow generating for dividend.

US Investment

Have some shares in US which has seen almost doubled in returns over the years. I think is time to slowly sell them off with the rising market. However I need to get my W8BEN renewed. They aren't tracked in investment portfolio. Compared to more famous stocks like Nvidia or Tesla, this returns frankly is mediocre LOL. What a time !

If there is a large correction in the US market, I may consider some investments over there.

Chicken Genius

I watched the Video from this local man in utube who make millions from Tesla. Strike the cord that we have to invest into Needs of the World. I think this makes perfect sense. The result could be long term. Of-course is in context.

For example I would think Nvidia provide high end solution to Bitcoin farming machines, high end graphics and Gaming. Covid helps to push it up another few  levels. There's a need for it. There  aren't strong competitor. 

Growth Allocation will be opportunity based.

Cory

2020-0116

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Late Night Chat - CPF

Last night I have a chat with wife like 2.30 am as she was tied up with work while I was trying to manage my CPF accounts in preparation for retirement plans. This aren't a systematic work discussion but kind of jumping in and out from one topic to another and then jump back to previous again. 

We talked about the worst case scenario like both of us decided to call it quit. How financially we able to continue to manage our expenses and taking care of our babies. And what outstanding to get our financials in order. 

Progress on CPF nominations which I have been procrastinating for a while, and how we can use CPF to supplement our expenses. I still have few years before hitting 55 so if we have to do something on topping up CPF using cash, is time.

I could release my fixed deposits that has been tied down. Singapore Saving Bond will be the core backup for emergency loan installments.

One of the possibility open up is for her to take 6 months leave-in-absence to take care of our household while continues to have nanny to care for the toddlers during our day time. She still want to keep her job.

She also propose to make active her saving available for future investment with my guidance. This will give our family a boost on dividend income. So I thought this is great. We have been reserving this option as additional emergency fund. However, this will take a while as we need to map this out more carefully.

Nominations

Long time since I last did my nomination so is time to update them. The Online nomination is cool. Hopefully it get processed. Few minutes job in the actual submission but need to get two witnesses with SingPass access for the declarations. I also found from 1M65 Telegram that if we nominated minors, they will have to wait till 18 before they get distributed. Here's the link if you like to find out more. (PTO)

Discounted Singtel Shares

Found some Singtel shares in my CPF which I just requested to be sold. Ouch ! for not managing them actively. Last traded my Singtel Shares in Year 2019 on some leftover shares as I do not see strong future of the business. This will simplify administration.

Singtel is one of best performing counter based on investment life of the stock. Today with the banking license, I have yet to see fundamental change that will improve the business significantly though it can still be profitable. 

CPF Interests

Have my SA Account Max to FRS mainly through OA to SA Transfers. And now exploring VC3AC(Top-up to all 3 CPF Accounts). This is interesting because is not via Retirement Sum Topping-Up Scheme ( RSTU) so we can do SA shielding later as I understand if we still can later. The main idea is that this option allows me to continue piling up my SA other than regular work contribution (MC). The downside is that some allocations depending on age group will  go to OA and MA. There is annual limits that we can contribute so every year before 55 counts.1M65 is great source of info in Telegram. 

My hope is that we could live off with some interests off CPF after 55 without touching the principals in OA and SA. What this mean is as someone feedback in my blog and from the Telegram Chat is that we should withdraw interests earned from OA and SA in the 2nd half of the year, preferably later months to allow interests YTD to accumulate before they get credited as principal in Jan next year. This will ensure the OA and SA Principals remain untouched. This is after 55 where the SA is FRS into RA and we have left over monies in CPF OS and SA.

Children CPF

Just requested for my children CPF details to be make available to me for verification. I have done some samples top-up into their accounts recently and would like to understand this further. Currently just nominal sum into RSTU. Some people prefer VC3AC as this will make the funds available to their children in their OA for housing and MA for their Medical. I thought this is neat idea.

Please DYODD as I am new to this journey. With that of my sharing, hope you have some ideas too.

Cory

2021-0113

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : A Short Story for my Daughters - VC MA Contribution

To be frank I only learn this term VC MA quite recently. This refers to Voluntary Contribution to Medisave Account. Few weeks ago I tried out VC MA with $1K via mobile transfer. And today after reading another blogger doing contribution and as a reminder, I decided to add another $5K. The process is very similar to CPF Housing Refund which I blogged few months ago.

There are few reasons why I am doing this. 

Firstly, my MA is not max obviously and I missing out 4% returns without risk of capital technically for years. This week trying to find an investment return in the last week of December seems quite tough. Nothing looks cheap enough for me in the stock market despite my search for the past couple of hours. The market is as listless as ever. So frustrating.

Secondly, total S$6K contribution amount pale in comparison to the fund available for equity investment. What's holding me up is liquidity if I do need the cash which I find rather silly now.

Thirdly, unused amount of CPF MA will be passed on to family when I expired. 

(The remaining Medisave balance, after the payment of the last medical bill, will be distributed to your nominees upon your death. You can nominate those you want to receive your CPF savings by making a CPF nomination)

Fourthly, of-course CPF MA can be used for medical bills and for my loved ones. And for technical matters Tax Benefits.

Dear Daughters, this is the way. My legacy to you.

Cheers,

Cory

2020-1229

Cory Diary : CPF Life - FRS or ERS

Some period ago I have decided Basic Plan is the way to go considering my age and investment portfolio I have that choosing moderation will be preferred. What I did not mentioned is should I default FRS or go for ERS. And in this article we will try to find out.

" For members who turn 55 in 2020, their Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are $90,500, $181,000 and $271,500  respectively."

To hit ERS, I need additional $90,500. So basically multiples 1.5x of FRS.  Let's use FRS to see the returns.

Current FRS = $181, 000

Current Basic Plan : $1,272 - $1,404 starting at Age 65

Take note the Basic Plan payout is based on below notes form CPF through CPF Life Estimator Calculator.

"The monthly payouts, total payout received, and bequest amounts shown are estimated based on the Retirement Account balance provided, current CPF interest rates, and current mortality assumptions. They may differ from the actual figures. The displayed ranges are based on interest rates between 3.75% and 4.25%, and do not represent the lower and upper limits of the payouts"

Let's say lifespan of 80. (updated chart to correct year error)

Counted slightly more using 1st Jan for Bequest. Roughly XIRR of 4.4 %. Is that of any surprise to you all ? Do note that for worst case is 4%.

One thing to add, if you manage to live to Age 99, XIRR will be 4.9% which is investment returns equivalent of 4.9% for best case.

Should I go ERS ? Maybe I can do Top-Up after 55 to decide. CPF is more like a reasonable good safe harbor in case I become senile.... :)

Again DYODD as we explore the journey.

Cory

2020-1117

Cory Diary : The Interesting and the Exception - CPF Read

For the past couple of days I have been reading up on how to optimize my CPF. With multiple queries to CPF. Their service is top mark so if you have any question, they are the key folks to go to. Do note following is what i understand and could be wrong so please DYODD.

My notes.

1. CPF Transfer to loved ones

There is no Tax Incentives. Both Givers and Receivers need to meet certain condition for this to happen. From OA to either SA or RA depending on receivers age. The Givers also need to have certain amount of CPF before this is allowed.  One thing that caught my surprise is that they have a rule where if your love ones passed away, the unused portion of the CPF given by you will be returned back to your CPF. I thought this is interesting. (link)

2. Income Threshold for Spouse/Siblings

What is interesting is that "To claim tax relief for cash top-ups for your spouse or siblings, the spouse or siblings must not have an annual income exceeding $4,000 in the year preceding the year of top-up."

"Annual income includes taxable income (e.g. trade, employment and rental), tax exempt income (e.g. bank interest, dividends and pension) and foreign-sourced income regardless of whether it has been remitted to Singapore. This income threshold does not apply to parents, grandparents, handicapped* spouse or handicapped* siblings.

*Incapacitated because of physical or mental infirmity."

3. Tax Benefits can go up to 14K

"Cash top-ups can be made to any recipient. You can enjoy tax relief of up to $7,000 per calendar year if you are topping up for yourself and additional tax relief of up to $7,000 per calendar year if you are topping up for your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings."

4. MediSave BHS (The Basic Healthcare Sum )

For CPF members aged below 65 in 2020 . The prevailing BHS is $60,000, and will be adjusted yearly. At current times, the interest rate at 4% will not be able to cover the annual increase even at max $60, 000 amount in MediSave. So if you are banking on overflow to other accounts by itself may need to take note that your cash flow will not happen currently.

5. OA and SA as Saving Accounts

There is limit on the amount allowed in SA account. Currently $181k. Basically cleared off when moves to RA. There is multiple articles on SA shielding such that the FRS is  fulfilled using OA monies so something you need to search about. For now before age 55, the interests from OA and SA are quite attractive than putting them in banks assuming you will meet the FRS amount regardless.

So why as form of Saving ? Because we are allowed to withdraw the monies as long FRS is met as we needed.

6. Basic Plan ( correction 14th Nov 20 )

If we intend to leave a sizeable amount of monies in our RA to our loved ones after we passed away, Basic plan (updated) will provide quite an amount left depending on when we get called, for an acceptable cut in our monthly withdrawal from 65. Check my earlier article on this. ( link )

7. Nomination

Can be done online. As I understand every time you get married, the earlier nomination gets invalidated. That's how I interpret ! What if I remarried ? hmm hmmm ... so better to do nomination again ?

Additional note. If marriage is not registered in Singapore ROM or ROMM, need to notify CPF. ( link ).

8. CPF Housing Refund

Can be done online. There is a limit of 5K each day using PayNow. Check my earlier article.

9. Discounted Singtel (ST) shares

Don't have to sell our shares.

"You may only apply to transfer your discounted Singtel (ST) shares to your own Central Depository account after you have reached 55 years old and have set aside the Full Retirement Sum (FRS) in the Retirement Account. The FRS can be set aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and property"

10. Silver Support Scheme

Often we hear about old people clearing table but not much is mentioned how much help was given from Silver Support Scheme. I thought this is interesting and that our gov is not as heartless as we think it is. Singaporean only. ( Link ) . What is good about this scheme is you do not need to apply ! 

I think there will be more interesting find in CPF website. Strongly suggest people visit them.

Cory

2020-1114

Cory Diary : CPF Life Retirement Study

Key financial thing I have done this month is to do Housing refund 50% to my CPF. Probably will completely pays it off before end of this year. From -2.5% to 4% that's a 6.5% swing from cost to profit.

And this can be done electronically through internet which is what's so amazing about today world. This boost my Pension quite a little for it to compound to age 65 producing a base monthly sum to my future retirement. Which comes to my next investigation on CPF Life.

CPF Life Retirement Study

While I was doing above, it strikes me how much should I put into my RA. Will doubling it provides me double monthly income at age 65 or more ?

As you can see from the estimator almost double. Probably slightly lesser if we try to be a little stingy about it.  The escalating plan is interesting to beat inflation but seems not for me as CPF is not my key dependency ( specific to me ).

While studying it strikes me why would anyone want to choose a Basic withdrawal plan. Not that's it is a lot ( roughly 130 lesser than Standard )? The answer lies with Bequests ( see below chart ).

At age 80, there is almost no money left if we choose Standard or Escalating Plans. However Basic will provide about half the money to beneficiaries upon passing. Now, Basic plan do looks interesting. However doubling the RA Amount initially only double my Bequest. Something I need to watch if I do my step correctly ....

So my preference is Basic 192K for now and depending how I do well in my investment financially, this may change. However once is selected, can't change after 30 days. oh dear. I need to make a note on this.

Watch for any error as I am new to this. As usual DYODD.

Cory

2020-1021

Cory Diary : CPF Housing Loan Refund Experience

In earlier article there is an Issue mentioned regarding low interest rate from the bank (1.1 % DBS Today for 11 months Fixed Deposit ) and higher Accrued Interest to pay back to CPF. It makes sense for me to do something.

The CPF Housing interest is computed on the CPF principal amount withdrawn for housing on a monthly basis (at the current CPF Ordinary Account interest rate) and compounded yearly. If this OA money is put inside SA it would be even higher at 4% !

Therefore  I decided to work on the CPF Refund process. There are 2 methods that I can do online. One is via PayNow and the other eNets. The later I have given up due to some issue getting the code to my oversea mobile. However I am pleased that PayNow works perfect for me.

Selections in CPF WebSite

The steps I took to do it for my case.

Completion Screen in iWealth

CPF Website

1. Login to CPF

2. My Requests > Property > Make a Housing Refund with Cash ... etc  (Decide the amount you like to payback)

3. Select PayNow

iWeath SG

4. Login to your mobile app (I use iWealth)

5. Select Scan & Pay

6. Scan the CPF page QR code

That's it. Upon completion ... the CPF website will reflect the repayment into OA Account.

Cory

2020-1007

Cory Diary : Why are we trying to beat the system ?

Apartment loan

When I bought my apartment years ago, I wanted to have more cash flow therefore decided to tap of CPF OA. By then I have some knowledge on Good Debts.  Fast forward now, if I have to go through this again today, I would have leave CPF alone. First of all the amount I tapped is just 5% of the housing value. The hassle is not only unnecessary, and if the amount is to be compounded, I would have less saving in total as I need to pay myself the CPF interests that has been borrowed. In addition for comparison, CPF is AAA rated, backed by Singapore government. If I am to buy a private bond, it would be much lesser returns and unwarranted risk to private companies. This totally do not make sense for myself as my exposure to CPF is not major.


Minimum Sum

By age 55, I could withdraw amount above minimum sum. I would expect a number of people to do that. Let's think about it. Why are we so keen to withdraw the monies. CPF is design to support our retirement and to safe guard our golden years. So it seems illogical why people is rushing out the door once they hit the age. The main reason could be the mistrust of institutions. The other is they just want to spend it before their times are up. Both of which is illogical to me. For one, most of my monies will still be denominated in Singapore dollars. And if there are distress in government debts, even saving bank could be frozen or cut. So is either I have a stake in Singapore future or am I not. The later reason on money available to spend is not only irresponsible but there are high risk of financial difficulties if one reached 70s-90s. The one viable scenario I could think of is when I am much way above the minimum sum that drawing some out will give a better return (Not guaranteed) or lifestyle which I COULD AFFORD.


My CPF Plan

Unlike other segments where there are risks, CPF is safer than bonds of good interests. Personally to me this one of the best available investment tool available to be managed at portfolio level offering stability and respectable growth. Ironically, the lock-in is the best part of the system which provide robust protection to citizen. As most of my assets are Non-CPF it will be unlikely I will ever need to do early withdrawal. This will form a nice retirement portion to supplement my monthly income at 65. If I could exchange off min sum at 55 for higher interests, I would opt-in !















I am sorry if there are dissenting voices due to political differences therefore CPF. To me this is purely my personal judgement on financial standpoint as an average investor to go along with the system available to work with us. At the end, if there are money in my CPF-Life once I passed, that's my legacy to my children definitely but certainly I would't want to be HDB as this could mean I have failed as a parent to bring up my children sufficiently.


Cory
2018-1023