When to get a private annuity?

Reader:
Been reading your blog for a while now and wanted to ask you what do you think of XXXXXXXXXXX as a retirement plan.

My financial consultant suggested this (product) to me recently but I wanted to get a second opinion on this.

Could you talk to yourself about this please?

AK:
As a retirement plan, there is nothing out there that can beat the returns offered by CPF Life.

Unless I have maxed out my CPF account, I would not consider putting money in a private plan.

http://singaporeanstocksinvestor.blogspot.sg/2015/02/an-annuity-would-you-rather-have-it-or.html




I have done a case study of a private plan before and how it could not beat CPF Life. 

You might want to use this as reference when looking at the product offered to you:

http://singaporeanstocksinvestor.blogspot.sg/2014/07/an-annuity-proposal-case-study.html




In summary, max out your CPF account first (i.e. top up your CPF-SA to hit prevailing FRS) or if you are above 55, think about maxing out your CPF-RA.

Only then, think of possibly getting a private plan to supplement CPF Life.

Related posts:
1. 4 ways to beef up CPF savings.
2. CPF savings 10 years from now.

Cannot do this in Singapore because...

Most of us are amateurs when it comes to anything that has nothing to do with our full time job. It stands to reason.

However, even if we spend hours each day doing something, we might not be very professional about it. So, we could remain amateurs. This stands to reason too.

AK is an amateur this and an amateur that in retirement. 

I do the things I enjoy but I am not necessarily good at them. 

It is about having fun and not making a living. 

So, I am not going to set professional targets or high standards. Just thinking about doing this is stressful. 

Naturally, this is how I treat gardening as a past time too. For an amateur gardener, I think I have done OK.

To be honest, it is probably because I have mostly chosen plants which are easier to grow. 

Yes, AK is a lazy fellow and always likes options which have lesser resistance.




A friend told me that it is too difficult to grow Lavender in Singapore because the weather is too warm.

Then, a friend told me that it is impossible for Lavender to flower in Singapore because it is too warm.

I would need to have a cool environment like in the Flower Dome in Gardens by the Bay for Lavender to bloom.


I told him I didn't know that and, by the way, I think my Lavender plant might just be flowering:

(Photos taken on 1 Sep 17.)

Some people tell me that they can never achieve financial freedom in Singapore. It is impossible because it is just too warm hard.

(Photos taken on 12 Sep 17.)

This final photo was taken moments ago this morning:

OK, maybe, AK is just lucky.

Related posts:
1. Gardening and investing.
2. Financial freedom for Singaporeans.

Reduce home loan with CPF OA or do OA to SA transfer?

Reader:
I have an existing HDB loan of 270k over 30 years with my spouse and we are deciding whether we should try to reduce the loan amount with our CPF OA or transfer some to CPF SA.

Objective is to pay the housing loan - debt free and to have a good retirement amount at 65 (hopefully to hit at least 500k in CPF).

We are 35 this year and we have around 80k in our CPF OA each with around 30k in CPF SA.

Hope to get your kind advice on this!

AK:
When we use our CPF-OA savings to pay for our home, we stop earning interest from the government. Instead, we have to pay ourselves interest if we should sell our home.

Once we realise this, it becomes pretty obvious that in an environment of prolonged low interest rates, it would probably be a better idea to pay for our home using cash if we can afford to do so. Don't use our CPF-OA savings.

Central to the idea is to receive more interest income for our CPF savings with an eye on achieving a higher level of risk free and volatility free retirement funding.





Before doing any OA to SA transfer, I would keep enough in the CPF-OA to service at least 24 months of mortgage payments. Bad things do happen unexpectedly.



Savings in our CPF-SA receive a base interest rate of 4% per annum.

If you use your OA savings to pay your HDB loan, you are saving 2.6% in interest payment but you will be losing 2.5% in interest income. So, you have a net saving of 0.1%...






Reader:
Thank you so much for the prompt reply and words of wisdom.

I will keep in mind your kind advice and work out a long term plan.

It has been very kind of you to share your knowledge and wisdom especially for many of us who are caught at a junction, not sure what is the best way to move forward and yet we would want to maximise the returns for our efforts/assets/decision. Sometimes, there is really no right/wrong way to make a decision.

Once again, thank you so much for sharing your knowledge selflessly!






Interested in making good use of the CPF to help achieve retirement adequacy? See related post #2.

Related posts:
1. Average HDB household and $1M.
2. 4 ways to boost our CPF savings.

Small savings might not add up to big money but...

It has been a while since I blogged about my money habits.

Readers who have been following my blog for a long time might remember the blogs on packing lunch to work and not buying drinks when eating out (and definitely not from Starbucks), for examples.





For sure, the blogs did not sit well with everybody and I was even labelled a person with a peasant mentality (or a person with a "poverty mindset") in wealth building because of them.

Well, I hope people who don't like my money habits don't read this blog.

Wait a while.

Filtered.

Still reading?

OK, you have been warned.

Since I changed my diet more than a year ago, I have been consuming more eggs and this is how I have been buying them.

In a tray of 30.

I transfer the eggs into smaller trays for ease of storage.

Tray of 30 @ $3.30.

Tray of 10 @ $1.65.

I save $1.65 each time.

What? $1.65 only? 

It is a 33.3% savings! 

Hey! It is like getting 10 eggs for free!

As you can tell from the scribbles on the label, I have been doing this for quite some time.

I know many people think that it is not worth saving small amounts of money. 

Maybe, saving small amounts of money gives them a "poverty mindset" and they don't like it.

Small savings are for poor people and they want to feel rich.

AK, you not poor wor. Why you so giamsiap? So cham like that.





Well, saving small amounts of money might not make us rich but it definitely won't make us poorer. Now, doing the opposite would definitely make us poorer.

Almost bankrupt, AK's family was once quite poor. AK doesn't want to go back there.

Related posts:
1. Money habits and $100K savings.
2. Earn $32,000 with a mug?
3. My family almost went bankrupt.