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The gain will outweigh the loss.

Thursday, October 26, 2017

I try to put some effort into coming up with creative titles for my blogs and I am quite pleased with this one. 

Pun upon pun. Rather fun.

After attending "Evening with AK and friends", some overweight readers became more interested in losing weight than investing for income. Ha ha.








A reader just wrote to me to say he has lost 3 kgs since he started dieting almost 3 weeks ago. 

I am very happy for him but I also told him that weight loss will slow down over time and, if he keeps to the diet, when the weight loss stops, that is when his body is telling him that he is at his ideal weight which should be healthier.

He could cut himself some slack then. 


One cheat day a week? Why not?





I see many overweight people trying to lose weight by hitting the treadmills in the gym or jogging along the PCN. 

They shouldn't be doing that.

Doing high impact exercises wears out the knees and overweight people will put a lot more stress on their knees. 

This is why for people with knee pain, losing weight helps a ton (pardon the pun).





Lose weight through dieting first. 

Then, consider doing some jogging.

Of course, regular readers know that my preference is for stair climbing.

I climbed 50 floors last night, jogged for 15 minutes and still enjoyed an evening walk. 

Nothing too strenuous. 

Just keeping myself physically active.





How to lose weight fast?

Avoid carbohydrates. Out with rice, bread, noodles, cookies and other stuff like that. 

Definitely, throw out sugar. 

When we take carbohydrates, it should be in the form of vegetables and fruits. 

Most of the carbohydrates is in the form of fiber and will not be retained in the body. 

Of course, there is sugar in fruits but they are naturally occurring. 

However, in the early days of your diet, you might want to choose berries, green kiwi fruit, green apples and pears, for examples, instead of mangoes, pineapples, durians and papaya, for examples. 

The idea is to go for less sugary options. 

Or you might want to eliminate fruits altogether for the first few weeks.




Don't avoid fats. Take good fats like extra virgin olive oil, extra virgin coconut oil and butter. Our body needs fats to function.

You could supplement your diet with Omega 3 capsules too. 


This is something I do because I don't take fish everyday.

Don't buy low fat food because they are usually filled with other stuff to take the place of fats. 

Just look at evaporated milk being sold at the supermarkets, for example. 

I would buy the full cream version and not the filled or low fat versions.

However, to lose weight, avoid milk for a start. 


It is because of the milk sugar.




Take enough protein. The guideline for a sedentary person is 0.8 gram of protein for every kg of body weight per day.

Take enough protein to maintain our muscle mass. We want to lose fats but not muscles. 

If your body weight is 60 kgs and your lifestyle is sedentary, you need 48 grams of protein a day, for example.

A medium size egg gives us about 7 grams of protein, for example. A small egg weighing 55 grams, about 6 grams of protein.

If we throw out the yoke which contains all the nutrients and eat only the white, we will get about half the protein.

I eat the whole egg.





Being fat is the reason for many health problems and with a sedentary lifestyle it is very easy to become obese if we are not careful with food.

Some of my meals in recent days:


Spinach, eggs, butter and olive oil.

Chicken, coconut oil and spinach.
Salmon, butter and olive oil.

I always add turmeric powder and black pepper because they are good for the joints. 





They are supposed to have other health benefits too if you are into Ayurvedic studies.

The gain will outweigh the loss.
Related post:

Which CPF Life Plan for me? Basic, Standard or Escalating? (UPDATED JULY 2018).

Monday, October 23, 2017

An annuity is supposed to help fund our retirement. 

So, I should be looking at getting a bigger payout, if possible, and not a smaller one.




So, my choice is the Standard Plan.

I know there are people who would like to leave more money behind for their children and they might say I think the way I do because I have none (or at least I think I have none).

OK, maybe so.





However, I do feel that children should take care of themselves once they are adults. 

Some might tell me that this is a Western idea. 

OK, then, how did this Chinese saying come about?

儿孙自有儿孙福,莫为儿孙作马牛。


Bad AK! Bad AK!

Now, for some numbers.





Following my last blog on annuity rates, if we were to choose the CPF Life Basic Plan in order to possibly leave more money behind when we die, the annuity rate is approximately 7.16% (i.e. $991 x 12 /$166,000). 

- Refer to Ervin's comment on annuity rate at the end of this blog.


If we were to choose the Standard Plan, the annuity rate is much higher at approximately 7.88% (i.e. $1,090 x 12 /$166,000).

- Refer to Ervin's comment on annuity rate at the end of this blog.




I feel that when it comes to an annuity, the bequest should not be a primary consideration because leaving a legacy is not the purpose of an annuity.

An annuity is not a legacy planning tool. 


An annuity is a retirement funding tool.






What about the new CPF Life Escalating Plan?

I would probably stick to the Standard Plan as receiving a more meaningful sum of money right from the start and for many years after that is intuitively more attractive to me.


Intuition is fine but let me see if I can explain my choice mathematically.

The CPF Life Escalating Plan's annuity rate will escalate at 2% every year. 






Therefore, for the annuity rate to be on par with that of the CPF Life Standard Plan's, it would take about 11 years.

Only from the 12th year, the Escalating Plan's annuity rate would be higher than the Standard Plan's. 


This means its monthly payout would only become higher than the Standard Plan's then.






This seems attractive but in terms of total dollars received from the first payout, it would have lagged behind the Standard Plan and, logically, it would take many more years to catch up with the Standard Plan to make up for the "shortfall".

If we take into consideration the time value of money which says a dollar today is worth more than a dollar tomorrow, the difference in value spanning a period of years is probably quite stark.
.




.

I have never been very good at Math and, like with all my blogs, this is just me trying my best to make sense of things but maybe not doing a good job of it.

You have been warned.



So, why would I choose CPF Life Standard Plan?

You blur?

I also blur.





Please remember that I think this is right for me but it might or might not be for you.

Yes, you have been warned again.




---------
Lee Keh Yi:
CPF has updated their CPF Life Calculator.
It show much more details now


.


.

Ervin Ong says...
Your annuity rate calculation is wrong: "CPF Life Basic Plan in order to possibly leave more money behind when we die, the annuity rate is approximately 7.16% (i.e. $991 x 12 /$166,000)". This is because $166,000 is what you have at age 55, but you only start collecting annuity at age 65. You have missed out all the interest for the 10 years period.





Related post:
1. CPF Life estimator.

What is effective annuity rate and is CPF Life competitive?

Sunday, October 22, 2017

A reader read an article in The Straits Times on CPF Life and asked me to write a piece on it.

I have blogged about CPF Life so much already and, so, to avoid boring anyone too much, I will try to keep this short.




This is taken from a recent chat with another reader:

foolishchameleon said...
... with so many annuities in the market, what returns would be considered decent?
2.5%? 3% ?

AK said...
What is a decent return? I have not done any comparison lately but I know none is able to come close to what CPF Life is able to generate which is a minimum of 4%.
However, if it is only 2.5%, I might as well just do annual VC to my CPF account as the OA pays 2.5%. So, intuitively, I would demand at least 3% from a private annuity.

(Source: https://singaporeanstocksinvestor.blogspot.sg/2017/10/how-insurance-weakened-familys-balance.html)







So, when the article in The Straits Times says CPF Life is able to offer a 7.1% effective annuity rate based on $100,000 premium, what are we looking at here?

We are not talking about effective interest rate here. 

We are talking about effective annuity rate.

If we are talking about interest rate, then, based on $100,000 savings in our CPF-RA, the first $30,000 gets 6%. Next $30,000 gets 5%. The rest gets 4%.

Average interest rate is 4.9%. 

I hope my math is up to scratch.





An annuity rate is not interest rate as it refers to how much is paid out as a percentage of our premium each year.

So, in the CPF Life example mentioned in The Straits Times, a 7.1% annuity rate based on $100,000 gives us $7,100 a year or $591.66 per month from age 65 for life.

It isn't a 7.1% interest rate.

It is quite clear that annuity rate and interest rate are different especially when we remember that some of this regular payout is a return of capital which is why at some point in our old age, when we pass on, there is nothing left for our beneficiaries.
Source: 
The Telegraph, 17 May 2017.




















Taken from the article in The Straits Times:

The report highlighted that with CPF's interest rate structure, CPF Life is able to provide an effective annuity rate of 7.1 per cent based on a $100,000 premium.

"This compares favourably with life annuities in most markets," stated the report. The annuity rate was calculated based on the ratio of annual payout to premium paid, for a male member born in 1962, or is 55 this year, who receives payouts at age 65.

It is no wonder that financial experts like Mr Christopher Tan, chief executive of Providend, believes that every retiree's portfolio must include an annuity plan to hedge against longevity risk.


He says: "CPF Life is currently the best annuity plan in the market. It is low-cost and offers high return."




Read full article here:
http://www.straitstimes.com/business/invest/is-the-new-cpf-life-plan-ideal-for-you

Related posts:
1. An annuity.
2. Retirement funding.
3. CPF Life Escalating Plan.

Retirement funding assurance for the average investor.

Saturday, October 21, 2017

I have met many people who told me they didn't believe in the CPF and they didn't believe in CPF Life.

When I explained that CPF Life is an annuity that would pay us a monthly income for life from age 65, some would go on to say that they didn't believe in having annuities.





There are different reasons given for not having an annuity but amongst investors, those that do not believe in annuities usually believe that they can always do better investing their own money.

It could indeed be the case that some of us constantly outperform the market.


See related post #2 at the end of this blog.

Well, I am not too confident of my own ability to do so.

So, I like to have some assurance that I would have a basic retirement income that is predictable.





In case my investments do not perform well enough in certain years, I have a well I can depend on. 

Having a well helps us to live well.

Sorry, I couldn't resist it.


Really.

No Evian? At least have well water.


That is what an annuity like CPF Life can do for us.



AK anyhow draw one.

Peace of mind is priceless.




Related posts:
1. An annuity.
2. CPF Life Escalating Plan. 


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