Lump sum CPF withdrawal suggestion by NTUC is myopic.

I am very disturbed by NTUC's suggestion to let CPF members "withdraw a lump sum - of at least 20 per cent of the balances - from their retirement accounts, even if they do not meet the Minimum Sum." Reference: Today Online.

In an open letter to PM Lee on 11 June 2014, I made 3 points. One of these was to allow members with genuine needs to "micro-tap" their CPF savings (presumably from age 55 to 64). A lump sum withdrawal of at least 20% is not micro at all and I am very worried that the suggestion says "at least 20%" which means that the percentage could be higher.

Although certainly not always the case, I am sure that many CPF members who are not able to meet the minimum sum at age 55 are not financially savvy. I am not sure that letting them withdraw a bigger lump sum (even with financial counselling) is the way to do it. Once the money is gone, it is gone.

A much smaller sum that is left in the CPF-RA as a result would mean a much smaller monthly income from CPF Life from age 65. How does this help the affected members' retirement adequacy?

So, I am against this suggestion by NTUC although I would like to see more compassion and understanding in the system.

What would I suggest then?

Like I suggested before, a micro tapping of CPF-RA savings from age 55 could be considered. The actual mechanics would, of course, need more thought.

Perhaps, a withdrawal rate of 2% per annum from age 55 to 64 could be allowed. If a member did not take advantage of this allowance in the first 5 years, he would be allowed to micro-tap up to 12% of his CPF-RA savings in the 6th year if there is a need to. Of course, in the first 5 years, the money that was not withdrawn would have earned some interest (compounding at 4% a year).

This would give money in the CPF-RA a better chance (i.e. more time) to accumulate so that there would be more money to be given out on a monthly basis from CPF Life from age 65.

Although we want to be understanding and compassionate, we should not give in so much as to compromise on a CPF member's retirement funding adequacy.

Related post:
An(other) open letter to the Prime Minister.

Be richer, save money by having yummy and frugal dinners.

Decided to have an early dinner today!

Yes, rice! Healthier than bread, I am sure.

Once the pot came to a boil, I turned off the heat.

20 minutes later, the porridge was ready!

While waiting for the porridge to cook, I had a fruit.
I bought 10 of these for $3.65.

Surprise! Some of you keep saying I don't take enough vegetables.
I hear you loud and clear. I got some vegetables. Washed!

Added some salt to boiling water and gave the greens a hot bath.

Really like the bright green color.
I added some pork floss to make the dish more interesting.

Yummy dinner. Quite cheap too, I am willing to bet.

Related posts:

1. A simple meal.

2. Have an extra $1,200 a year.

3. Be $48,000 to $60,000 richer in 10 years.

Value for money: Rolexes snapped up in Singapore.

"Rolexes flew off the shelves over the weekend after the Swiss franc's surprise appreciation last Thursday sent Singapore's luxury watch enthusiasts on a buying spree before retailers adjust their price tags."
Source: The Straits Times.

Today, a fellow blogger sent me a message:

"I read today that pple are rushing to buy Rolex and other Swiss watches, from a value point do u think it is worth to buy now?"

To be quite honest, the thought of buying a Rolex or two crossed my mind too after reading the news regarding the Swiss Franc last week.

I thought about it a bit more and decided that although the prices of brand new Swiss made watches are certainly going to be higher in future, I would be silly to lock up money in what is a consumption item that is likely to depreciate in value over time even though I might have a margin of safety buying at the pre-adjusted prices. I am very sure, therefore, that it won't be an investment.

Depreciate in value? Don't believe me? Go to shops that sell pre-owned Rolex and other atas Swiss watches to take a look. Most people have relatively short memories but we might want to be reminded that, during bad times, we might even be spoilt for choice in these shops.

Well, it seems that many people disagree with me, going by the newspaper report today. Mr. Market is always right. So, AK is the silly one.

Anyway, my reply:

"Watches are consumption items. We can buy pre-owned Rolex and other Swiss made watches at a fraction of what they would cost brand new.

"I know some people say that luxury watches are investments. Well, I believe that some luxury watches can be investments. These could be highly sought after limited production pieces from very exclusive brands.

"It is not a subject that I have the time or inclination to learn more about. So, I am quite happy to stick to what I know which is that given a choice, I would rather hoard gold and silver than luxury watches."

Since I am not an expert on the subject, I have "invited" an expert to give us his view:

"The Swiss watch market is especially sensitive to economic depressions, and finds itself always having to aim where new money is. This is because high-end wrist watches for the most part are a poor economic investment. You should buy them because you love them, because they are beautiful, and because you want to wear them. Not because you think they will hold or increase in value.

"As a professional talking head on watches I often get asked about investing in watches for profit. The idea that you’ll buy a watch and wait until it increases in value doesn’t made for good sense. Plus, historically it doesn’t happen often even with extremely rare watches. Of course this is not the universally the case, but if I was your investment adviser, I would say stick with watches for wearing not anticipating." Ariel Adams in Forbes. 

Have you bought your Rolex yet?

Related post:
My vintage Rolex.