"Return our CPF" protest in Hong Lim Park (UPDATED).

UPDATE (12-12-2016).

State pension schemes in a number of countries are under tremendous stress. We try to look after our old people but in a sustainable way.

A very down to earth message from a reader, JQ, to ASSI's readers:

"Think of CPF as money that can be used for meaningful purpose than a windfall that you can splurge. If you looked at the flip side, for CPF, you contribute a certain amount, your companies topping up on top of your contribution and the government gives you a nice interest on it, so now whose money is it anyway? entirely yours?" JQ
---------------------------
Hi JQ,

I liked a certain female politician from the opposition but when she shouted "Whose money is it, anyway?" during her rally, I dropped her from my favorite list.

After so many years blogging about financial matters, CPF or not, there is one group of people I have given up entirely. These are people who are ignorant, opinionated and stubborn. 

If they are rich, they will manage somehow. If they are poor, well, I hope they win the lottery.

AK 
12-12-2016
----------------------
Anyone who is in favour of the CPF would have to be very brave to speak up in Hong Lim Park today. Some netizens who were at the protest estimated the turnout to be between 3000 to 6000 people! This is truly mind boggling.

The speakers included Tan Kin Lian, Kenneth Jeyaratnam and the now very famous Roy Ngerng. I checked twice to make sure I got his surname right.

There is a whole lot of unhappiness. There is a whole lot of distrust. There is a whole lot of work for the government to do to diffuse this time bomb. 

Yes, I feel that it is a time bomb.

If not handled sensitively and in a timely manner, it could turn out badly. I am sure no matter whether we are for or against the CPF, we do not wish for the country to sink into anarchy. Think Thailand.

Here are some photos netizens shared on FB:

Read a rather sterile report by Channel NewsAsia: here.

"... distrust is something so emotionally charged that it is guided by its own perilous logic and propelled by its own alarming momentum. It has already widened the original disconnect between the PAP and the people into an almost unbridgeable chasm." Catherine Lim.

Read the full impassioned plea by Catherine Lim: here.

Regular readers know what I think of the CPF and how I believe it could work for us. 

The CPF is a good tool if we know how to make use of it.

However, if people no longer trust the system, then, it is almost impossible to even make them listen.

Related post:
Achieving level one financial security.

Building an income portfolio is like building a house.

After blogging for so many years, I have received a fair number of emails and comments. 

I have no way of telling how many emails I have received in total thus far but BlogSpot makes it easy to see how many comments have been published.

As I make an effort to reply to all emails and comments, half of the comments published should be my replies. 

I have, by now, received more than 10,000 comments from readers.





As I blog about money management and investing for income frequently, it is no surprise that I should receive emails from readers with questions related to these topics. 

Of course, in my replies, I am mindful to tell readers that I am not a financial advisor and I am just sharing what has worked for me. 

I always say that, in my blog, I am just talking to myself.





Although I have received enthusiastic emails from readers both young and old who were thinking of investing for income for a more secure future, I have also received some which had more pessimistic tones although they were willing to give income investing a try.

Even though it would take a bit more work to encourage these people, I was happy because the writers, despite the pessimism and, maybe, scepticism, decided to take that next step in an effort to possibly improve their lives.

As the saying goes, we can lead horses to water but we cannot make them drink. 

If a horse which was suspicious at first decided to taste the water, we should be happy. 

The proof is in the pudding and, in all likelihood, the horse would then drink.





Today, I received a letter from an institution which I invested money in many years ago. 

It is one of those investments that I almost forget that I have. 

I am reminded once a year of its existence when it is time to receive dividends. 

I remember saying this about Hock Lian Seng as well.

You will see that the amount is not big but I have had this investment for so many years. 

So, it adds up. 

The same goes with many of my other investments.

Although how much we receive from each investment is important, how persistent we are in building our income generating portfolio is even more important.





There are many analogies which I like to use when I talk to people about investing and regular readers are probably familiar with the one about grasshoppers and ants. 

The one I am going to share today is about building a house. 

Building an income generating portfolio is like building a house.

When we make our first investment with the intention to build an income generating portfolio, we have taken the first step in building this metaphorical house. 





Over time, as we make more investments, we are putting in the floors, the walls, the windows, the doors and other things which make the house functional.

When the house is complete, our mission is accomplished. 

We could choose to move in and enjoy the house as it is or continue to add features to make it more comfortable or, even, luxurious. 

We might want to put in a gazebo or, maybe, even a swimming pool, for examples.





What we want in a house is quite subjective. 

Similarly, how much we want in passive income will differ from person to person. 

However, what is not different is the need for time in order to build a dream house, to have a portfolio that generates income which we feel is sufficient for our needs and, maybe, wants.

The Chinese people have a saying: 

万丈高楼平地起

Even skyscrapers start from the ground up. 

Don't ask me about the basements though.

For regular people, our first investment for income might not yield much but make more investments over time and we will see how it all adds up. 





Patience is required.

Like they say, all in good time. 

However, time can only be good for us if we do the right things.

...





Related posts:
1. To be a happy peasant.
2. Save 100% of take home pay.

Free medical insurance in our old age?

On 14 December 2013, I blogged about how we could possibly get free medical insurance in Singapore. 

I shared my own experience and how things have worked for me. 

The beauty about the method I shared is that it is risk free and, therefore, stress free.

You don't know what I am talking about? 

Then, you might want to read this first:
How to get free medical insurance in Singapore?






Of course, there is some concern with how the annual premium which we pay for our H&S (hospitalisation and surgical) insurance will increase as we grow older. 

This means that the cost of coverage will become more expensive over the years with annual cost exceeding $2,000 as we age into our 60s in some cases.

This is one reason why I am quite happy to have the government increase the limit for the Medisave Account (CPF-MA) which pays 4% per annum, risk free. 

Having more money in my CPF-MA means receiving more in interest payment.

Last year, I received $1,760.35 in interest payment for money in my CPF-MA. 

The year before that, I received $1,654.48. 

That is an increase of more than $100. 

However, withdrawal to pay for my H&S insurance remained at $665.00. 

So, I have some surplus.





If the MA ceiling is raised year after year, I should have more surplus in my MA year after year too. 

This means that funds in my MA earn more interest to pay for the higher insurance premium that is bound to come as I enter the next age bracket and the next and so on.

So, the argument that even this method will not ensure that we get "free" medical insurance in our golden years is weakened. 

In my 60s, I would probably have to pay more than $2,000 annually for my H&S insurance. 

Last year, I already received $1,760.35 in interest payment. 

With the MA's ceiling raised annually, could I see more than $2,000 in interest payment eventually? 

I cannot say for sure but, everything else remaining equal, I think so.





Of course, by having the maximum allowed in my MA now while I am younger, I will enjoy plenty of surplus as I receive the maximum in interest payment while paying relatively lesser for my H&S insurance. 

The surplus amounts to a few hundred dollars each year, in fact. 

It is like receiving more money now to pay for the higher cost of insurance in our old age.

If you worry about the high cost of health care in Singapore, you should get yourself covered with a good H&S insurance policy. 

If you worry about the cost of insurance escalating as you age, you might want to max out your MA, letting time and the government help you accumulate the funds to give you free medical insurance that so many say we do not have in Singapore.





Related post:
Enhanced Incomeshield (H&S) for my mom.

Free "e-book": Don't depend on wage increases for higher income (UPDATED in 2018).

I am sure you have read the news and it is sobering. 

Wages are increasing more slowly and actually if our wages did increase, we should count ourselves fortunate. 

Some people I know are not seeing any increase in wages.

One of the things we must never take for granted is that wages will always increase year after year. 

There will be years when we might not get any increase. 

There will be years when we might have to take a pay cut. 





What? You have never experienced a pay cut before? 

Lucky you.

What could be worse than not getting any wage increase? 

Getting a pay cut, of course. 

What could be worse than that? 

Retrenchment! 

What could make that worse? 

To see inflation marching on. 

That would make everything a double whammy.





What to do? Take on another job? 

I guess we would have to do that if we didn't have a choice and if we could get another job. 

There would be bills that still need to be paid, wouldn't there? 

There would be expenses that could not be avoided. 

It could get very depressing but human beings have the tendency to feel invincible when things are going swimmingly their way, never preparing for how things could go wrong.

Of course, if we had money stashed away, it could lessen the pain. 

This is why an emergency fund is important. 

Having said this, even emergency funds could get depleted. 

So, for double protection, we should own assets which consistently generate income. 

Indeed, this is something that should benefit all of us who want a secure financial future.

These are topics I have blogged about often enough.

So, here are a few chapters in another "e-book" which you might be interested in reading. 





Don't depend on wage increases for higher income:


Chapter One

People who depend on their monthly wages just to get by are wage slaves. 

Don't be a wage slave.

See: Freedom from wage slavery.





Chapter Two

We need to put aside a meaningful emergency fund. 

This is probably the most basic thing we must do to have a measure of financial security.

See: A meaningful emergency fund is important.





Chapter Three

In order to own income producing assets, we need to have money. How do we have money?

See: The first step to becoming richer.

Chapter Four

We always hear about how we should start investing to grow our wealth as soon as possible. 

Starting young would give us more time to grow our wealth.

See: Retiring a millionaire?






Chapter Five

Remember, however, that it is never too late to learn how to invest for income. 

The best time to start is always "now".

See: Retirement adequacy for late bloomers.





Chapter Six

It is also important to always have a war chest ready. 

In good times, I would never ever be 100% invested. Why?

See: Ready to come out on top from a recession?





Chapter Seven

As we embark on our journey towards greater financial security, try to involve everyone in the family. 

Mutual understanding and support will make the journey perhaps more enjoyable and, hopefully, easier.

See: Achieving financial freedom is a family affair.





If you are new to my blog, I hope that this "e-book" has inspired you. 

If you are a regular reader, you might want to share this with people you care about, especially people whom you want to journey towards financial freedom together with.

Free "e-book": Achieving level one financial security for Singaporeans.

When I mused on how I should perhaps start grouping blog posts together to produce "e-books", I was really kidding because it sounds like work and I am too lazy to want to have more work. However, readers responded so well to my first "e-book" that I thought maybe I should try my hand at another one.

This time, I am inspired by a conversation with a friend over dinner last night. He was complaining about the CPF and how it should be abolished. I told him that it is extremely unlikely that the CPF would be abolished and since it is here to stay, we should learn to play the game and play it well.






In a way, I told him, the CPF is like his mother-in-law. If he is not prepared to divorce his wife, he must accept his mother-in-law. Similarly, if he is not prepared to renounce his citizenship, he must accept the CPF. He laughed and asked me how to play the game and play it well?

OK, before I start, I think that I have played the game pretty well but I am almost certain that it could be played even better.

What does this show? 
Would you like to make a guess?

We must first understand that the CPF is a tool that is primarily meant to help us meet our retirement needs. So, if we can make use of the tool to help us towards this purpose, why not?

Chapter One: Do you want 2.5% to 5% risk free rates?
Often, we hear people saying that we can achieve a higher return if we invest our CPF money. Well, how many of us are savvy enough to achieve 2.5% to 5% compounded annual returns? If we are that good at investing our own money, we should have more success stories than sob stories with the CPF-IS. Unfortunately, the opposite is true. Investing in the stock market is never free of risk while the CPF's rates are risk free. Leaving money in fixed deposits to earn 1%  return a year is, in fact, a higher risk proposition for any amount above $50,000.
See: Securing risk free returns early for our retirement.
See also:
How to upsize $100K to $225K?





Chapter Two: Do you want to pay less taxes?
While saving towards retirement, we could also pay less taxes. Sounds good, does it not? We could also help our parents become financially more secure and to pay less taxes. Again, how could this be a bad thing? If our parents are financially more secure, so are we. So, how do we do this? We do this by voluntarily contributing funds to our CPF-SA (MSTU. Now known as RSTU.) and CPF-MA.
See: Build a bigger retirement fund with CPF-SA and Voluntary contributions to CPF.
See also:
Know how to grow our CPF savings.






Chapter Three: Do you want to buy an apartment?
Realise that when we use our CPF money for housing, we are giving up on pretty attractive risk free returns. So, when we want to buy as pricey an apartment as possible with our CPF money, think again. It is an opportunity cost. For people who buy BTO HDB flats, I think that it is a safer use of their CPF money because these flats are subsidised. However, for people who use their CPF money to buy resale flats or private housing, there is a higher risk of losing money on their purchases. We should not take too much risk with our CPF money.
See: Buying an apartment: Considerations.





Chapter Four: Do you want free medical insurance?
One of the biggest worries many of us have must surely be the rising cost of healthcare in Singapore. I am certain that by the time I am a senior citizen, healthcare costs would have become even higher. So, what do we do? Buy the best H&S policy we can find. Pay 10% of our hospitalisation bills and the insurance company pays the rest? Sounds good. Of course, this does not come free. There is always a catch. Insurance premium must be paid. However, we could help the government pay this for us. Huh? Clue: The CPF-MA pays 4% in risk free rate per annum!
See: How to get free medical insurance in Singapore?





Chapter Five: Do you want more money at retirement?
Having said all this, the money we have in our CPF will never be enough to provide for our retirement. So, make use of the SRS which will help us pay less income tax as well and be more pro-active in growing our wealth towards having a financially secure retirement. Towards this end, we need to learn how to invest our money too.
See: SRS: A brief analysis and Young working Singaporeans, you are OK?
See also:
Made $1M investing for income.






Chapter Six: Do you want to invest with your CPF money?
Do not invest for the sake of investing. Be educated and do your homework. Money in the CPF is almost sacrosanct to me. I will not utilise it unless the benefits are almost guaranteed. I will not utilise it unless I could get a much higher return. There will always be people who will make guarantees and try to make us part with our money. If you are ever in doubt, stay out. It is better not to make money than to lose money, especially our CPF money.
See: Nobody cares more about our money than we do.





Probably, the biggest advantage of the CPF is that we cannot take out any of the money including the interest earned until we are pretty old. Huh? This is an advantage? Yes, the magic of compounding will naturally work in such an instance.

Just ask people who are trying to save money whether they have ever been tempted to use their savings for something else? Or have they ever given themselves a break from saving money due to some reason. I am sure many are less disciplined than they believe themselves to be. CPF is a form of forced savings and probably the best form there is.

At a risk free rate of 4% per annum, money will grow 50% every 10 years without any additional funds injected. Of course, the more time there is, the greater the effect. So, if you have never looked at the CPF this way before, you might want to start now.

Time is required to make this work. The earlier we start, the better off we are going to be.

Related post:
Free "e-book": Retiring before 60 is not a dream.