Young working Singaporeans, you are OK. Really?

This was just in the news:

Young Singaporeans in the workforce today will have adequate savings in their Central Provident Fund (CPF) accounts by the time they retire, according to an independent study by the Ministry of Manpower.

A recent study using the Income Replacement Rate or IRR indicates that Singaporeans are adequately covered.

Pension economists measure retirement adequacy by using an IRR, which is the ratio of retirement monthly income to pre-retirement monthly earnings.

The study found that a median male earner who enters the workforce today will be able to achieve an IRR of over 70 per cent through his CPF savings.

For the female median earner, the equivalent IRR is 63 per cent.

These figures are similar to those of countries of the Organisation for Economic Co-operation and Development (OECD).

The IRR for the median OECD economies is 66 per cent. The World Bank recommends a range of between 53 and 78 per cent.

The rate is significantly higher in Singapore when it takes into account the fact that Singaporeans have their own homes when they retire.

Cash is freed for other living expenses as they do not have to pay rental fees.

With Workfare, which supplements the wages of low-income workers, the IRR is even higher -- at 93 per cent.

Read the full article: here

I find it impressive that a young Singaporean male who joins the workforce today would be able to have a retirement income equivalent to 70% of his pre-retirement earnings just by drawing on his CPF savings. I suppose this is assuming that he is gainfully employed without significant periods of unemployment till age 65.

I have always thought that it is impossible for us to retire and have a standard of living comparable to pre-retirement if we were to rely on our CPF money alone. Now, if someone is able to have an IRR of 70 to 93% at the official retirement age of 65, it comes rather close.

So, does this mean that people no longer have to make their savings work harder and learn how to invest their money to beat inflation? Ah, inflation!

I assume that upon retirement, our monthly withdrawal of our CPF money is a constant number. This is what CPF Life will do for us, if I understand it correctly. This means that our monthly "allowance" from our CPF would stay the same nominally till the day we bid farewell to this world or am I wrong? So, even though someone could have an IRR of 70%, that someone's standard of living could worsen with time due to inflation, could it not?

I would still encourage all Singaporeans to be more pro-active in managing their money and growing their wealth. It is risky to think that our CPF money will be enough, financially, to provide for our old age.

Of course, there are those who would like to retire before hitting 65 but that is another story.

Related posts:
1. SRS, CPF-OA, CPF-SA.
2. Do you want to be richer?
3. Wage slaves should be fearful.

Tea with AK71: Inflation hits fried bee hoon.

Today, I went to the "economic fried bee hoon" store near my office to buy breakfast. I like fried bee hoon a lot. It is inexpensive and tasty. However, I would try to restrict it to once a week or fortnight. It is still less expensive to bring my own food to work (e.g. oatmeal).

I would usually order fried bee hoon with a piece of tofu to make it a more nutritious meal. Price? $1.50. If I am not feeling very hungry, I would have half of it for breakfast and keep the rest for lunch. Two meals for $1.50! I like this too.

We all know that inflation has come fast and furious to Singapore. For a while, I thought my favourite fried bee hoon would be spared as the price has remained the same since last year. I am mistaken. Today, I paid $1.70. So? It is only 20c more, right? It is actually an 11.76% increase in price!

Imagine how this would affect someone who does not have the habit of bringing food from home to work. If his eating out food bill is $300.00 a month, it would mean paying $35.37 more every month! That is enough for a nice dinner for me at Soup Restaurant and still have money left over for some grocery shopping.

With QE3 launched by the Mr. Ben Bernanke, inflation could get worse. Time to get cooking.

Related posts:
1. A simple meal.
2. Another budget meal.
3. A healthy, low cost meal.
4. Korean noodles for lunch.
5. A loaf of bread.

Fraud: Credit cards.

When I was in Los Angeles with my dad once many years ago, he tried to buy some chocolates at the airport but his card was declined. The cashier told him that a message appeared on the machine that he was to call the card centre. My dad was puzzled since he promptly paid his credit card bills each month.

Anyway, he called the card centre using his ICC at a public phone booth. In case you are wondering what on earth is an ICC, it was an International Calling Card issued by Singtel for people who were travelling overseas in the past. I don't think ICC exists now.

The card centre lady asked him where he was and told him his credit card was used in a petrol station in Johor just two hours ago! Wow! My dad must have had taken something faster than the Concord to travel from the USA to Johor and then back in two hours.

There are risky places to use credit cards and we have to be very careful:

Flea MarketsFlea market merchants are often transient and can be difficult to locate if there is a problem with charges. It's especially true for vendors who don't have online credit card terminals and instead make carbon copies of your credit card.

That doesn't mean those vendors are necessarily fraudulent, but it makes the transaction less secure. The credit card company might have trouble doing a charge back. If you're going to the flea market, take cash. It's also easier to negotiate that way.

Small Shops/Cafes in Foreign Countries
These smaller merchants have a significantly higher percentage of credit card fraud as reported by large banks and credit card companies. Many of these transactions end up being written off by the banks because the merchants simply can't be located. There's just a higher chance of fraud when you get outside of the mainstream, so when in doubt, use cash.

For the full article, read:
The Riskiest Places to Use Your Credit Card

China Minzhong: Emerging from a down trend.

The last time I blogged about China Minzhong, I said that the longer term downtrend was still intact. Has this changed? Yes, it broke out of this downtrend middle of August and briefly went under the trend line in early September.

Both MACD and MFI have formed higher lows. Breaking the down trend with stronger positive momentum is good news for the bulls. Now, all eyes would be on 78.5c, the recent high of 23 August as well as the declining 200d MA at 80c. If price action is able to break these resistance levels and move higher, we could see a move to test a band of resistance between 88c to 94c.

In case of further weakness, I see support at 66c, provided by the 50d MA. Stronger support is at 63c, the top of a 5 months base formation (March to August 2012). I would be accumulating on weakness.

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We expect higher operating cash flow and less Capex in FY13, thus the first positive free cash flow in three years. We cannot rule out the possibility that Minzhong will pay dividends or buy back shares in FY13. Although we have not put in any dividends payments or share buyback forecast as our base case, we believe such actions will boost the valuation if they eventuate. (Kim Eng, 28 August 2012)

Related post:
China Minzhong: Pushing higher.