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52 year old lost $200K and unsure about next 30 years.

Tuesday, August 30, 2016

hi AK, need your advice.

I am a 52 years old single person, still working but hoping to quit from my stressful job and pursue own interest.  

Have come across your postings just recently - how i wish i had done that much early.  

My investment decisions over the past 10-15 years were really bad and lost $200k+ in stock and commodity markets.

Current financial situation:
- 5 room hdb flat (fully paid) with 2 rooms rented out. Got maid to take care of the flat, tenants and me

- mini condo (570 sqft - $660k) above MRT station and mall TOP later this year, w outstanding loan $400k @1.5%+ p.a. (another bad decision?  haiz)

- Cash at bank $580k, Investment $280k, CPF OA $150k, CPF SA $190k

1 whole life and 2 critical illness policies sum assured of $50k each running since 1980's (total annual premium $3.6k for all the 3 policies)

1 term life $250k until age 65

1 Enhanced Incomeshield (advantage)

1 Aviva MyCare (Supplement ElderShield) Premium $1.2k/yr with payout of $2k/month for live if anything happens

1 Home insurance $80k

Very unsure what i should do at this crossroad in life to at least get some stable/passive income to sustain myself for the next 30 years maybe?

- sell or rent out the mini condo? not sure what price it could fetch if sell?  If don't sell, should i try to pay up the full loan asap? 

- what type of investments i should go into, thinking of ETFs and REITS, but which ones and when to enter?

Would really appreciate if you could throw some ideas..

Many thanks. 

AK says...

I will make a few general remarks here and you see if they are helpful to you:

1. You must find out how much money you need on a monthly basis in retirement and whether your current passive income level is sufficient. 

If it is sufficient, you can basically quit your stressful job and retire now to pursue other interests.

2. If passive income level is insufficient, are there ways to reduce expenses and liabilities? 

Are there ways to improve passive income level?

3. Shoebox condominium. 

I don't know if it is a good decision or a bad one. 

If this is able to generate positive cash flow for you, keep. 

Otherwise, you might want to consider selling it.

4. Insurance.

- Since you have had the Whole Life policy for donkey years, you might want to keep it till age 65 before surrendering. Treat it like a bond. 

However, you could consider terminating it if you do not have dependents. This will improve cash flow.

- Keep the CI policies. You need these.

- Keep the Term Life unless you have no dependents.

5. Investments. 

I won't tell you which ETFs and REITs to invest in. 

Do a bit more reading and decide for yourself.

- At your age, you might want to simply max out your benefits as a CPF member. 

You are only 3 years from 55 when you will be allowed a lump sum withdrawal from your CPF account. 

Contribute to the Annual Limit allowed.

- You might also want to start a SRS account especially if you are a high income earner. 

The tax savings is very attractive and is money in the pocket. 

The SRS account money will become accessible without penalties at age 62.

The discussion continues in part 2: here.

Related posts:
1. Why plan early for retirement?

2. Buying a property: Value for money.
3. Consider terminating whole life insurance.
4. SRS: A brief analysis.
5. Retirement: Buying AAA rated bond.


AK71 said...

Sandra Ho says...
Hi AK, can u share your thoughts regarding choosing the plan between FRS vs ERS? Tks.

AK says...
Quite simple really. If you want a bigger monthly annuity payout and have ample CPF savings, opt for ERS when you turn 55. This is especially useful for people who want more predictability, less volatility and less risk in retirement funding. :)

For people who are more senior, certainty in sufficient retirement funding should be the basic goal. Suffering a bad fall, they could find it hard to recover, if they do at all.

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