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Worried as dividends and interest income reduced.

Wednesday, June 17, 2020

Regular readers know that I am a worrier.

Yes, it is true that I am somewhat mental.

As my parents are not financially savvy, I worry about them constantly.

This is one enduring worry which has only become worse over time.

I am more worried about my dad than I am about my mom because he spends money too freely.

There is no point in nagging at him which was something I was prone to doing in my younger days.

I remember when I told him to sell two of his club memberships away some 20 plus years ago, he got angry with me and yelled that he wanted a lifestyle in retirement.

Well, he is trapped into paying $500 each month in club subscriptions even though he hardly visits the clubs.

It is worse than buying insurance policies which he doesn't need because there is no way to terminate these memberships other than to sell them away.

Of course, club memberships are not as popular as they were once upon a time and it would be harder to sell them even if he wants to do so now.

If my dad regrets not listening to me donkey years ago, he hasn't told me.

All of us have pride which can be a good thing but it can also be a bad thing.

My dad is in his mid seventies and it is too hard for him to change his ways.






I blog about my parents from time to time.

The last time I did this was in October last year when I talked about how much passive income I needed?

In that blog, I talked about my decision to double financial support for my parents to about $40,000 a year.

With dividends from my investments reduced this year, I might have to dip into my emergency fund to keep the promise.

Of course, we would know for sure by the end of the year when I calculate my total dividends for the full year.

It is my responsibility to make sure that my parents don't have to worry about money.

If our government is right about the negative economic impact of the COVID-19 pandemic lingering on for years to come, I must be prepared that I might have to continue dipping into my emergency fund as my dividend income falls short.






Adding to this development, lately, I have been wondering if I must give even more financial support to my parents?

This happened after a recent visit back home and a conversation I had with my parents.

My dad complained about the paltry interest rates when he renewed his fixed deposits.

Banks' shrinking interest rates on my dad's shrinking savings.

My dad complained about the former while my mom complained about the latter.

Uh oh.

I don't know if some of you might be familiar with such a scene or something similar to such a scene.

Well, as expected, in my case, it quickly escalated into a yelling competition.

When two people who have been married to each other for half a century fight, oh, they have so much material to draw on.

All that baggage.

I will not share the details.

Too much and, really, what's past is past.

Also, we have to accept that no one is perfect and if we cannot look past that and see the good in each other, life becomes almost unbearable.

Of course, when emotions run high, people become unreasonable but the problem is that they think they are reasonable.

OK, you get the picture.






Anyway, to help address my mom's complaint about my dad's shrinking savings and also to help address my dad's concern about shrinking interest income, I made my dad an offer.

I told my dad that at his age, it is about not taking on too much risk while trying to make his savings last longer.

I know he doesn't want to be reminded of the bigger financial support I am giving them.

Old man has pride.

Of course, as children, we should want our parents to age with dignity too.

So, I made him an offer that I felt he would respond well to.

I introduced him to AA REIT which, of course, I increased exposure to more than a month ago.

I took him through the pros and cons of the investment and offered to let him take over my recent investment in the REIT at $1.15 a unit which was what I paid.

I told him that, conservatively, it could give him a return of 7% per year at that price.

He took the offer and somehow managed to make it looked like he was helping me out.

Like I said, old man has pride and if it makes him feels good about himself, so be it.

That was how I partially diffused the tension that day.

Only partially but I shan't bore you with everything else.

家家有本难念的经.






If AA REIT's unit price should plunge below $1.15 for some reason and if my dad should decide to sell, I would still pay him $1.15 a unit.

So, his investment in AA REIT is like a risk free fixed deposit but with some upside.

I am sure I do not have the right answer to every problem.

I also do not have unlimited financial resources but I will always put my parents' interests before my own.

We are not perfect but this imperfect son will do his best for his imperfect parents.

This is as close to perfect as is humanly possible.






Related posts:
1. Improving retirement funding adequacy for my dad.
2. Retirement adequacy for late bloomers.
3. How much passive income do I need?
4. The most dangerous crisis and what should we do?
5. AIMS APAC REIT investment is larger now.
6. Dad's whole life insurance policy.

49 comments:

Siew Mun said...

Good stuff AK, you are the backstop for your Dad.

AK71 said...

Hi Siew Mun,

My parents are aged retirees.

Although not financially savvy, they provided for me before I became independent.

Looking back, I regret the nagging I did in the past which despite my good intentions probably made my dad more than just uncomfortable.

Who knows how many ways I have failed as a son in the past?

I will just have to do better.

Unknown said...

Hi AK,

I can really resonate with this. I have been constantly nagging to my dad not to keep throwing his hard earned money into shares at his age (65). Like your parents, both my parents are retirees. I find that most people at their age have a tendency to trust our government linked companies too much in the best and feel a "duty" to keep these shares even if the fundamentals have changed.

My dad had legacy shares from SPH , Sembmarine in their high prices. These have losses of around 70-80% on capital for some and is only buffered by dividends previously received (thank god!). The only silver lining was a majority of his portfolio was in DBS and not in other stocks, although he did get them at much higher prices too.

Like you, i told myself i have to do better especially when my own portfolio is performing much better and that is what i did. I have taken over the portfolio and restructured it, solely with the aim of making up for the losses incurred over the years and reducing the eventual weightage to stocks in the next 3-5 years.

My dad has always resisted the idea of putting money into CPF. I told him he would have been many times richer if he had trusted CPF. A pity! Thanks AK. :)

tong said...
This comment has been removed by the author.
tong said...

Tot u have $120 to $150K dividends/distibutions from shares and reits. Still need to dip into your E cash?

AK71 said...

Hi Unknown,

I also have a legacy investment in SPH. ;p

As long as your dad is making more money than he is losing on a portfolio level, he should be doing OK.

We cannot always be right. :)

However, I find it strange that your dad would trust GLCs but not trust the CPF. Hmm.

Of course, it is no secret that I like the CPF very much. ;)

Thank you for sharing your story with us. :)

AK71 said...

Hi tong,

REITs are cutting back on income distributions and many businesses are reducing dividends too because of the economic damage caused by the COVID-19 pandemic.

I suspect that the passive income generated by my portfolio this year might not be sufficient to meet my needs.

You might have missed the following blogs:
1. How much passive income do I need?
2. How much should we have in our emergency fund?

Bananamint said...

That's a very respectable thing to do, AK :) *salute

I believe people who are good to their parents will be rewarded.

Hope that the banks will continue paying regular dividends, then you will have more than sufficient :D

#prayforAKtostopworrying :D

Unknown said...

Hi AK,

You need a “like” button on your blog, like Facebook, so we could like your post.

BTW, do you think we’re in bull rally now? Coz Nasdaq Composite already has complete V-shape recovery and people like me have missed the whole rally. :(

Jackie said...

Hi AK,

Why didn't you introduce iREIT to your dad? Wouldn't the income stability be better? Or do you think otherwise?

AK71 said...

Hi Bananamint,

If I do get good karma from my actions, I hope they are all transferred to my parents. :)

Our local banks are very well capitalised and very safe.

The way things look, however, the banks will see earnings squeezed.

So, I must be mentally prepared for a reduction in dividends. -.-"

AK71 said...

Hi Unknown,

Facebook and AK had a parting of ways about a year ago.

Facebook treated AK badly. :_(

You can copy the links of blogs you like and paste on your FB wall to share with your friends, if you like.

A bit more work, I know. ;)

As for the stock market, I always say we should stay pragmatic.

Many stocks are fundamentally overvalued and we see many billionaire investors (i.e. the smart money) in the USA selling stocks especially as prices recovered.

Even at lower prices than before the crash, we are seeing PE ratios much higher for the local banks, for example.

That is all very interesting but I have stayed pragmatic.

I have been using the charts to help me avoid falling knives and buying when I thought the dust is settling and the visibility is better.

The only investment I reduced exposure to recently was Ascott REIT-BT.

AK71 said...

Hi Jackie,

I shared in a recent blog my concerns regarding office buildings in the longer term.

You might have missed this blog:
AA REIT, IREIT and Ascott REIT-BT.

I also suspect that IREIT has a rights issue coming in the not too distant future.

The plan is for them to buy the rest of the Spanish portfolio of commercial properties which was acquired before the pandemic from the sponsors.

AA REIT looks to be more stable and their strategy to grow by redeveloping existing assets has a lower chance of them having to raise funds.

I hope I am right.

Invest Sg said...

孝顺的儿子!赞赞赞!

AK71 said...

Hi PG,

Oh, for sure, I would prefer that quarterly reporting by corporations stays.

It helps to keep investors updated in a more timely manner.

Doing away with this requirement means a regression into greater opacity when what we really need is greater transparency.

AK71 said...

Hi Invest Sg,

Looking back, there were things I could have done better.

I hope I am doing better now and I hope to do better in future.

Thank you for your encouragement. :)

AK71 said...

Hi PG,

I do not think that it is fair for PREH's management to say that shareholders are in for short term gains.

There are traders and there are investors.

I am a PREH shareholder and have been one for many years.

In 2016, I wrote:

"I believe that PREH is a long term value creator.

"The investment thesis is somewhat similar to that for CapitaMalls Asia which I had an investment in before.

"Similarly, PREH's Chinese investments will take time to deliver the goods."

Reference:
PREH is likely to continue trading at a big discount.

Why wouldn't shareholders who are long term investors like me want to be updated on the business more frequently?

pf said...

No wonder u r adverse to setting up ur own family.

AK71 said...

Hi pf,

I think I know what you are thinking and you could be right. ;p

laurence said...

Isn't $40k just a tiny fraction of your annual stock dividends?
And that's not even looking at the annual interests earned fm yr CPF and SGS.
So yr wealth is still growing by the day.
Hardly the sad scenario that you described.
;)

jonathan said...

Hi AK,

May i know your thoughts on recent Singtel results and the cut in dividend? With the share price around $2.55, have you started nibbling the shares? Thanks!

jonathan said...

Hi AK

May I know your thoughts on the recent Singtel results and the cut in dividends? Do u think Singtel will maintain this level of dividend going forward? Also, the price is hovering around $2.55, did you manage to nibble more shares? Thanks

AK71 said...

Hi Laurence,

$40,000 is not a tiny fraction of my annual passive income especially with diminishing dividends due to the COVID-19 pandemic.

Anyway, I didn't say it is a sad scenario.

It is just worrisome to me.

Just have to hope for the best. :)

AK71 said...

Hi Jonathan,

SingTel is being prudent.

Competition is not letting up.

I sold most of my investment in SingTel when its stock price ran up last year and have not done anything to it since.

I have been more interested in increasing my investments in the local banks.

AppleBro said...

You know it's ironic that your dad trusts government linked companies but do not trust putting money in CPF

SnOOpy168 said...

Upsize by S$40k or upsize to $40k p.a. ?

Whatever happened to his fat CPF nest egg & the CPF Life Payout ?

Ok ok, don't sour Shifu AK here.

but hor, dipping into your reserves to finance a filial payout is as good as spending beyond your budget. everyone has a limit and this isn't a one-off emergency payout. You think think la.

This is why i was very upset when INCOME stopped their classic annuity product, the very one that I took my parents to ditch all their shares & FD, park it there. Annuity rate was about 7%+ with guaranteed 10 years payout. Unfortunately, my father got to enjoy it for 2 years before crossing the rainbow bridge. We transferred most of that balance principle to Mom.

Now mom's passive income is far far greater than my humble salary. I wonder why that INCOME FP didn't push harder when we were talking about this topic for myself a few years back. Perhaps I can strongly co-fund the regular cruise trip that mom wanted to take someday - just mom & I. ... :-)

Loo said...

Hi AK,

I am much younger but your story is a reminder to me of the importance we should always place on our parents. Thank you for the sharings. Your approach is novel and akin to a strategist, being able to achieve your aims without hurting a man's ego. I hope that in the future I will not face the same situation but if I do, I will take a leaf out of your book.

Joe said...

Hi AK,

With the potential emergence of Digital banks, how is this going to affect the earnings of our local banks and will it affect your investment strategies in banks moving forward ?

AK71 said...

Hi SnOOpy168,

You might have missed this blog when I shared how I would increase financial support for my parents:

How much passive income is enough for you now?

My parents are not in urgent need of more financial support (yet).

I decided to do it for them earlier than later as they are not getting any younger.

I don't want to later regret not doing more for them in their golden years.

It has been more than a year since that decision.

My parents do not qualify for CPF LIFE but they are under the RSS.

They started getting a monthly payout when they turned 70 and this will run out one day.

I told my parents not to touch their CPF-OA and CPF-SA savings (apart from the interest earned) unless they really have to as those savings enjoy relatively high interest rates.

Far better for me to give them more financial support.

I do appreciate your concern and your reminder, of course. :)

Well, like our government dipping into our national reserves, I hope that dipping into my reserves if I have to would not be a recurring activity. :)

As for you, go enjoy as much quality time with your mom as possible.

Go on that cruise when it becomes safe to do so again. :)

AK71 said...

Hi Loo,

One day, I will be an orphan.

My eyes tear up whenever I think of that eventuality.

They are tearing up now. :_(

AK71 said...

Hi Joe,

I know that DBS has a digital bank in India.

UOB has a digital bank in Thailand.

I am not sure about OCBC.

I don't know the full extent of the impact which the introduction of digital banks in Singapore would have on DBS, OCBC and UOB.

Don't put all our eggs in one basket, I suppose. ;)

pf said...

It's wonderful for you to think so much for your parents. However, they themselves need to be responsible of their own actions. You can't be responsible for all their choices.

AK71 said...

Hi pf,

When I brought my parents out for makan and jalan jalan this past weekend, my dad said he had to use the ATM.

When my dad was away at the ATM, my mom told me (again) that my dad spends a lot of money.

I told my mom that she was doing her health a disservice by saying that all the time because she would get worked up.

Dad will be dad.

Mom will be mom.

You are right that they are responsible for their own actions but I must still keep an eye on them especially in areas which I feel they might fall short in. :)

pf said...

Sometimes they need to face the consequences on they choices they make before they learn.

Your way of not letting your parents worry about money is to give them more money. My way is to pay for the household bills. As my parents income reduce as they age, I start picking up the bills. Not everyone have the same values or lifestyle I guess.

AK71 said...

Hi pf,

I do both. :)

I don't know if you remember I blogged about how I was doubling financial support for my parents last year in October: How much passive income is enough for me?

I said this in that blog:

"Although my parents did not ask for help, earlier this year, I decided that I should help to pay a big proportion of their major recurring expenses.

"Financially, it means a doubling of what I give to my parents to $40,000 a year and this is going to be a long term commitment."


We have the same strategy, it seems. :)

TangoXray said...

Sound like you are a single child like me.

I always worry about my parents, and similarly my dad (when he was alive), he used to spend freely even though he already dont have a job. Worst is he use "gambling" as a form of job and thought he could be financially sound by wining in gambles in footballs and horse. LOL

Of cos in the end, all didnt go as planned. He only changed in the last 3-5 yrs before he passed on.

He is a good father, gave me everything i need, even if it cost alot, i dont understand until I started working. His hard earn money shouldnt be spent in that manner.

I have to say, me and my mum saved up alot behind his back using his leftover savings and use it to invest and pay for the bills at home. He didnt knew about it until I told him the year he passes on and show him our joint acct CDP (he was shocked, on how we could save up and invest so much over the years).. as he dont need to pay the bills at home.

Hope your dad will realize soon but yes, they are old liao, hard to change one.. my dad used to tell me, if i dont spent money, i will be very unhappy ... i was like.... wtf ... scold him only will cause the relationship to sour... so i let him be... gave him some money to spend on a monthly basis... within my means.

Thanks for sharing your side of story ...... stay safe.

EY said...

Hi AK,

Great to hear what you are doing for your parents. 百善孝为先。If money can buy happiness and comfort for your parents and you can afford it, that's the greatest blessing. 都是修来的福! :)

AK71 said...

Hi TangoXray,

Thanks for sharing your story with us.

When it comes to gambling, I think my dad only likes the flashing lights and lively music of the slot machines in the casino.

Those things should be banned.

He calls them the one arm bandits. ;p

Most parents are quite willing to spend freely on their children if they have the money, I know.

Looking back, my parents too.

This was a good reason why many years ago, I decided to give them as much money as I have been doing.

Once given to them, it is their money.

What they do with their money is up to them, right?

I try very hard to remember this. ;p

You stay safe too and thanks again for sharing. :)

AK71 said...

Hi EY,

Hey, long time no write. :D

When it comes to 孝, I always have a feeling I can do a better job.

As for 福, if I have accumulated any good karma, I wish for them to be passed to my parents.

Up to a point, money is definitely helpful when it comes to having a more comfortable life which will promote happiness.

After all, money issues are a big reason for family disharmony and I have seen it happen so many times before.

I told my dad many years ago that if a problem can be solved with money and if we have the money, then, it is not a problem.

For most of my life, I didn't think like that and, sometimes, I forget.

EY said...

Hi AK,

Haha. Ya, like disappeared for a long time. Some part of me retreated into the mountains to seek enlightenment. Lol.

The value of money can only be realised if something good comes out of it. Giving it to parents definitely makes the money so much more valuable.

Our good fortune is also often from our parents' blessings which they have accumulated. Rightfully so that we return our 功德 to them so they will live a worry-free and happy old age, hopefully in good health too!

Anything that you need reminding, put into your handphone calendar! Remind self: If money can solve, it is not a problem. If money can't solve, make it someone else's problem. Lol.

AK71 said...

Hi EY,

Oh, I know what you mean.

There are times when I just want to isolate myself and I don't need COVID-19 to make me do it. ;p

Once upon a time, when money was scarce, all I wanted to do was to hoard money.

A mental illness and just one of many I have, I am sure.

Money is but a tool and, like all tools, its value is only realised when put to good use.

I think I might have attained partial enlightenment. ;p

Although I hope we would never have to face a problem that money cannot solve, it is bound to happen one day.

Now, this thought is setting off another bout of anxiety.

I have to go into the mountains to meditate now. ;p

Cory said...

Hi AK, a little frustrated because I have to retype most of the things because a little chubby took away my wireless keyboard when my attention was drawn away....nevertheless I like to try again because see some similarities that we could learn from each other. Obviously the financial aspect is from you!

If you could remember, I am older than you. Few years back, Single and probably 6 years ago I am a gamer in Wow online. Immersed in digital world for like 8 years. It was like my mind stay stagnant in that world and emerge physically older but mentally young. Like you, financially I am well taken care of and what I find lacking is no one to share my joy in life. Is not the same with papa and mama ok.

Loneliness creep in later and probably have depression which I hate to admit. It is when I tell myself is time to end my gaming crusade and start looking for something to cherish in life. Took me a long while to get back into society. We are lucky because financially we are doing ok. The road is tough especially finding the other half. Is also different with friends. They can only do so much for a while and is aren't permanent.

Fortunately for me, I found someone who is willing to walk with a much older me. 2nd kid this year. Frankly is not easy to reach here. We go through many difficulties and we found happiness and sorrow too. Kids are really a challenge for me but a life that we have to go through because there are endless joy within and is much better than being alone for me.

Frankly, I am happy with a life partner. Kids are bonus. Never regretted trying.


Cory

AK71 said...

Hi Cory,

Congratulations on being a father and a second time too. :D

Thanks for taking the time and making the effort (even retrying) to share.

I appreciate your good intentions, always. :)

I don't know if you have tried Neverwinter (NW) but it is free to play and doesn't require a paid subscription like WoW.

Of course, I don't know if you have the time or the inclination to try NW now that you have kids. ;)

I love NW but I love my parents more.

After not being able to see them during the 2 months circuit breaker, I feel it more.

It is too easy to take my parents who have been around me for a long time for granted.

I am not just trying to do more for my parents, I am also trying to do more with my parents.

Have to get my priorities right. :)

isabel said...

Hi AK, such loving article. Your parents must have loved you to heaven when you were young. It shows in your article.

AK71 said...

Hi Isabel,

Asian parents were more reserved back then when it came to showing love or praising their children.

Things have changed over the years.

However, my parents certainly did not hold back when it came to providing for me.

I shared more in blogs such as these:
1. With some difficulty, AK says good-bye.
2. Life was difficult and I wondered if Santa existed.
3. My family almost went bankrupt.

SgFire said...

Ak

Accordian takeover announced at 73c.

You can read in announcement

Ivanp said...

AK, u are a shiny example of 养儿防老,kudos and enjoy the company of your parents. For me sadly, it's a case of 子欲养而亲不待。

AK71 said...

Hi SgFire,

Too cheap but what to do? -.-"

AK71 said...

Hi Ivanp,

Sorry to hear about your case. :(

I am just doing what I feel is the right thing.

I will try to do better.

Thank you for the encouragement.

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