AK talks to an expert on Investment Linked Policies, ILPs.

I was offered a chance to do a sponsored blog post on ILPs and instead of just the same old newsletter style or a cookie cutter interview, I decided to do it like a talk show.

So, we have AK, the host of the show, and a guest who is an expert in the industry taking questions from callers (who are actually my blog's readers). The questions were put forward by readers on my FB wall recently, in case you are wondering.

Anyway, here goes:

AK: Welcome to the "Accredited Kay Poh Also Can Show". I am AK, an accredited kay poh and your host for the show. With me today is Mr. Brendan Yong who will be doing all the work answering questions related to Investment Linked Policies or ILPs. Welcome to the show, Brendan, and let us start by asking you what are ILPs and how are they different from regular whole life policies, for example?

BY: In the case of regular whole life policies, your premiums (less commissions) for regular whole life (we call participating plans) along with others are collected into a "Life Fund", and the insurer is responsible to invest the premiums wisely,  to produce a return which is shared with the policy holder. Claims are paid out of this common pool in addition to other expenses.

For ILPs, your premium (less commissions, sales charges) buys into unit trusts (therefore the responsibility of investing lies with you). Periodically, insurance charges are deducted to provide the coverage stipulated by your insurance contract, other charges include: policy fees and management fees. Insurance charges rise with age. 

In other words, whole life policy returns are outsourced to the insurer. Insurance claims are deducted from common pool of invested funds.

ILPs investment returns and risk are borne by the consumer. ILP imposes insurance charges, which are deducted by selling units. Claims are paid by insurance company from another pool of Life Fund for ILPs and Term.

AK: Thanks for that clear explanation. Recently, when I asked my readers on FB what would they like to know regarding ILPs, I received a long list of questions. So, we would like to pick your brains here. Allen Allen asks "Is it advisable to take on ILP? I am currently having a ILP for 7 years and am considering to surrender it as I don't see it breaking even anytime soon." What would you say to that, Brendan?

BY: The main issue is ILPs are not suitable after age 55, as insurance costs increase exponentially. So if it was implemented thinking it covers life time for death, and critical illness, it is potentially a time bomb. If it's implemented for investment returns, you may be disappointed with the returns due to the high charges and fees. Every situation is unique, we have to compare the option of surrendering vs buy term invest the difference to give a proper recommendation.

AK: Sounds like Allen Allen might have to get in touch with his financial adviser after the show. Next, Spencer would like to know "What will happen once the mortality rate / cost of insuring is higher than investment returns?"

BY: The insurance charges are to be deducted from units by selling them. Imagine you are paying $3,000, after paying 5% charges, the remaining $2,850 is invested into funds. But your insurance charges at age 70 is say $8,000. Then you have to sell $8,000 worth of units to pay for the charges. Provided you have enough units to deduct, you coverage continues, while the accumulated fund depletes. If it depletes to zero, your cover is terminated.

Some agents say the returns will pay for the charges, but seriously, at the older age, you'll have to reduce the risk of the portfolio, settling for a lower return. So there is a high chance that it will start to deplete despite returns, due to the rising insurance charges. The effect will hit you after 55 ...

AK: That is quite a revelation! Older viewers/readers might want to take note! Next, Thomas asks "have u bought an ILP for yourself? If yes, is it a big portion (%) of your investment portfolio? And would u strongly recommend it to your spouse, and also to your parents? If so, did they buy it and what's their objections if they didn't."

BY: No ILPs for me. Not for my spouse, definitely not for parents (anyone above 50 is literally a mis-sell). Buy term invest the rest instead of ILP.

In my ebook, I mention only 2 situations it may still have some merit:

1) Newborn baby or very young kid. The long term plan is to cash in before age 55, making use of lower insurance charges when young.

2) Young working adult with little or no fiscal discipline. Same long term plan.

AK: Some very clear guidelines there as to when ILPs might make sense. Now, Gabriel wonders "if there are any ILPs which have beaten the STI index returns? Or has any ILP beaten the highest unit trust returns?"

BY: ILPs refers to the policy not the fund. So I would suppose the reader means the ILP fund. ILP funds are the same thing as Unit Trusts. There is also no sense talking about ILP funds beating Highest UT returns, as they maybe from different sectors, regions or asset type. There is no sense comparing any fund to STI, if the fund is not bench-marked against STI. A China/India ILP beating STI returns says nothing for the fund.

So allow me to re-phrase the question. Is there any difference between ILP funds and Unit Trusts? Has ILP funds beaten their index?

ILP funds are essentially unit trusts that are subscribed into by insurance policy holders. One advantage of ILP funds is the large pool of "dollar-cost-average" policy holders that will buy into the fund regularly, through good and bad time. This may explain some out-performance vs similar UTs. Let's take for example STI benchmarked funds:

NTUC Singapore equity invests 60%+ into STREETTRACKS STRAITS TIMES INDEX FUND, and manages the remaining portion. See that they just slightly outperformed STI (mainly due to reinvested dividends). Some attribution perhaps to Dollar-Cost-Averaging. 

AXA Fortress A Fund has consistently outperformed STI in fact by a large margin. Some impact may be due to dollar cost averaging, but most of it because of the capable fund manager: First State Investments Singapore. 

Finally Aberdeen Singapore is a pure UT. So AXA ILP outperformed, but NTUC ILP underperformed pure UT. 

Conclusion: Some UTs beat their benchmark, many don't. Some ILPs beat similar UTs with same benchmarks, some don't. At the end of the day, the choice of the fund can make a big difference. The short-coming is that ILPs may be sold and left alone, disregarding crisis or opportunities. It's the same issue with buy and holding UTs. This doesn't work. Even UTs that beat benchmarks need to be monitored for fund manager movement, and market cycles. 

I have many research on this area... working on another ebook... akan datang.

AK: Another e-book? I am sure you will be keeping me in the loop. Next, Lee Jiahui is "interested to know the market players income/revenue distribution/proportion of ILP products vs the traditional products".

BY: Unfortunately, there is no public data about this.

AK: OK, that was a fast one. Next person on the line is Derek Lim and he asks "What is your timeframe in holding a ILP? Is there a maximum age where you would advise against buying a ILP? Do you cutloss or do a fund switch if your ILP is doing badly? Similarly if your funds has done well, how do u lock in your gains? How do u balance between investment and coverage e.g. should I strive for minimum coverage and maximum investment?"

BY: Insurance charges rise exponentially after 55. So my time-frame is to cut at 55 if I'm holding to one (provided you have adequate cover from other policies). Anything above 50 is mis-selling. Any starts of regular premium ILP above age 40 is not cost-effective.

Cut-loss have to benchmark with buy term invest the rest to decide. In general most comparison will lead to the conclusion that BTIR is better. No manner of fund switching will solve the rising insurance charges problem.

AK: "Similarly if your funds has done well, how do u lock in your gains?" 

BY: Same with UTs, if some funds have "done well", you can choose to switch into bonds to lock it in. However you give up any potential upside. You can also switch into funds that have been beaten down severely, and buy them at a low price. This is one of the strategies that I teach investors who have little time to manage their UTs.

How do u balance between investment and coverage e.g. should I strive for minimum coverage and maximum investment?"

If ever I'm forced into an ILP, I will go for Maximum cover, min investment, and terminate before 55. If you are going for investment, forget about ILPs with "some" insurance coverage.

AK: So, I repeat, go for maximum cover, minimum investment and terminate before turning 55. Derek, I hope you are taking down notes. Next, Talen Blackburn Terence asks whether "ILPs are better than buying shares directly? Which are the better ILPs? What percentage of our salary should we invest in ILP? what % of our portfolio should be in ILP?"

BY: ILPs and UTs cannot be compared with direct shares. Totally different issue. To invest in shares, you will need: (1) some time, (2) a reliable method (e.g. Value Investing, GAARP, etc) (3) that works for your psychology (4) and accumulate experience over at least one complete cycle beating the STI index. If stocks work for you, stay with stocks. The only reason why some stock investors work with us, is to access bond funds. If you are not a good stock investor, you can consider UTs.

ILPs are same as UTs. So I rephrase the question: Which are better UTs? Answer: Whatever that's going to make good money for you in the next 5 years. If I had a crystal ball, I'll let you know.

What am I saying? "THERE IS NO SUCH THING AS THE BEST OR BETTER UT or ILP". You need a strategy to make some money in UTs. 

What percentage of our salary should we invest in ILP? what % of our portfolio should be in ILP?

None preferably, if he's talking about  ILPs.

AK: Brendan, if you manage to get a crystal ball that works, let me know. I only have a bowling ball and it is not very cooperative most of the time. Here is another question from Gabriel, "why are ILP costs so high while the returns are non-guaranteed? Are there any upsides at all for holders of ILP?"

BY: There is no why... That's how they are structured. The only remote upside I see compared to BTIR, is that term has a specific expiry date, ILP doesn't. Example you have a term cover till age 65 thinking you'll not need it when children are all grown up. If you had an ILP instead for the same cover, you can CHOOSE to continue beyond 65. Say you already have an early stage of Cancer, before 65. It might be a good idea to continue coverage ...

Having said that, if you design your insurance portfolio well, you should have some other option to fall back on like a 99-year Critical Illness cover or a Living-type Policy.

AK: That is a good point on how ILPs might be a positive for certain people. OK, The next one is a biggy or several biggies from long time reader, Jimmy Ng. Buckle up or you might fall off your seat. Here comes the first question, "Why are distribution cost & expenses so high that it take a very long time (i.e. over a decade), on projections of guaranteed & non guaranteed, to break even, let alone generate positive returns?"

BY: There is no why... That's how they are structured. Insurers have costs. They calculate that this is how they can still make some profit after giving out commissions.

Instead of asking why, just compare the alternative and make a decision.

(1) Can I afford not to be insured? If Yes, at least have a good hospitalization plan. If you cannot afford not to be insured, but you still don't want any: eat healthily, exercise, hope you don't have bad genes and pray.

(2) If you want to insure adequately, use a competitive term insurance to cover Family Dependency Needs, and a Living or 99-year term to cover Critical Illness. Compare this option with ILP if you must.

AK: Is there any low expense version of ILP ?

BY: Not significantly. Even the cheapest may not compare well with BTIR. Between insurers, ILPs can differ A LOT!

This was from The Straits Times:

AK: How does the insurer split shared costs - like overheads - between the policyholders' and the shareholders' funds? How can a policyholder know if the split is fair?

BY: You might want to visit this site: http://www.moneysense.gov.sg/understanding-financial-products/insurance/types-of-insurance/life-insurance/types-of-life-insurance/participating-policies.aspx

Shareholders can only take a maximum $1 for every $9 distributed to policy-holders, this is regulated.

Other than that it's totally insurer's discretion. It's a free market. If their product is not competitive, they can't get market share.

You have a choice. So, explore the alternatives.

AK: In the Singapore context, can the ILP gives similar or better returns than CPF OA & SA ?

BY: ILPs = UTs. Yes, if the market allows. Yes, it you hang on to it for 20 years. Yes, if you employ a good strategy. No if you choose the wrong fund. No if you are expecting it to do wonders within 3-5 years.

AK: Will it be street smarter to buy a term policy getting the same mortality coverage of ILP and invest the rest into ETF or REITs or AK Investment fund (Jimmy's words, not mine)? My feel is that the returns from these investment could generously help to pay for the term insurance cost, do you agree ?

BY: Yes, generally speaking. Still... shop around. Term insurance rates can differ by 20%.

AK: What determines the Premium Allocation, Insurance Charges, Policy Fee & Funds Bid-Offer Spread ? Are these charges fair to policy holders or could be significantly reduced ?

BY:  Let's not visit the fair issue again... The market will drive charges. One insurer cuts Bid-Offer spread or Premium allocation and comes up with a super competitive product, the rest will have to change soon. The Law of Economics will take care of excessive profits.

AK: What can be done to reduce the premiums & expense payable while increasing the coverage and ROI ?

BY: Nothing. Make a decision: (1) Cut-loss, replace with BTIR or (2) decide to hold and surrender before 55. Increasing Coverage and ROI cannot happen at the same time. It's either one of the other.

AK: Brendan, you have answered all of Jimmy's questions but we are not quite done yet. Just a few more questions from other readers to go. Elvin wants to know "If I suck at money management and am not savvy.. Is the ILP the right product for me? Does the ILP give me a peace of mind in terms of financial protection and is my capital guaranteed while receiving coverage? Are there embedded risks in ILPs?"

BY: If you suck at money management, go and learn. No one will be more responsible about it than you. If you REALLY cannot manage, and have poor fiscal discipline, then maybe you'll be better with ILP off than nothing at all. Risk are the market risks, capital non-guaranteed. If you want some guarantee, buy 99-term or a traditional living plan.

AK: Next, Kenji asks "how do u make money from ilp when u r in a losing position now?and is switching fund the only way?"

BY: If you are talking about a Single Premium ILP, meaning it's not a monthly or yearly premium plan, then SELL the ILP, buy an equivalent UT or in a potentially better one. You'll recover it faster because of the ILP charges.

AK: Jieren Azrael Zheng wants to know if it makes more sense to buy a similar or underlying ETF instead of an ILP?

BY: I think we are talking about single premium again. Yes, UT or ETF is better than ILP.

AK: Clement Wong wants your opinion on his 3 year old ILP. "i bought an ILP 3 years ago without knowing any better. how now brown cow..."

BY: Evaluate vs BTIR. Make a decision. Consult a proper financial planner before doing anything.

AK: Zaw Oo asks "Given your current knowledge, would you encourage anyone to take up ILP as a form of long term investment?"

BY: flat NO.

AK: Very emphatic! GW Samzel says "I own both Golden Regional China Funds and India Equity Fund from Manulife and it seems like my current buy price is always higher than it's sell price (selling a fixed amount monthly as charges for the policy). Even though the chart is slowly going up (it's only been 4 yr since I got the funds), high buy price is forever higher than sell price. Would i really make any gain eventually? Also, how do I evaluate that these 2 recommended funds by my financial planner is really the most suitable fund she could offer for me?"

BY: Buy is always higher than sell due to bid-offer spread of around 4-5%.

How to evaluate a unit trust ... (perhaps that's the title of my next ebook) ...

Step 1: Go to https://www.dollardex.com/SG/?current=investUTgraph/home&previous=investUTgraph/home

Unselect show funds only sold at DollarDEX, so that you can see all funds (even so some are not listed on DollarDex)

Step 2: Click and Select funds to compare:

Step 3: Decide: cut ILP, buy equivalent UT or something else

How to determine if you insurance agent or financial planner is competent to advise you on investing UTs:

1) Did they make their wealth (significantly) with UTs?

2) Have they gone through one full economic cycle?

3) Can they answer questions convincingly about markets, fund characteristics etc?

4) What is their strategy and rationale of fund selection?

5) Do they only look at performance ? And only last 3-4 years? 

6) Did they show you how bad it can get? The downside?

AK: Brendan, I really like these 6 questions that you have listed. Very telling! I want to thank you for patiently answering all our questions and, to all my readers, if you would like to have a copy of Brendan's e-book, go to: https://ut200.isrefer.com/go/ILPTB/sgstock/

Remember, nobody cares more about our money than we do. So, take charge and ask questions. Make sure we understand what we are getting ourselves into each and every time. If we don't understand something, walk away. Don't commit.

With that, the show has come to an end.

Choose your own CPF adventure!

There was a creature called the MS (full name "Minimum Sum") which gained mutant powers. 

In gaining mutant powers, MS was able to mutate into a smaller creature half of its original size or into a bigger creature 50% bigger than its original size.

The creators of MS hoped that more would take a liking to MS which had been verbally abused in some quarters. 





So, with newly gained mutant powers (and a new marketing team), MS took on new names for its various forms.

The smaller and cuter MS mutant was called the BRS (full name "Basic Retirement Sum"). 

In its original size, the MS was renamed the FRS (full name "Full Retirement Sum"). 

The bigger and more powerful MS mutant was called the ERS (full name "Enhanced Retirement Sum").

Everyone had to adopt a MS but they didn't have a variety to choose from in the past. 

It was a little like the first mass produced car by Ford, the Model T. 

Everyone had a choice of color. Remember? 

It was either black or black or black. 

People still had to adopt a MS but at least they would have a choice of size with the mutant forms.




The MS had been badly misunderstood by many and far from being a monster, a closer look revealed that it was actually a cow. 

Yes, it was a simple farm animal! 

The MS was supposed to provide sustenance to its owner for an indefinite period of time once the owner turned 65. 

That was when the MS would become a deity-like bovine called the CPF-Life.




Whichever choice people should make between the BRS, FRS and ERS, these cows retained their power to become deity-like bovines later on with their powers to provide more or less sustenance for life to their owners, their powers being proportional to their sizes.

Oh, the movie had a compulsory audience participation section as well. 

It was a bit like a "Choose Your Own Adventure" component. 

Yes, some of us older folks would remember flipping through what seemed like random page numbers in those storybooks with outcomes depending on the choices we made. 

They were the craze at one time.




How would things play out? 

Well, with miniaturization still a craze, I suspect that the BRS might win hands down. 

Kawaii! 

The apathetic would probably stick to the FRS. 

A smaller more prudent but insecure feeling group would choose the ERS.

If I were to use another analogy, the BRS is like a hut made of straw while the FRS is like a hut made of wood and the ERS a hut made of bricks. 

Remember the story? 




The hut made of straw was the easiest and fastest to build while the hut made of bricks was the hardest and took the longest time to build. 

Then, remember the three little pigs which stayed in the huts?

In a less child friendly (and more realistic) version of the story, the little pigs which stayed in the straw and the wooden huts were eaten by the big bad wolf. 

Only the little pig which stayed in the brick hut survived. 




In most versions, however, all three little pigs survived because the first two pigs ran to the house made of bricks to escape the big bad wolf. 

So, the little pig who took the trouble to build the hut made of bricks had to share his living quarters with his brothers. 

Well, we can choose our friends but we cannot choose our family, as the saying goes.




I believe that the movie would not only have a sequel but there could be remakes in future. 

Whatever the case might be, in the audience participation section, we would do well to choose wisely in the meantime and hope that many more would choose wisely too.

Related posts:
1. A lot of money in my CPF-SA...
2. How did AK amass money in the OA?
3. Get free medical insurance in Singapore?

https://www.cpf.gov.sg/Assets/Common/Documents/FAQs_IncreaseinSalaryCeilingandCPFConRateChanges.pdf

"From 2016, the CPF Annual Limit will be increased correspondingly from $31,450 to $37,740 (equivalent to 17 months x CPF salary ceiling of $6,000 x 37%)."
---------------------------------------------------------------




"The panel is proposing that the sum of S$80,500 for CPF members turning 55 in 2016 be called the Basic Retirement Sum. This Basic Retirement Sum should increase by 3 per cent each year for cohorts turning 55 from 2017 to 2020, to keep pace with inflation and changes in household expenditure.


"For CPF members who are not homeowners or who do not have a CPF pledge on the their property (which refers to the sum of money that will go into his CPF account if he sells the property), the panel thinks they should set aside a sum of S$161,000 in 2016 – equivalent to the Minimum Sum for those turning 55 from July. This could be called the Full Retirement Sum, the panel said.


"Those who want to put more into their Retirement Account for higher annuity payouts should be allowed to do so, felt the panel, which is proposing that they be allowed to have up to three times the Basic Retirement Sum to pay for CPF LIFE premiums (or S$241,500 in 2016).


"Also addressed in its first set of recommendations is lump-sum withdrawal of CPF savings at the age of 65. The panel suggests allowing the withdrawal of up to 20 per cent of Retirement Account savings, inclusive of the S$5,000 that can be withdrawn from age 55."

Source: Today Online, 4 Feb 15.

See all the infographics: here.

---------------------------------------------------------------

UPDATE: 
The Straits Times, 11 Oct 2016.

LUMP SUM WITHDRAWALS

Central Provident Fund (CPF) members who turned 55 in 2013 and later can make a lump sum withdrawal of 20 per cent from their Retirement Account when they reach the payout eligibility age (i.e. age 65).

AUTOMATIC PAYOUTS FOR RETIREMENT SUM SCHEME

Previously, members on the Retirement Sum scheme had to apply to start their payouts. Starting from 2018, payouts will begin automatically once the member turns 70.

When to buy (and sell) a private residential property?

Please don't take what I say as the Gospel truth. I am just sharing my thoughts and limited experience. This was an exchange on FB:

• M
  

  Bro. Your property post always trigger my interest and thinking!

  Anyway during the talk, you mentioned there are still good property deals around.

  I wonder what's your definition of good deals?
• 7:44pm
  

  Assi AK
  

  Well, if people are looking for a BTO flat for own stay, I just shared an example in CCK (on my FB wall). Good deal.
• 7:44pm
  

  M
  

  How about private?

  Ps. I should be clear.
• 7:45pm
  

  Assi AK
  

  If people are looking for condos for investment, it is quite hard to find a good deal now.
• 7:45pm
  

  M
  

  Still will like your brain juice on what are good deals on private. Lol

• Assi AK
  

  I know that some developers like Bukit Sembawang and Capitaland are slashing prices but I don't think the prices after discount are good (enough) yet.
• 7:46pm
  

  M
  

  Haha. How much you will go in?
• 7:46pm
  

  Assi AK
  

  For example, someone bought a condo in Cairnhill by BS and it was heavily discounted. Just under $2m. Previously, would have to pay $2.4m to $2.5m for similar unit. However, the current rental is only $4K a month.

  ... Buyer said good deal. He said earlier buyers overpaid. I think (earlier buyers) just overpaid more than he did.

  His gross yield at $4K a month rental would work out to be about 2.4%. His housing loan interest rate is (probably) 1% + 3 months sibor... So, it is almost 1.7% now... It is probably going to be higher in the next 2 years... -.-"

  But what to do? D9 atas. I had a D9 property that I bought during the GFC and sold it when market recovered. This person (I feel) bought as market peaked (again) and beginning to correct.

  I sold off my properties that would have yielded just under 4% per annum. I found properties that were able to yield 6.1% per annum (later on). It made sense to me even though the 6.1% yielders are not in atas locations.

  In the current environment, those that I sold are yielding just above 3% per annum while the would be 6.1% yielders are now 5.1% yielders. (What a difference 2 years make.) All declined but I have a bigger margin of safety now.

• M
  

  Power!! Love your explanation. Gonna share w my wife bro.
• 7:56pm
  

  Assi AK
  

  Aiyoh, pai seh lah... I anyhow say de.
• 7:56pm
  

  M

  Nvm. Keep anyhow say
• Assi A
  

  I think I cut and paste for my next blog post. I ran out of ideas. This one just nice. LOL.
• 8:01pm
  

  M
  

  Yes. This one really vvvvv good

  It will educate a lot of property standbyers
• 8:04pm
  

  Assi AK
  

  Kamsiah. You very kind lah. I only sharing my thoughts and experience. I pai seh.

• 8:05pm
  

  M
  

  You Pai seh what. Haha. I sincerely appreciate that. My frens and wife learnt a lot too
• 
  

8:06pm

Assi AKReally? Thanks for the encouraging feedback. Very happy they enjoyed themselves.

Feeling happy (but also a bit scared) to share.

One thing is for sure though. You can safely ask AK if you need a haircut because AK is not a barber.

Related posts:
1. An evening with AK and friends.
2. Affordability and value for money.
3. Considerations for first timers.
4. CCR, RCR or OCR for rental income?
5. Smaller apartments' prices more resilient.

IREIT: What is a more realistic distribution yield now?

A reader who attended last Saturday's event sent me an email asking me about IREIT Global because he got in during its IPO and he is now worried after hearing what I had to say. 

I was puzzled because I asked if anyone was invested in the REIT on Saturday but there was no indication that anyone was.

Anyway, for those who are interested, I did not say anything new last Saturday. 

Please see related post at the end of this blog. 





Basically, I again explained why I avoided investing in IREIT Global when they had their IPO middle of last year.

I also said that people who invested in the REIT because of the expected 8% distribution yield would probably be disappointed. 

So, what is the expected yield now?

The Euro has been in a downtrend against the S$. 

Today, the exchange rate is one Euro to S$1.54 which is much lower than it was middle of last year at S$1.70.





Based on the estimated income available for distribution to unit holders of Euro 8.3 million (6 months) and approximately 419 million units in issue, annualising the DPU in S$ terms now gives us a distribution yield of about 6.8%.

IREIT Global's unit price has retreated since hitting a high of 90.5c a unit.

Will IREIT Global's unit price go much lower? 

It looks like it could, especially if Mr. Market still demands an 8% distribution yield.

What? Take a stab in the dark? 

Er, well, if the annualised DPU is 6.1c, to get an 8% yield, the REIT would have to trade at 75c a unit which is some 15% lower than its IPO price of 88c a unit.





Related post:
IREIT Global: Distribution yield of 8% safe?

Suddenly, financial freedom looks less remote!

Blogging about my meals has had positive consequences both for me and some readers.

1. There are people who care enough to write to me to tell me I don't eat enough vegetables. So, I have been making a conscious effort to incorporate vegetables in my diet more regularly, thanks to their nagging. What did I have for dinner this evening?

Non-fried noodles. Broccoli. MSG free soup cube.

Add mom's secret ingredients plus a mug of genmaicha.

2. Some readers have informed me that I have inspired them to pack lunch to work and to have dinner at home more often instead of going to the restaurants. Some of them actually realised substantial savings especially when they managed to get the whole family to participate. 

Like with many things, it gets easier with time as is the case for a lady who told me her husband is now a firm believer in the changes she has made to their lifestyle because of the resulting savings he sees accumulating in their bank account.

Their wealth is growing more rapidly now, month after month, and this gives them a greater sense of financial well-being. This is an achievement. 

I feel happy for them.

Through sharing very personal information such as how much I receive in terms of passive income, how much I have in my CPF-OA and SA, how I am able to get free health insurance in Singapore and how I save money on a daily basis, just to name a few things, I have found that it is easier to convince people, to inspire people to take their first step on the journey towards financial security and, ultimately, financial freedom. 

Suddenly, it is not just something people talk about. 

Suddenly, it looks more achievable. 

Suddenly, it does not look so remote.






It has been a 20 years journey for me but, hey, if AK can do it, so can you, right?

Some might take a shorter time. 

Some might take a longer time. 

It doesn't really matter, does it?

I know some people might ridicule me for blogging about my meals but I am sure regular readers are able look beyond the facade. 

Regular readers know that my journey towards financial freedom is anchored upon a philosophy and that philosophy is apparent in my daily life.




Updated on 2 July 16:

Related post:
How to recession proof your life?

Singlish with AK: Give a talk? Can but not free.

Aiyoh, the title is so ambiguous lah. Fun, right?

Got people invited me to give talks and I said just read my blog lor, it is free lah.

At home, I blog, reply to emails and interact online with readers. All own time, own target and for free mah.

If I have to leave my home to give a talk, it cannot be free liao. Why? AK lazy. AK doesn't want to leave his home. Too bothersome. (Don't later some smart aleck suggests to have talk in my home hor.)

I made the remark, "I fishing no use hook de..."

From the reply, I think the person doesn't know what I am talking about. LOL.

How to make my money last longer? A senior's example.

The very first question I was asked during the meeting with readers last Saturday was, "I am 60. What can I do to make my money last longer?" 

Well, in our golden years, I feel that we probably want to be less adventurous when it comes to money matters and I shared some of my thoughts with everyone at the event. This blog post coincidentally exemplifies one of those thoughts. I don't know if the lady who posed the question on Saturday will be reading this or not but I hope she does.

My dad might not be the most financially savvy person I know and he has some bad money habits but he has very good work ethics. He belongs to a generation of hard working Singaporeans who refuse to stop working. He is almost 70 years old and, yes, still working.

My dad used to spend money very easily, too easily, and, for many years, I was very worried. I wondered whether he would have enough money for retirement. So, in my own retirement planning, I factored in the cost of my parents' upkeep, just to be safe.

For a long time, my dad was also very suspicious of the CPF but, in his old age, as he fears not having enough money for retirement, he started believing in the system instead of joining the Hong Lim Park "Return our CPF" protests. Well, this is largely due to my nagging.

Son nagging at father? Bad AK! Bad AK!

This morning, my dad sent me a message:

"Son, my cheque to CPF cleared already."

I logged into his CPF account just now to take a look.

My dad continued to work beyond 55 years of age and, in so doing, accumulated more funds in his CPF account. Any voluntary contribution he makes now can be considered as short term savings as he is allowed to withdraw money from his CPF account once a year while still working and anytime he wants once he stops working. 

The funds will enjoy interest rates of 2.5% (OA) and 4% (SA) per annum in the meantime. No fixed deposit rates in Singapore can beat these.

If you are a senior or if you have loved ones who are seniors, this might be something worth considering and sharing if they are trying to achieve retirement adequacy.

IMPORTANT (added 4 Feb 15):
For seniors 55 to 65 years old, please read comment by Sally Tan in the comments section below.

Related post:
Retirement: Buying a AAA rated bond.

How to recession proof your life? Your time will come too.

Last evening, after the group photo taking ended, I took my first selfie ever with a couple of readers and the lady asked me whether I might make some changes to my frugal spending habits as I go into retirement. Well, maybe not in those exact words but I think that was what she meant.

Actually, many people asked me questions along the same line before. Why not be more generous to myself since my investments are generating meaningful income annually? Why am I still so frugal? (Aiyoh, car, chocolates, ice cream, remember?)

"I don't think I will change anything. I am too used to what I am doing now. I don't think I can change," was my reply. Now, this can either be viewed as a good thing or a bad thing, depending on what we are talking about.

My breakfast this morning.
Yes, got chye sim! Trying to take more vegetables.
I nag at readers about money and readers nag at me to eat vege.
Sounds fair to me. ;)

Human beings are creatures of habit. Everyone has some habits, whether good or bad. Look at ourselves and be honest. I am sure we can identify some of our own habits.

We might need a little help because our eyes are looking outwards. So, ask our friends and family members and they will tell us. They might be brutally honest but that is a good thing. It is all going to contribute to an important body of knowledge, self knowledge.

A visit to NTUC Fairprice in the morning.

There will always be some habits in life that will hold us back from achieving financial freedom. There will be habits in life that will help and, no matter what your persuasion might be, it is probably difficult to dispute that being frugal is one good wealth building habit. If we keep to our frugal lifestyle even as we make more money in life, we would probably be on our way to financial freedom.

My dinner tonight, breakfast and lunch for tomorrow.

I shared last evening that my family narrowly averted bankruptcy when I was in primary school. It was a difficult thing to understand for a boy but my mom was able to paint a picture of total loss for me that has stayed with me till today. I forgot to mention last evening that although we averted bankruptcy, we suffered financial hardship for many years. We lost almost everything. How does one forget something like this? Quite impossible.

The fear of growing old and destitute stayed with me till today.

I must never be in a situation like this, I told myself, and the last two decades have been a journey of self-discovery and stumbling in the dark, somehow doing mostly the right things but also falling into a few pits along the way. I do feel that I have been mostly lucky.

Of course, I could still fall into a pit or two in future. I don't know everything there is to know, for sure. However, I hope that I have done enough that is right so that, unless the pits I fall into in future are particularly deep, I would be able to recover quickly.

In summary,

1. Develop good habits that will help to build wealth.


2. Discard habits that lead to wealth destruction.


3. As our wealth and income grow, maintain a frugal lifestyle.

If we do all these, we would most likely become more recession proof than the average person too.

It is always hardest in the beginning. It takes time but you must believe that your time to work when you want to and not because you have to will come too just like it has for AK the giam siap fellow.

Related posts:
1. If we are not rich, don't act rich.
2. Three points which could turn our lives.
3. To retire by age 45, start with a plan.