AK asks HDB-HIP-VERS can eat or not? Baojiak?

Single or married, if we are looking for a home in Singapore, the best value for money option is still a brand new HDB flat (i.e. BTO HDB flat), if we are allowed to buy one, of course.

Heavily subsidised, brand new HDB flats pass the Rule of 15 test with flying colors.

Don't know what is the Rule of 15 test?

See:
Rule of 15.



Singles weren't always allowed to buy new HDB flats.

Although allowed to buy only a one bedder (i.e. 2 room flat), allowing singles to buy new HDB flats is progressive thinking as many more young Singaporeans are staying single.

Space wise, having lived in a shoebox apartment for 4 years now, unless we are hoarders of material goods, I believe there is enough room for a single person in a 2 room HDB flat.

See:
My home is a hut in the sky.





As for HIP and VERS, for those who are not familiar with these acronyms, you are so unpatriotic lor.

Didn't watch National Day Rally 2018, right?

Bad XXX! Bad XXX!

"All Housing Board flats can expect to be upgraded twice during their 99-year lifespan under the newly-expanded Home Improvement Programme (HIP), as part of the Government's public housing redevelopment initiative.

"In a nutshell, all flats will be upgraded when they reach about 30 years of age, and again when they are about 60 to 70 years old."

Read article: 
HERE.


"Under the new Voluntary Early Redevelopment Scheme (VERS), owners in flats aged 70 years and older can vote for the Government to buy back their homes before their leases run out, if their precinct is selected for VERS.

"They can use the proceeds to buy a new flat, while the Government redevelops the precinct. If they vote against such a move, they can continue to live in their flats till the leases run out."

Read article: 
HERE.





Many things have been said by many people about HIP and VERS since NDR 2018.

I was afraid readers might ask me about them and my fear came true.

Why afraid?

Apart from the fact that I am really lazy, I am really unimpressed by HIP and VERS.

To me, HIP and VERS are simply attempts to allay fears of people who happen to be owners of older flats, especially those who might have bought a resale flat that is quite a bit older than they are.

Purely from a value for money perspective, I think it is silly to pay full market prices for much older flats if we have the option of paying a much lower price for new HDB flats which, of course, have fresh 99 year leases.

See:
Affordability and value for money.





HDB flats come with a 99 year lease.

In case you don't understand what that means, it means that we will enjoy them for a maximum of 99 years.

As they age, the remaining lease becomes shorter and shorter.

If we are sufficiently clear headed, it would be quite obvious that HIP and VERS do not address the core issue of a decaying lease.






HIP

HIP simply makes old flats look new again.

The looks are upgraded but the leases are not.

It is like repackaging something with an approaching expiry date to sell to an unsuspecting consumer.

Or imagine an 80 year old granny going for plastic surgery to look young again but it does nothing to extend her lifespan.

Alamak, AK why liddat say?

Bad AK! Bad AK!






VERS

What about VERS?

Surely, it must be a good thing, right?

Well, it is 20 years away and we can't really tell what the compensation quantum is going to be like.

However, we can make an educated guess.

My guess?

VERS is going to be like selling the tail end of the lease to the government (i.e. HDB Lease Buyback Scheme) except that, this time, you get kicked out of the flat.

See:
HDB Lease Buyback Scheme.





You will have to look for a new home.

The monetary compensation from VERS should be higher than selling the tail end of the lease to the government under the HDB Lease Buyback Scheme.

However, the compensation cannot reasonably be expected to be enough to purchase a new home with the same attributes with a much longer lease.

You will most likely have to downgrade or downsize or top up to buy a new home.

What does this sound like?

Sounds like your old home with a much shorter remaining lease which you sold to the government under VERS was less valuable.

See?

It is free market economics.






You cannot reasonably expect to exchange an older batch of produce which is going to spoil soon for a fresh batch that will stay good for some time to come.

Hmm.

Wait, actually, you can.

How?

If you meet a "gong giah" (i.e. "stupid fool" in Hokkien) of a buyer lor.

So, what is the moral of the story?

Look for a "gong giah" buyer lah!

Aiyoh, no lah!

You so terrible!

Moral of the story is don't be the "gong giah".






For some reason, if you are set on buying a resale HDB flat, "bochap" (i.e."ignore" in Hokkien) the hype around HIP and VERS.

They are just noise.

Remember, you must have very good reason to give up the option of purchasing a new HDB flat if you are actually lucky enough to have that option.

Focus on what you need and if only a resale flat will do the job, try not to buy a very old flat.

See:
Buying properties with short remaining leases.






Although you are being a "gong giah", don't be more "gong" than necessary.

See also the related posts at the end of this blog.

OK, I am packing and rushing to the airport to catch the next flight out of Singapore now.

Hopefully, it is going to a country that does not have an extradition treaty with Singapore.

Alamak!

Bad AK! Bad AK!







Related posts:
1. Older flats are problematic.
2. HDB flat is 37 yo but son is 8 yo.
3. $1M for 30 year old flat and now?

Another blog was published earlier today:
CPF SA time and income lost!

CPF SA time and income lost due to peer pressure.

Definition of "peer pressure":

A feeling that one must do the same things as other people of one's age and social group in order to be liked or respected by them.

(Source: Merriam Webster Dictionary)






Reader says...
In my 20s, I already had the intention of transferring the monies from my OA to SA.

I also intended to make voluntary contribution to my CPF accounts at that point of time.

I told my friends about my intention and they criticised my plan and called it a "stupid" idea.

As a result, I did not execute my plan.

I finally took action when was 38 years old two years ago. 

I transferred the maximum allowed from OA to hit FRS in SA without telling anyone then.






Of course, my OA was significantly reduced after the transfer.

Going forward two years, my OA balance surpassed my SA once again due to mandatory contribution from my active employment.

I have no regrets doing the OA to SA transfer.

I only regret succumbing to peer pressure and not doing this in my 20s.






AK says...
Yes, doing OA to SA transfer in our 20s would make the government work a lot harder in building our CPF savings to meet the FRS much faster.

People sometimes say that 4% interest in the SA is only 1.5% more than 2.5% in the OA.

I always tell them that it is not 1.5% but 60% more!

Add the magic of compounding, it becomes much, much more. ;)






Peer pressure can be a terrible thing.

Some things we should never do despite what our peers tell us.

Some things we should go ahead and do despite what our peers tell us.

If our facts are right and if our reasoning is sound, stick to our plan and ignore the noise.





AK anyhow talking to himself only lah.

I am not peering at you.

I am not giving you pressure.

No peering and no pressure hor.

Related post:
1. Bigger retirement fund with CPF-SA.
2. Much money in SA from the government.
3. Hit FRS in SA by age 32!
4. FRS in CPF SA at age 30?

Good men top up their wives' CPF accounts!

Reader #1 says...
I have decided to use cash, $10K annually for 18 years to top up my non-working spouse's CPF SA.

She currently has only $10K in her CPF SA.

In this way, she should be able to meet the minimum sum by the age of 55 and join the CPF Life.

10K annually will be the minimum top up and will be around $280K by the time she is 55 if my calculation is correct.

Any extra will be bonus.





We are not very well-to-do, so we hope that with both of us on CPF Life, we will not burden our children when we aged.

Just like to thank you for sharing your thoughts/talking to yourself on the CPF system, so that we can better understand it!

And thank you for taking your time to reply me with the link.

What u are doing is truly out of good will.

Good karma for good hearted people! 善有善报！😊






Reader #2 says...
I had just hit the FRS in SA and the BHS in MA as some of your readers did.

Wah, feel happy and looking to grow my spouse's CPF account as my next objective.

She is a SAHM (stay at home mother).







AK says...
The CPF system is one that helps members who help themselves.

It is a system that rewards the gainfully employed.

Housewives are usually disadvantaged, therefore.

So, good husbands like you guys are needed!

Doing a good job! Gambatte!





Imaginary Reader says...
What about you, AK?

Are you doing a good job too?


AK says...
B.Y.H.W.

Wealth destruction!

I lucky I no wife. :p

Yes, I know.

Bad AK! Bad AK!

What is behind hitting the FRS and what is our plan?

In the last few days, I have been sharing stories of young readers hitting the FRS in their CPF-SAs.

Although it is meant to be encouraging, it has also caused some readers anxiety.

I guess it is just like getting mixed response from readers after sharing my own CPF numbers over the years.

"One type of rice feeds hundred types of people."

Direct translation of a Chinese saying.






How we respond to something depends on our own beliefs and situation.

However, there is no doubt that all of us need to be financially secure in our retirement.

It is a basic requirement for a worry free retirement.

So, take inspiration from what others have achieved but we must have our own plan which means doing what we are capable of doing.

There is no point in emulating or trying to emulate what others have done if it is going to cause us distress.

If others are faster in achieving a common goal, congratulate them and we simply soldier on.






I am very pleased to share this message from a reader:

Reader says...
2 years ago, in my early 30s, after reading your wonderful blog, i decided to just pump in 10k into my CPF SA, never mind there is tax relief for the first 7k only.

I do it because i have a bit of spare cash, and to enjoy more interest that ah gong will be giving me.

Never mind about the tax relief (because i dont earn a lot so i dont need to pay much tax in the first place).

Heartfelt thanks to you, AK.

You deserve the praises and appreciations that we readers are giving! 🙂

Keep up the good work AK.

So rare to find someone like you, so rich in love for all of us strangers by sharing your "secrets". Kudos!






The aim is always to become financially stronger over time.

The aim is not to be the fastest in our cohort to become financially stronger.

The important thing is to make personal progress.

Trying to hit the FRS in our CPF-SA is basically trying to save money for our retirement.

That is the purpose of the CPF-SA.





Like depositing coins in a piggy bank when we were kids, every contribution to our CPF-SA, big or small, adds up.

It will take time for us to hit the FRS.

Some of us will need more time than others.

Financial freedom is not a race and neither is meeting the FRS.







Related post:
FRS in CPF-SA at age 30?

FRS in CPF-SA at age 30? Sharing in detail.

For the benefit of younger readers, the reader who hit the FRS in his CPF-SA at age 30 has decided to share his thoughts in great detail.

Reader says...

This is not about me per se. It is also about helping the next young person who is thinking of topping up his CPF. 🙂

Everyone has different backgrounds, incomes, obligations but sharing some reasons for me to hit the FRS early and to fully maximise our CPF systems.



1) The yearly increase in FRS should be covered by the interest of 4% each year.

This means you are likely to meet the FRS when you hit the retirement age.

I estimate the FRS to be approx $346,815 in 25 years assuming 3% increases but my SA would be a lot higher since it is compounded at 4% and my contributions to SA from work is not added in yet as well as the flow over of interest from MA.








2) Hitting the FRS at 30 means that I can allow for the FRS to compound for at least 25 years till the milestone age of 55.

25 years isn’t a very long time away in my opinion but the compounding can be substantial.

It would be about 2.67x the current amount and likely I would be able to withdraw if I need or aim to hit the ERS.








3) If CPF LIFE is still around by my retirement, it will likely be able to provide me with a decent cash flow when I am not working.

In fact, I don’t look to retire early.

I look to still be gainfully employed till as old as I want to.

The key is to allow me to have a choice in doing what I want at that time and this changes with age!









Some tips of what I used to hit the FRS:

1) Do OA-SA transfers when below 30. I fully transferred my OA to SA at one point in time.

2) Do CPF SA top ups yearly since I started work (taking advantage of $7k tax relief at the same time) and in some years I topped up beyond the $7k if I received good bonuses.

3) VC to your OA/SA/MA and thereafter transferring the OA amount to SA.

4) Used my CPF OA to buy stocks before HDB wiped out the full sum for deposit and thereafter sold the stock and transferred it back to my CPF OA, follow by step 1 again.

5) Using full cash to finance your property and leave the CPF accounts untouched.







I also do not advocate paying off HDB early because I treat them as good debt.

The compounded interest in my CPF (at 2.5%/4%) is substantially higher than the interest saved (2.6%) over 30 years.

This point is difficult for most to see because they compare 2.6% minus 2.5% and they think they are saving on the interest.








Separately, I am obligated to get HPS when taking HDB loan so if I pass on, at least the insurer helps me to pay more.

Ultimately you need to manage your property purchase which I feel is the main expense of a typical Singaporean apart from food and there is honestly no need for a car (I have 2 kids).

My BTO cost less than my 3x annual income. (Live within means like what our PM says)








My background:
Went to Poly, NS, 2 years of Private University after that.

Have 2 young kids and my wife stays home to look after them.

I am just a normal salaried worker with starting salary was $3k like most fresh grads but my annual compensation is a low 6 figures now after 6 years. Good luck!








Related post:
1. FRS in CPF-SA at age 30? Yes!
2. How to grow our CPF savings?
3. 4 ways to boost our CPF savings.

FRS in CPF-SA at age 30? Yes, with ability and will!

Reader says...
It’s been a while since I dropped you a note.

The impact you have on my financial planning and share investments have been instrumental.

I managed to hit my FRS before I turn 31 this Oct!

In searching for financial guides, it always lead me back to your website.

Please don’t ever remove it even if you stop writing!

Enjoy your retirement! 🌈




AK says...
I am very happy to read this. 😀

This cornerstone in retirement funding will be a significant one for you because you have reinforced it so early in life. 🙂

Stories like yours make me feel that sharing my CPF story and even numbers in recent years has been worthwhile. 🙂






Reader says...
Yes it helps for sure!

Thank u so much!

Keep doing what you are doing.

I am sure many have benefited a whole lot.




This young reader together with a few others who have written to me have achieved something that I did not at their age.

Although I suspect their monthly salaries are higher than mine was which allowed them to hit the FRS at a younger age than I did, without the will, having the ability is useless.

Their determination to make the CPF work for them is equally if not more important.

Don't earn as much money as them?

Don't be discouraged.

Even if our earning capacity is lower, just by giving our CPF-SA a push now and then, we would be making the government work harder to help us meet the FRS.







I can safely say that I was not a high flyer as a working adult.

If I did not do OA to SA transfer when I was in my 20s, my CPF-SA would probably still be some way from the FRS today.

Because I gave my SA savings a leg up early on, compound interest had more time to work its magic.

If we do whatever we can, it is better than not doing anything at all.






Most messages I have received from readers in response to my blogs on the CPF have been very positive.

I am glad that sharing my own CPF experience has been enlightening and inspiring.

I am even happier when that inspiration translates into informed action for many readers.

For more on what I have to say on this matter, please read the related post at the end of this blog.





From my Facebook wall later the same day:

Jack James said...

Hitting FRS before age 30 is a high achiever . 😱😱😱😱

Assuming you studied JC, 4 years of university, 2 years of NS, by the time you work for 7 years, you can hit FRS, that’s like age 30 to be exact!

Assumptions:

(1) Fresh graduate start up pay S$6,000 (max CPF contribution).

(2) You didn’t use a single cents in OA/SA for HDB or stocks.

(3) Assuming company gives you at least 2 months of bonus consistently.

(4) The quick figures above do not include the fat up to 5% interest in SA and 3.5% in OA and their compounded interest effect, that’s why the 7th year can hit FRS.

(5) Other ways to accelerate to FRS:

(A) SA S$7K TOP UP since year 1.
(B) Do VC contribution each year to the max.
(C) Company gives you tons of bonus like 8 months.

Then you can beat the 7 years timeline.

Good luck! Cheong ar!!

If AK can do it, so can you?

NO!

If AK can do it, you can do better!







Related post:
Hit the FRS in CPF-SA by age 31!

Hit the FRS in CPF-SA by age 32! Stunned like vegetable?

Reader, Spotlessmind, says...

Discovered your blog a couple of months ago and found it both inspiring and educational.

Having read varied opinions on the topic of CPF, I felt compelled to share my thoughts.





Since I started working after graduation, I have been transferring all my money in the OA account into my SA account on the advice of my mother, who despite having only pre-university education, knows the power of compounding interest.

Many of my friends (regardless of whether they are single/attached/married) worry that they will not be able to afford a flat in the future if the money in the OA is transferred to SA. 

There is always a big "what-if" hanging over their heads.





On the other hand, I thought that I would remain single forever and thus would not need to buy a flat.

I will cross the bridge when I get to it.

So, I simply kept transferring.

I met my significant other just before I turned 30.

At 32, CPF stopped allowing me to transfer anymore money from my OA to SA :).





I am lucky that my job pays reasonably well, so I have been able to accumulate a significant sum in my OA for flat.

I think many young people have always thought that money in OA = Flat.

Many fear that if they cannot afford a flat, they cannot get married and risk losing their significant other.

Others who are single want to have the option of being able to use the money in OA when they want to.





My approach is considered very risky by my friends.

In my 20s, I was laughed at for being silly.

It is bad enough that we cannot withdraw the money in OA, but at least we can use it to buy a flat.

Why so silly to lock it deeper into SA when we won't see it until we reach retirement and have a minimum sum?





None of my friends took up my suggestion.

I can understand the rationale of those who need to buy a flat.

But I cannot understand the rationale of the rest.

After all, if we are single, we can only buy a flat when we reach 35.

Or maybe some intend to purchase private property.





In short, while a certain degree of skepticism in life is healthy, too much of it is a hindrance to progress.

We waste time when we hesitate, and as you have mentioned it, compound interest is magic that takes time.

I cannot agree more with you.





AK says...
If readers thought that my story is amazing, yours should rock them off their seats!

I am in awe!

...




Hit the FRS in the SA by age 32?

Stunned like vegetable?

It is possible and without using any out of pocket money either.

I am not saying that we should all do this.

After all, not everyone has the ability to do this.

Even for those who have the ability to do so, they should always carefully consider their own circumstances and priorities first.

Remember, the CPF is but one piece of the jigsaw puzzle called "retirement adequacy".









Related post:
Sensible to do OA to SA transfer?

Lost life savings and now in debt. (Investor or speculator?)

When are we investors and when are we speculators?

When we buy into something that has intrinsic value which generates revenue and ideally provides us with an income, we are investors.

When we buy into something that is the complete opposite but we feel that we could sell it for a higher price in future, we are speculators.





People often get into serious trouble when they think they are investors when they are really speculators.

Speculating is not for everyone.

People of more modest means would do better if they stay away from speculating and just stick to investing.










The value of all outstanding cryptocurrencies has fallen by about $600 billion, or 75 percent, since the peak in January.

The damage is likely to be particularly bad in places like South Korea and Japan, where there was minimal cryptocurrency activity before last year, and where ordinary investors with little expertise jumped in with abandon.

Kim Hyon-jeong, a 45-year-old teacher and mother, put in about $90,000 last fall.

She drew on savings, an insurance policy and a $25,000 loan.

She is down about 90 percent.

“I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around.”





Twitter is also filled with complaints: “It’s really hard to stomach losing all my hard earned money. Just broke down and cried.”

On Reddit, a user posted a picture of the $100,000 loan that he had taken out in December to buy cryptocurrencies — and that he will now be paying back out of his salary for the next three years.

“I’ve made a mistake, and now I’m going to have to unfortunately pay the cost for the next few years.”

Source: New York Times.






Remember, no one cares more about our money than we do.

Before parting with our money, question if it is an invitation to invest or an invitation to speculate.

Oh, I don't even borrow money to invest with.

Borrow money to speculate with?

That is how some people "ki chia" lor.

Related post:
My final word on Bitcoin and friends.
"When people tell me that they invest in Bitcoin, I get the impression that they are either confused or they are out to confuse other people."

Give me the freedom to enjoy life!

Reader says...

Excluding cases where they need to work to have the $ to pay bills, be it for self, family or descendants.

Most of the people I know in their 50-70’s would prefer working than the so-called relax life.

A granny lament she would rather work than “enjoy life” at home.






2 other aunties I know of took up a 4-5 hour/day job after retiring.

Their jobs are not the physically demanding kind. It’s mostly light duties in a comfortable pace environment.

Not everyone views work the same way, like a chore.






AK says...

Of course, not everyone is lazy like AK. ;p

I am not suggesting nor would I ever suggest that everyone be like me.

What would happen to Singapore then? :o






"If AK can do it, so can you!"

It isn't a war cry for people to achieve financial freedom and become a full time gamer like me.

It is simply an encouragement for people to achieve financial freedom because being financially free gives us options.






Simply put,

We want to work because we want to and not because we have to.

Financial freedom affords us this enviable position in life.









If we are working because we need the money, how like that?

If we are working because we want the money, why like that?

If we are working because we simply enjoy working, why not like that?

Give me the freedom to enjoy life!









Related post:
Average income workers can be rich too!

CPF-SA is not a free lunch but it is not a myth.

Reader says...

As you were showing your SA amount i was wondering how come it can b higher than the FRS?

I tot SA amount should be capped at FRS.

How did u accumulate $200K+ in your SA?






AK says...

Once our CPF-SA has hit the FRS, no Top Up is allowed.

No OA to SA transfer is allowed either.

However, mandatory contribution and voluntary contribution are still allowed up to the annual contribution cap (i.e. contribution that goes into all 3 accounts) every year.

CPF-SA will also continue to grow from interest earned year after year even after it hits the FRS.






The former Minimum Sum (MS) and, now, the Full Retirement Sum (FRS) are not monsters we should fear.

The FRS has to increase year after year as cost of living increases year after year.

If we push more money into the SA earlier on in life and continue to be gainfully (and legally) employed till we are 55, even after we stop contributing to our CPF, the interest earned in the SA will likely keep pace with the increase in FRS year after year.








Could the interest earned, in fact, be higher than the increase in FRS?

Definitely, it could or, at least, that has been my experience.

The CPF-SA can actually continue to grow without additional effort on our part!

So, is the CPF-SA like the mythical perpetual motion machine?

No.

The perpetual motion machine is a myth.

The CPF-SA is not.






You cannot get something for nothing.

There is no free lunch in this world.

If someone is getting something for free, someone else is paying for it.

The CPF is about helping members to help themselves.

Put nothing in and we get nothing in return.

Put something in and we get something in return.






Feel as if you cannot beat the system?

You are only beaten if you think you are beaten.

Bad AK! Bad AK!

Remember.

If AK can have more than the FRS in his CPF-SA, so can you!






Relates posts:
1. AK showing off his CPF-SA again?
2. 4 ways to boost our CPF savings.

Jin jelly or jin buay song my CPF? Hosay liao!

Reader says...

My colleague this week say CPF can only take out $ at 67.

I say 65 start CPF life payout.

55 can take out too if hit FRS.

He say can hit FRS meh?

I say don hit take can take out $5k.

He more agitated. 😂

Looks like he believe he cannot hit FRS.

Imagine I tell him in 2 months time I gg hit FRS. Lol






AK says...

Some people jin jelly.

Now, this one jin buay song.

How liddat?

On its own, it might be insufficient but the CPF can help us on our journey towards financial freedom.

Believe me or not?





Assuming that I stop contributing to my CPF account from 2019, I should have more than $1.2 million in my CPF at age 65.

Yes, more than $1.2 million if I stop contributing.

It is not a typo.

How does that make you feel?

Jin jelly or jin buay song?

Or did you just say hosay liao?







Related posts:
1. AK makes people jin jelly.

2. You can hit the MS (FRS) too!
3. $1 million in CPF by age 65.