Singapore Savings Bond 2.44x oversubscribed.

At the beginning of this month, I blogged about my intention to divert money earmarked for my CPF account in 2023 into Singapore Savings Bonds (SSB.) 

I would keep doing this as long as the average 10 year return of SSBs is higher than 3% per year.

For the full explanation on this, if you don't remember or if you want a refresher, here is the blog:

CPF or Singapore Savings Bond? It is a no brainer.

So, as I earmarked $38,000 for voluntary contribution to my CPF account in 2023, that was how much I used in the SSB application this month.

So, what is the result?

Source: MAS.

As expected, the Singapore Savings Bond was pretty much oversubscribed as the average 10 year return was a relatively attractive 3.21%.

2.44x oversubscribed in fact.

How much of my application was filled?

I am going to assume that I got $10,000 since there is less than 1 in 3 chances of getting $10,500.

What now?

I will have to see what the Singapore Savings Bond next month in November offers.

It is likely that the average 10 year return is going to be higher than 3% per year too or at least I hope so.

In such an instance, I would apply with $28,000 which should be refunded to my savings account soon.

What if the average 10 year return offered by the SSB next month is lower than 3%?

Then, I will wait to see what December brings.

There is always the option of putting the money in my CPF account in the new year.

Nothing to worry about here.

Good luck to us all. 

Gambatte!

Recently published:

1. Daiwa House Logistics Trust: FX and TA.

2. CLCT: Staying defensive and Chinese banks.

Growing passive income: Equities, CPF and bonds.

I have been blogging about the passive income generated by my investment portfolio every quarter for many years now.

I have also shared how much interest income my CPF account makes every year.

Some readers asked if my quarterly passive income reports included the interest income from my CPF account?

The answer is "no."

I blog about passive income from my investment portfolio and interest income from my CPF account separately.

If we were to add the two streams of income which is something I have not done before, then, my annual passive income would be a larger amount.

It would be quite easy for anyone who might be interested in knowing what the larger amount might be to find the relevant blogs and add the numbers.

I won't bother doing it because unlike my quarterly passive income reports and my annual CPF interest income reports which share my thought processes as well, I feel that simply putting the two together in a single blog to show a larger number isn't helpful in any way to anyone.

Well, it could generate some interest like some tabloid newspaper article would sensationalize some event but it would have no value otherwise.

A bigger number is simply the logical conclusion and it might even give people the impression that I am bragging.

Anyway, to continue, with interest rates rising, interest income from my savings accounts and fixed deposits will become more meaningful but I am too lazy to start a new series of blogs on interest income generated this way.

I have blogged about the importance of saving money often enough in the past and also why having a meaningful percentage of our portfolio in cash or fixed income isn't a bad thing.

Think emergency fund and war chest.

Think survivability and opportunity in times of distress and if you are new to my blog, I have an "e-book" on this: HERE.

As interest rates have risen significantly, I will be diverting funds from my fixed deposits which are maturing into Singapore T-bills  (i.e. zero coupon bonds issued by the Singapore government) as these have much higher interest rates than fixed deposits of equivalent durations (i.e. 6 months and 12 months.)

Treasury Bills Statistics.
Source: MAS

As these T-bills will be held in my CDP account, the interest income earned will show up in my quarterly passive income reports.

Similarly, as I am diverting funds which I originally earmarked for my CPF account to Singapore Savings Bonds which now offer an average 10 year return of more than 3% per year, the returns will add to my quarterly passive income as these bonds are also held in my CDP account.

These developments will have an impact in the accounting of my passive income in the future but the impact is probably a relatively small one.

The change is still noteworthy especially if I continue to divert funds from existing fixed deposits to T-bills. 

This is more so if funds originally meant for my CPF account is diverted into Singapore Savings Bonds at the same time.

So, what can we expect in a nutshell?

Higher passive income numbers in my quarterly updates and slower growing interest income in my yearly CPF updates, everything else being equal.

If T-bills continue to see increasing yields, I might have to stop being lazy and make a trip to DBS to move funds from my CPF account into T-bills.

They should really allow us to do this on their banking app just like applications for T-bills using cash or SRS money.

Anyway, I am glad fixed income in Singapore is once again a financially more rewarding option for income investors.

It is definitely good news for those of us who are more risk averse.

Cash is not trash at least it isn't if we are referring to the Singapore Dollar.

I want to end the blog by saying that things aren't all doom and gloom for most of us.

We can continue to grow our passive income whether we are preparing for retirement or in retirement as long as we stay financially prudent.

Gambatte!

Recently published:
DBS, OCBC & UOB at 40% of portfolio?

References:
1. CPF or SSB?

2. 3Q 2022 passive income.

3. My CPF interest income.

For those who are interested in Treasury Bills, this is a good resource by DBS: Apply for T-Bills.

CPF or Singapore Savings Bond? It is a no brainer.

Regular readers know that I have been doing voluntary contributions to my CPF account every year.

I consider the CPF a special investment grade bond that is risk free and volatility free while paying relatively attractive coupons of 2.5% and 4%.

The plan was to continue doing maximum voluntary contributions till I turn 55.

In my age bracket, a bigger percentage of my voluntary contribution would go to my SA which enjoys a 4% interest rate.

Approximately, 31% of my voluntary contribution would go into the SA while the rest goes into my OA.

What about the MA?

My MA is usually maxed out while my SA has already exceeded the Full Retirement Sum (FRS) and, so, what is supposed to go into my MA would flow into my OA instead.

However, with interest rates rising, I have been keeping an eye on the Singapore Savings Bond.

The effective interest rate for my voluntary contributions to my CPF account for the next few years is about 3% per annum which is an averaging of the interest rate for the OA and SA by contribution proportion.

It is a no brainer that if I am able to get more than 3% from another risk free and volatility free instrument, it would trump the CPF even for my age bracket.

SSB is now offering 3.21% per year.

Even if we were to hold for only 1 year, it will pay 3.08%

Source: MAS.

So, I will be applying for the SSB closing on 26 Oct for a sum of $38,000 or a rounding up of $37,740  (i.e. the CPF annual contribution limit) which has been earmarked for voluntary contribution to my CPF account in the new year.

As I expect the level of interest in this SSB to be rather high, my application is probably only going to be partially filled.

In such an instance, I will use the refunded money for future SSB applications if the coupons remain higher than 3%.

Again, what about the MA?

The plan is still to do a top up to my MA in the new year to hit the new Basic Healthcare Sum (BHS) as that enjoys a 4% interest rate.

However, if the SSB coupon should exceed 4% before then, I will channel the money earmarked for my MA to the SSB instead.

So, it seems that I will either be making a smaller contribution to my CPF account in 2023 or not at all.

The big picture really has not changed.

I am still growing the risk free and volatility free investment grade bond component of my portfolio.

However, the interest earned in the SSB is not retained and compounded unlike the CPF.

I must be prudent and put the interest earned to work and not consume it.

So, CPF or Singapore Savings Bond?

Same, same but different.

References:
1. 2022 CPF contribution and top up.
2. $1.1m in CPF savings!

Retirement drawdown strategy? Passive income and CPF?

This started out as a reply to a reader's comment and it got so long that I decided to publish it as a blog.

My reply:

I think I am a bit like that too. 

I am comforted by a high level of savings. 

See: Save 100% of your take home pay! 

Mentally scarred. (TmT) 

See: Life was difficult... 

However, I have been less tight fisted in recent years with money. 

There are more important things in life than money, after all. 

For example: My passive income from 2015 all gone! 

Bad AK! Bad AK! 

As for your question on retirement drawdown cases, this is something other readers have asked me before. 

There is no shortage of advice on the internet on this topic. 

However, this is a difficult topic for me to blog about because all of us have different circumstances, varying needs and wants. 

We are also wired differently and will find comfort in different approaches. 

I can only talk to myself about what works for me. 

In my retirement, I do not want to worry about outliving my savings. 

My focus is on passive income generation so that I would not have to draw down from savings. 

I do feel that this is a valid and even important idea to consider but like I said, we are all wired differently. 

If I keep my needs simple and wants few, I might never have to draw down from savings and I might even be able to grow my savings in my retirement. 

Of course, regular readers know it all started with a spark. 

See: To retire by 45, start with a plan. 

So, the focus for many years leading to my early retirement a few months before I turned 45 was to invest in bona fide income producing assets. 

Of course, we must always hold some cash and this, of course, includes our emergency fund and war chest or opportunity fund. 

See: How much should we have? 

It is good that you mentioned CPF because my CPF savings, apart from yearly voluntary contributions and top ups, is really on autopilot. 

Conventional wisdom tells us that investment grade bonds should be a significant proportion of our portfolio in retirement and the CPF works for me.

See: Unless we are very rich, CPF is all we need.

If I ever need to, I will be able to make withdrawals from my OA and SA in a few years from now when I turn 55 years of age. 

See: Withdrawing CPF savings. 

I do not see that happening unless my passive income is severely curtailed or if I suddenly need more spending money. 

Money in the RA will automatically be drawn upon once I turn 70 and, of course, that is CPF LIFE which is a lifelong annuity. 

See: Make CPF LIFE work for us! 

I know this is a tangential answer to your question. 

However, like I said, we are all different and there are just too many possible draw down cases. 

Know what we need and want in retirement. 

Look at what we have now.

Think of what we are able to do from now till our desired retirement age.

Devise a realistic plan which we are comfortable with. 

Be disciplined and march towards our goal. 

Of course, a good dose of luck helps. 

Once our goal is met, in our retirement, be cautious and stay mostly conservative when it comes to money and we should be fine.

The best retirement drawdown strategy is the one that gives us peace of mind.

Related post:

Retirement adequacy for late bloomers.

Recently published:
Cutting Alibaba and investing for income.

1M50 CPF millionaire in 2021!

Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teenager would wait in line for a cup of bubble tea.

Do you know that bubble tea is wealth and health destruction incarnate?

Expensive carbohydrate and sugar.

Expensive empty calories.

Oops, I digress.

So, what does my CPF pie look like?

It looks different from previous years.

I shouldn't say "it" because this year we get more than one pie.

I prefer the old pie because it looked cheerful with bright colors.

These new ones look really dull.

Anyway, I will just show the first pie:

Are you disappointed?

Oh, you are but not with the colors of the pie but with the numbers?

Right, where is the one million dollars AK hinted at in the blog title?

Well, this is where AK got tricky.

Some of you might have guessed it.

Voluntary contribution of $37,740 this month to my CPF account means I have more than one million dollars in CPF savings now!

Maybe, AK is an overgrown hobbit. 

"Stupid hobbitses, tricksy hobbitses."

Gollum reads Donald Trump's tweets:

Yes, I know.

Bad AK! Bad AK!

My CPF savings in January 2021:

Total:

$1,012,703.70

Hurrah!

We know of 1M65 which is to have one million dollars in CPF savings by age 65.

We might also have heard of people who have accumulated one million dollars in CPF savings before age 65 and now AK is one of them.

AK is 50 this year.

So, AK is a 1M50 CPF millionaire!

Technically, AK is a 1M49 CPF millionaire as he is a year end baby but 1M50 looks more wholesome.

So, 1M50 it is.

Anyway, 49 or 50, eh, who cares?

Indeed, I would argue that it doesn't really matter if it is 1M50, 1M55, 1M60 or 1M65.

I said before that the journey to financial freedom is not a race and as long as we achieve financial freedom, we win.

See:
Journey to financial freedom is not a race.

The same spirit should be applied to growing our CPF savings as just like the quest to achieve financial freedom, each of us could go at a different speed because each of us have our own circumstances to deal with.

Think of it as a rewarding journey that should provide some pleasure along the way.

No pressure, just pleasure.

As long as we are doing the right things as much as we can, we should give ourselves a pat on the back.

Growing my CPF savings over the years has been very satisfying and although I can only see the pie now, I will get to eat it one day.

Growing old is definitely not all doom and gloom if we are well prepared and we should help the CPF to help ourselves.

If we have not done so, start now.

Stay the course and, over time, we will see results.

Remember, compound interest might seem like magic but it really is simple math.

We don't have to be talented like Harry Potter to make it work for us.

If AK can do it, so can you!

AK says one hor. ;)

Related posts:

1. Retirement adequacy.

2. VC to CPF in January.

3. 2019 CPF savings in a pie.

Recently published:

1. 4Q 2020 passive income.

2. Interest income from CPF in 2020.

Reference:
Saving $1m through CPF, The Straits Times.

Interest income from CPF in 2020.

When most people think about passive income, they think about investing in income producing assets like stocks and properties.

Most wouldn't think of interest income from saving money in a bank account given the very low interest rate environment we have been in and the even lower interest rate environment we are in today. 

This isn't wrong, well, if you are not a Singaporean. 

This is because we have the CPF in Singapore and all Singaporeans are CPF members. 

Whenever I have conversations with foreigners about retirement funding, they are always in awe of the CPF system in Singapore. 

Actually, they are envious. 

The CPF pays relatively attractive interest rates of 2.5% to 5% to those of us who are younger and up to 6% for members who are more senior in age. 

I just heard the jaws of some foreign friends hitting the floor. 

Jaw droppingly good.

Source: CPFB.

Anyway, regular readers know that I am a strong advocate of the CPF and I put my money where my mouth, er, CPF account, is. 

As a retiree, I have not had mandatory contributions to my CPF account in the last few years. 

However, I have been making voluntary contributions to max out the annual limit allowed per CPF member. 

Yes, there is a CPF annual contribution limit which we cannot exceed. 

Want to contribute more? 

Sorry but the CPF system is not designed to help the rich. 

So, how much interest did CPF pay AK in 2020?

 OA interest: 

 S$ 15,191.75

 SA interest: 

 S$ 11,647.46

 MA interest: 

 S$ 2,380.98

If we are new to wealth building and if our mandatory CPF contributions leave room for voluntary contributions, consider doing so. 

Not only does the CPF offer attractive interest rates, the CPF is as risk free and volatility free an instrument as we can find as Singaporeans. 

We should take full advantage of it. 

If people tell you that CPF is a PONZI scheme, read this: 

A river called "CPF" and the stubborn horses.  

If people tell you that our CPF money is fake money, read this:

CPF interest earned in 2019. 

Rumours and gossip about friends can be fun but it isn't the way if we want to keep our friends. 

Why do I say this? 

You might want to read this:

CPF: Our best friend in retirement.

That's all for now but I promise to blog about my CPF pie (chart) soon.

Related posts: 

1. Purpose of the CPF is to make the rich richer. 

2. CPF is all we need unless we are very rich.

3. CPF fake news and financial prudence.

Recently published:
4Q 2020 passive income.

Investors eat crusty bread with ink slowly for peace of mind.

Older readers will remember an older blog of mine which asked

"How to have peace of mind as an investor?"

In that blog, I suggested that we should

"Eat bread with ink slowly."

Using mnemonics, it stood for:

1. Emergency fund.

2. Borrowings.

3. War chest.

4. Income.

5. Sizing.

If you cannot remember the details or if you are new to my blog, you might want to read the blog: HERE.





Actually, there is something missing from the list and I have been thinking of doing an update for a while but long time readers of my blog know that I have such a busy life.

This week, in fact, I have spent tens of hours adventuring in a new world.

Yes, a new world.

It is likely that I will spend hundreds of hours in this new world in the coming months.

It is an ARPG this time which is quite different from the MMORPGs like Neverwinter and Guild Wars 2.

ARPG stands for action role-playing game.

The name of this ARPG?

Path of Exile.







Once Mod 18 in Neverwinter goes live on 21 January, I will be busy adventuring in Avernus, the first layer of the Nine Hells of Baator.

Path of Exile and Guild Wars 2 will provide me with alternative worlds to adventure in each time I wait for new Mods from Neverwinter.

I can never be bored in retirement as I enjoy adventuring in such fantastic worlds.

The amazing thing is that I don't have to pay a single cent (and I don't) in order to enjoy these larger than life adventures.

Some people say:

"Aiyah, you can do this because you are rich mah."

This might sound a little sour but, to be honest, they are right.





We want to be financially free so that we do not have to exchange the most precious resource we have (i.e. time) for money anymore.

Why do many average income workers find this impossible?

Do you believe me if I were to say it is not because they make an average income?

If you are a new reader or if you don't remember, read this blog:

Average income workers have a choice to be rich.






To be richer, learn to be better savers first.

This brings me to the crux of the blog or in this case, the "crust".

"Eat crusty bread with ink slowly."

Using mnemonics again.

The letter "C" in the word "crusty" stands for CPF.

I have said in many blogs before that having a rather significant safety net allows me to invest the way I invest with peace of mind.

My CPF savings is a very big part of this rather significant safety net.

In fact, I said that the CPF would continue to be an important part of my passive income strategy even after I had made $1 million in dividends from my many investments in equities and trusts.

Now, when was this?

This was back in October 2016.

See:
The AK passive income strategy after making $1 million.

So, to have peace of mind as an investor, not only do I eat bread with ink slowly, I choose to eat crusty bread with ink slowly.

1. Emergency fund.

2. CPF.

3. Borrowings.

4. War chest.

5. Income.

6. Sizing.






I rather like this update.

Definitely sounds complete now.

Sounds a bit more yummy too.

Sedap!

Don't you think so?

Related post:
CPF is all we need unless we are very rich.

CPF can be our best friend in our golden years. (CPF is a bond, an annuity and a savings account.)

In a blog published in February 2019, I said that even if I were to stop doing voluntary contributions to my CPF account then, I would have approximately $1.5 million in CPF savings when I hit 65 years of age.

If you are a new reader or if you don't remember, read the following blog.

See:
$1.5m in CPF savings by doing nothing henceforth.

Why did Albert Einstein call the power of compound interest the "8th wonder of the world?"

You tell me.







In a more recent blog, I revealed that I was doubling the amount of financial support for my parents.

I also said that I would like to continue making voluntary contributions to my CPF account, maxing out the annual contribution limit, till at least age 55, barring unforeseen circumstances.

Crossing fingers as that means another seven years of maximum voluntary contributions.

I said I might want to enjoy life a bit more and stop doing voluntary contributions to my CPF account after I have accomplished that.

Regular readers know that I have been trying to be more easy going when it comes to spending money on myself.

This is a big behavioral shift for me and something I have had some success in but, to be honest, it is something I am still working on.

See:
How much passive income is enough?







Well, nothing is set in stone, of course.

After I turn 55, there is still the possibility that I would continue to make voluntary contributions to my CPF account yearly as long as I am able to, everything else remaining equal!

Eeeeeeks!

What has happened to AK?

Mental condition got worse!

Well, some readers might remember this blog from mid 2017.

See:
CPF members above 55 should use it as a savings account!







See why I should continue to make voluntary contributions to my CPF account after I turn 55 as long as I am able to?

So, does this mean I will go nuts saving money in my old age?

Well, notice that I said I "should" and not I "must" continue to make voluntary contributions?

Also, these voluntary contributions might or might not be up to the annual contribution limit.

I did not say I would not be making withdrawals from my CPF account then either.

Post age 55, I am going to cut myself some slack.

Post age 55, I would play by ear instead of making yearly voluntary contribution to my CPF account a strict requirement.





Ah, AK's mental condition is not as bad as some might fear it seems.

Hurrah!

Of course, I don't know if my mental condition would worsen as I age.

Ahem.

Anyway, if interest rates remain what they are now, after age 55, it is probably a good thing to remind myself to think of the CPF as a savings account with higher interest rate.

The CPF is not just an investment grade bond and an annuity.

What, you don't know that is how the CPF provides us with some financial security?

See:
This guy has $800K in CPF savings.






People tell me I am worrying too much and I have an inkling that they are right.

This is especially when I have a relatively big safety net in the form of CPF savings.

We should take full advantage of our CPF membership.

That is the smart thing to do.

Yes, we want to retire smart.

Remember this blog?

See:
Don't do silly things and we can retire smart too.







CPF can be our best friend in our golden years if we nurture the friendship.

Now, that is the honest truth.


Believe in yourself.

Believe that you can do it too.

Believe that it is so and you will have the strength of a thousand men!

If AK can do it, so can you!








Recently published:
Voluntary contribution to CPF MA in 2020.

You might be interested in this:
Insure against longevity risk but not like this.

2018 CPF savings in a pie chart. (Growing CPF savings.)

There is always some risk when it comes to investing in stocks and there will always be some degree of price volatility.

Not everyone is able or willing to take risk when it comes to their money and not everyone is able to stomach price volatility well.

Some get sick from the volatility and some even die from it.

This is why we are fortunate in Singapore to have the CPF.







CPF members should take full advantage of this risk free and volatility free instrument that pays reasonably attractive coupons.

Yes, I say coupons because I look at my CPF savings as the risk free and volatility free investment grade bond component of my investment portfolio.






Having a meaningful amount of CPF savings will give most of us peace of mind as we cannot reasonably expect every year to be a good year for our investments.

In my retirement, lacking mandatory contributions to my CPF account, I have been voluntarily contributing to my CPF account and here is what it looks like at the end of 2018:

$845,373 at the end of 2018 and that was at the ripe old age of 47 too.

By age 55, more likely than not, my CPF savings will be in excess of $1 million.

To the very rich, $1 million might not be a lot of money but to the vast majority of us, I am sure it will make a meaningful difference in funding our retirement.

This is why I share my CPF story.

Unless we are handicapped in some way, I believe that if we put in enough effort, we can become CPF millionaires.






If you are a CPF member and have yet to max out the benefits of your membership (think FRS and BHS), read this blog:

CPF is all we need unless we are very rich.


Many or most Singaporeans do not realise what a good thing the CPF is.

Haven't reached the prevailing Full Retirement Sum (FRS) in your CPF account and thinking of buying a bond fund?

If you have yet to hit the Full Retirement Sum, why bother with bond funds?









Want a financially more secure retirement?

It is really as easy as ABC, er, I mean as easy as CPF.

Believe me when I say:

If AK can do it, so can you!




If you haven't listened to the song, listen, there is a hidden message.





Related posts:
1. Voluntary contribution to CPF MA (2019).
2. CPF interest earned in 2018.
3. Financial security plain and simple.