Keeping in touch as I break from blogging.

I have not been blogging for 10 days and I have received several messages from readers regarding this.

I am sorry if I have caused some anxiety for some readers but don't worry, I am OK. Still alive and kicking.




Then, why have I not been blogging?

My blog will be 8 years old this Christmas Eve.

Yes, I have been blogging for almost 8 years.

Surprised? I am surprised too.

I know I enjoy writing and I enjoy sharing ideas to do with personal finance and investment.

However, looking back, I am still surprised by my blogging stamina.




Over the years, from time to time, for various reasons, I have also blogged about possibly retiring from blogging but I have always been able to bounce back pretty quickly from those moments.

What about now?

Well, I just felt like not blogging quite suddenly.

Is there another way to describe this?

Could I share the abrupt feeling through story telling?

What about this?

Suddenly, one morning not too many years ago, I was not able to read the papers as my vision was blurry and I realized that I needed reading glasses.



OK, not quite there but I think some might get the feeling of abruptness.

I am sure some of you might be able to do a better job of describing this feeling.

As for suddenly realizing that I needed reading glasses many years ago, it is a true experience.

People my age or older would know the feeling.

If you don't know what I am talking about, well, when you hit 40 (plus or minus a few years), you will.

You will get a reminder in the mail too because that is when our government tells you to consider getting Eldershield. ;p

Old age.

We can run from many things but not ageing.



So, am I really going to stop blogging this time?

To be honest, I don't know if this feeling is temporary. 

I don't know if I am only feeling a bit burnt out from blogging and that I need some time to recover or if this is a more permanent thing.

If I were to hazard a guess, I suspect it is temporary.

I am still checking my blogs for comments.

I still visit my Facebook page.

I still check my emails.

However, I might not be very prompt in my replies.

I still try to reply to the many messages and emails I get but if you don't hear from me, it could be because I have yet to read your email. 

I don't usually ignore emails from genuine readers.

So, if you wrote to me and did not hear from me for a prolonged period of time, chances are that your email did not reach me for some reason.



For those who want to keep hearing from me but are not following me on Facebook, go to my blog's left sidebar, find the Facebook link and follow me.

I have been updating older blog posts which I feel are still useful to share again on my Facebook wall.

So, you won't suffer from withdrawal symptoms.

Not to worry.

I don't think my time as a blogger has ended and I shall blog again. :)

Largest investments in my portfolio.

In February this year, I revealed the top investments in my portfolio with some indication of their values in dollar terms.

Understand why I decided to share after refusing for so many years by reading this blog:

Investment portfolio and market value.

Then, later in May, I updated the list as I had accumulated a pretty significant position in Centurion Corporation Limited from February.

Centurion has turned out to be a pretty good investment. Read the update in this blog:

Centurion's pricing power.






It is now almost the end of October and things have changed yet again.

1. The decline in QAF Limited's share price makes it a smaller investment for me. It is not as large as it was before. So, it is no longer in the list.

2. The sale of Croesus Retail Trust has been completed and income distribution has been made to shareholders. So, it is removed from the list.

3. The heavy accumulation of SingTel's stock, increasing my exposure by several times, pushes it into the list.






The updated list:

From $350,000 to $499,999:
AIMS AMP Cap Ind'l REIT

From $200,000 to $349,999:
ACCORDIA Golf Trust
SingTel
FIRST REIT

From $100,000 to $199,999:
ASCENDAS H-Trust
WILMAR Int'l
Centurion Corporation Limited






Although Centurion's stock price has gone up quite a bit and I have not reduced my investment, it isn't quite enough to push it into the $200,000 bracket.

Income distributions from my investments this year is likely to end on a high note due to bumper distributions from Croesus Retail Trust and Saizen REIT as both got delisted. 

I will blog about these towards the end of the year when the income from all my investments are received.

Related post:
1. SingTel and Netlink Trust.
2. Croesus Retail Trust.

The gain will outweigh the loss.

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:

Food bill grew but weight reduced.

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

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.

2. Annuity rates.

What is effective annuity rate and is CPF Life competitive?

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.

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. 

What to do with $45K? It depends.

Reader:
I have a bal of 45k which trying to find place to put. need for kid study or health problem. Is posb invest-saver a good choice?







AK:
Since you say you might need it for health problem, then, it is not money you can afford to lose.
Go for the safest options.
In case you are wondering, safest options are those that will not result in monetary loss. 🙂
So, if you need the money, you know you can get 100% of it.

Reader:
ya. cause read many earn from this invest saver but not savvy in investment. think just buy some good stock to keep is better.






AK:
Invest saver is an investment plan.
There is a risk of monetary loss.
The same goes with stocks.
Invest only with money u can afford to lose.

Also read this:
Investor psychology.

Reemployed with lower pay and worried about retirement.

Reader says...
I have been a reader of your blog for many years now.

Similar to your childhood experience - my parents also went thru bankruptcy during my teens and bad memories of money lenders coming to the old house.

I am Malaysian and coming to 55 years old. I was made redundant middle of last year, was unemployed for 4 months and have since resumed working.






My current gross salary is just enough to cover my household expenses + medical insurance for the whole family. (wife+ 3 kids.)

My fear of becoming destitute in the old age has created self-stress, as I continue to have interrupted sleep & tension with family members as I continue to delay/disapprove of their wants.

I currently have > RM3.3Mil in Malaysia Bonds, EPF & fully paid-up endowment policies. I park SGD$0.57Mil in a Singapore bank and have 2 fully paid-up landed property (one for my parents and the other for my family worth a total of RM2.5Mil).

AK pls talk to yourself, How should this person 'live life' going forward?






AK says...
All of us need to plan for the day when we stop working either voluntarily or involuntarily.

Usually, it means saving some money first and then putting it to work.

Hopefully, by the time we stop working, we would be able to receive a regular and meaningful income to have a comfortable retirement.

If your gross salary is enough to only cover your expenses, it means that you do not have any money left to grow your savings. So, I can understand your worry.






However, I can see that you were prudent in your younger days. 

Having 2 fully paid homes, $0.6 million in savings and RM3.3 million in bonds, EPF and endowment, I feel that you could possibly have a comfortable enough retirement if you have a modest lifestyle.

Having said this, I agree that you should continue to be prudent when it comes to wants because your earned income does not have room for wants. 

To satisfy the wants, you would probably have to dig into your savings.





Assuming the old folks at home are financially independent, I would continue to work till my 3 children are financially independent.

If my parents depend on me financially, then, I would continue to work till they pass on and when all my children are financially independent.

Maybe, I could switch to part time work and have more leisure time when fewer people depend on me financially.






You could rent out one house when your parents pass on in future. 

The rental income plus the interest income from your bonds and EPF savings mean you would have a more meaningful passive income.

Money from your fully paid endowments and savings in the bank could be put to work when Mr. Market goes into a depression or whenever there is a good investment opportunity. I would think of these as your war chests.





If you are risk averse, you could think of purchasing a few annuities to fund your retirement. 

You might want to do this sooner than later so that you could start receiving another stream of passive income sooner.

At your age, your balance sheet is definitely not weak but with dependents, it could be exhausted quite quickly if you are not careful especially when you are not able to grow your savings meaningfully.






As long as you stay prudent when it comes to expenses, when you no longer have dependents, all else remaining equal, I believe that your retirement will still be a comfortable one.

Related posts:
1. Advice on saving.
2. Needs and wants.
3. To retire, have a plan.
4. Have an annuity?
5. Too late to plan at 57?

How insurance weakened a family's balance sheet?

This is the continuation of a conversation with a reader who is having difficulty accumulating an emergency fund and who depleted her savings after her dual income household became a single income household.

Reader:
I just read on "How many 20 years and $29,000 do we have?"

I have the Prulink too and have been paying for 12 years now.

Apart from this I have an endowment plan to be paid for another 9 years before mature.

My husband and I plus 2 kids have whole life plans, personal accidental and hospitalisation plans.








AK:
You are (probably) paying too much for insurance.

Your children don't need life insurance. Life insurance are for people with dependents. Children don't have dependents.

I won't touch investment linked policies or ILPs (e.g. PruLink) even with a 5 feet pole. I don't mix investment and insurance.





My action plan if I were in your shoes:

1. You and your husband just need term life insurance (+Critical Illness cover). (You need life insurance until your children are no longer financially dependent on you.)

2. You do not need whole life insurance. Definitely, your children don't need life insurance (until they have dependents). It is a luxury.

3. ILPs are terribly expensive life insurance. (I would get rid of this.)





4. Keep the hospitalisation insurance (H&S). (This is essential.)

5. Accident insurance is not a must but they are pretty cheap. You can keep this if you like. (Otherwise, don't renew when it expires.)

6. Endowment plan, 9 more years. A form of forced savings. Just complete it. (A plain vanilla endowment is less problematic than an ILP.)

Before terminating any of your life insurance policies, get covered with term life insurance of equivalent level of protection first.







We should increase our income if we can but we must be sure that in the event our income suffers a dip or disappears, we are able to cope.

We want to be especially careful with any long term financial commitment that takes up a significant percentage of our regular income.

Making sure that these long term financial commitments are absolutely necessary will help to avoid weakening our financial health too much.






This family can bring down their expenses rather significantly and strengthen their balance sheet by not overpaying for insurance and to buy only what they need.

Related posts:
1. Critical illness insurance.
2. Disability insurance.
3. Term life insurance.

Exceeded CPF FRS and 2 questions.

Reader:
May i get your advise on this matter. Am going 52, meet Full Retirement Sum (FRS) with excess. So OA, SA and MA all met limit.

I read your blog said its good to do Voluntary Contribution (VC) to CPF.




Questions:

1. If i do a VC, where or which account will the money go to since all 3 accounts had hit limit?

2. Can i withdraw the VC that i put in with interest together with my excess above the FRS at 55?

Thanks for your advise in advance.

AK:
Please remember the CPF Annual Contribution Limit (i.e. $37,740 which is 17x of CPF monthly salary ceiling of $6,000 x 37%).

How much Voluntary Contribution you can do depends on how much Mandatory Contribution (from employment) is made in a year. 

Of course, if you are retired or unemployed, then, there is no mandatory contribution.

In your case, Voluntary Contributions will flow into your OA and SA. Nothing goes to your MA.

(The same thing happens with Mandatory Contributions for anyone who is still gainfully employed.)




You want to read this blog and refer to the Allocation Table provided:

http://singaporeanstocksinvestor.blogspot.sg/2017/08/cpf-sa-savings-10-years-from-now.html

At 55, the FRS will go to your newly created CPF-RA. The FRS money will be from your CPF-SA and, if that is insufficient, your CPF-OA. 

Anything in excess of the FRS in the CPF-SA and/or CPF-OA, you can withdraw when you turn 55.



Related posts:
1. Know how to grow our CPF?
2. Average HDB household $1M.

Insurance agent told me I am a valuable piece of art.

Agent:
"We should do a review. Your salary is higher now. You should need bigger insurance coverage."

This was what one of my insurance agents said to me many years ago.

I was wondering why did she say something like that. 

Wasn't I financially more secure by then? Why would I need to increase my insurance coverage?

Agent:
"You are worth more now. Your life is more valuable. It is like insuring a valuable piece of art. More valuable the artwork, the higher the coverage."

OK, at that point, I think most people would have just bought into the argument.

I didn't.

I decided that the agent was only interested in lining her own pockets with more of my money.






Read this conversation I had with a fellow blogger on the need to buy insurance and how this need correctly changes with our circumstances.

AK:
We should look left and right before crossing the road. In some instances, we should look back as well to make sure we are not in the way of some speeding motorized scooters.

Risks have to be managed and having insurance helps to manage risks.

Since we are talking about risks, actually, insurance companies could go bust too. What then? OK, I am being a little perverse. ;p

So, even if we have insurance, it is still important to have a meaningful emergency fund and I do maintain a very large emergency fund well beyond the 12 to 24 months of recurring expenses that I usually suggest.






The need for certain insurance products in life diminishes if we have a large enough emergency fund as well.

Insurance is most relevant when we want to transfer risks which could result in catastrophic financial losses or hardship.

So, we have to insure ourselves against events which we or our loved ones might find hard to cope with on our own.

The financial ability to cope will, of course, differ from person to person and from family to family.






la papillion:
I think it's a important to know that everything we do runs a risk. Even if we buy insurance, it's also possible for the company to close down, as u had mentioned. (that's why don't buy all your policies from one single company).

That's not the only risk of buying insurance. These days, even if u bought a plan, u might not be able to claim because of some disclaimers laid out but u didn't know about.

So, I agree that we should progressively take the risk ourselves as our financial situation improves.

When we just started working, the insurer should bear a big part of the risk because we don't have the means to shoulder the risk. It should be inverted when our situation improves.






Don't think of ourselves as a valuable piece of art that needs insurance coverage.

We should become more valuable as a person because our wealth has grown.

As we become wealthier, we shouldn't need to have more insurance coverage.

How to become wealthier?

What?

Make more money and buy more stuff that we need to buy insurance for?

OK, maybe, I will ask that insurance agent who said I was a valuable piece of art to give you a call.

Related posts:
1. Emergency fund.
2. Best insurance.
3. Become wealthier.