An annuity: Would you rather have it or not? (UPDATED)

I told a friend over a tau hui break just now that there are really many Singaporean families which seem to be doing very well but, in actual fact, are not doing well at all. 

In many instances, low or non-existent financial literacy is to be blamed.

Chances are that these people will be unprepared or under-prepared for retirement. 

Many actually do not believe in annuities, especially the one that is linked to the CPF. 





In fact, ironically, I have found that savvy investors are more likely to say that annuities have a place in their retirement portfolios while people who really need annuities more don't seem to trust them.


Anyway, if you do not believe in the CPF Life, no matter what people say, I understand if you want to skip the rest of the article but you might want to read this instead:

Have huge amount of savings and work till 70?




For the rest of us who believe in the CPF Life, we would be happy to know that there is an article in The Sunday Times today which compares the returns of the CPF Life against other annuities available in Singapore.

CPF Life is the best annuity there is in Singapore.

CPF members are a fortunate bunch even if many don't know this.

Source: The Sunday Times, 15 Feb 15.

There is also a very good article by Mok Fei Fei on the CPF which discussed:

1. Why it is wise to keep money in the CPF?

2. Know which plan you are eligible for.
(Remember the 3 little pigs and their huts? See Related Post 2.)




3. Check both returns and risks.
(Remember the Hong Lim Park protests? See Related Post 3.)

4. Decide how much you need.

5. Maybe complement CPF Life with private plans.





UPDATE:

Central Provident Fund (CPF) members will be able to grow their retirement savings further next year as the Government will raise interest rates on account balances, the salary ceiling for contributions and contribution rates for older workers.

An additional 1 per cent interest will be applied to the first $30,000 of CPF savings for those aged 55 and above next year, on top of the existing 1 per cent extra interest on the first $60,000 of savings. This means that the first $30,000 in Special, Retirement or Medisave accounts can earn up to 6 per cent interest.

(Source: The Straits Times, 23 Feb 15.)

Related posts:
1. An annuity proposal: A case study.
2. Proposed changes to the CPF.
3. We do better managing our savings than the CPF does.

Buffett and Munger don't like to pay full prices. Do you?

It is hard not to mention how important it is to save money whenever I blog or talk because it is so much a part of me. Now, by saving money, I am not just talking about paying ourselves first. I am also talking about how I try to get the best deals.

Today, I thought I was meeting some friends and when I messaged one of them, I found out that I was mistaken. So, I decided to do some window shopping. Nice, lazy Sunday. Then, suddenly, I felt like having a cold Ribena drink. It was kind of strange but I just felt like it.

So, I walked into the supermarket in the mall and saw that it was going for $1.70 a packet. Those that were chilled would cost 15% more! Reminding myself that there was a Watsons in the mall, I decided to check if they had the same drink at a special price.

Wow! Chilled Ribena drink in Watsons was cheaper at $1.50 a packet and the special deal was "Buy 2 for $2". Jackpot! So, basically, I got 2 for the price of 1.

Since I was in Watsons, I decided to see what other good deals they had and I found these:

Usual price: $8.20 each. I paid $8.80 for 2.

I am always getting paper cuts. Using hand mosturisers each time after I wash my hands help to prevent paper cuts. Rosken is an inexpensive brand which I have been using for years and the pharmacies here have special deals once every few months. Those are the times I would buy.

People sometimes laugh at me and ask me:

1. How much can you save?

2. Aren't you spending more by buying more?

Well, I believe that savings no matter how little do add up. If I am able to get more bang for my dollar, why not? If it is something I use regularly, why shouldn't I buy more?

This thinking is not something that I apply only to the small things in life. I am like this with bigger things in life too. 

I will try to find value for money in big ticket items like cars, apartments and stocks too. 

If something has become a habit, it pervades our lives. Always looking for the best deals is a habit for me.

So, how much money did I save in the process of pampering myself with chilled Ribena drinks and buying what is an essential item for me? Well, there could be several answers to this question. So, I will let whoever is interested derive his own answer:

Of course, for those of us who did Economics in school as a subject, we will remember that all of us have imperfect knowledge, so, it could be very difficult, if at all possible to get the best possible deals all the time. 

If we did get the best possible deal sometimes, we were probably lucky. 

However, this shouldn't stop us from trying. For anyone who is always paying full prices, getting better deals is already a fantastic start.

"Whether socks or stocks, I like buying quality merchandise when it is marked down," Warren Buffett.

"... all that is required is a willingness to bet heavily when the odds are extremely favourable, using resources available as a result of prudence and patience in the past," Charlie Munger.

Related posts:
1. Song Stonecold: Getting value out of everything.

2. Seven money habits of AK71's.

3. Shopping online with free shipping saves money.