5 Things You Need To Know About Your CPF

5 Things You Need To Know About Your CPF

Central Provident Fund (CPF) is a compulsory comprehensive savings and pension plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs in Singapore. It started in 1 July 1955 and just like our Integrated Shield Plans, there have been many changes over the years.

Like with most changes, some will appreciate it, others will not appreciate it as the “rules changed”.

Love it. Hate it. It is an asset class that we will have with us for the rest of our lives.

5 Things You Need To Know About Your CPF

5 Things You Need To Know About Your CPF

To help you understand CPF, the opportunities and optimization better, I have put together a free webinar to share my knowledge on it. Limited seats only. Join us with the link here.

 

Fun Fact #1: You cannot use your CPF to pay for your house in the past

Before 1968, CPF cannot be used to pay for a house. In 1968, the government finally allowed the use of CPF for the downpayment and to service the monthly mortgage loan instalment. Fast forward to 2021, majority of the people around me are using their CPF to pay for their downpayment and their monthly mortgage loan servicing.

This liberation allowed Singapore to have one of the highest house ownership levels in the world. However, as more money is used for housing, the original intend of CPF to help us retire may have taken a back seat. There is also the cause of concern for accrued interest.

Most of you might be servicing your mortgage with your CPF and worry that you do not have enough money in your CPF for retirement. For that purpose, I use a CPF Projection Calculator for my clients. This allow me to accurately measure the amount my clients will have in their CPF at age of 55. So far, they have found this insightful.

5 Things You Need To Know About Your CPF Retirement Age 55

5 Things You Need To Know About Your CPF Retirement Age 55

 

Fun Fact #2: Special Account (SA) was started in 1977

To help you with retirement, the special account was created in 1977. Tons of literature has been written on the special account. Among my favorites are the following. If done correctly, the following opportunities will help you in your retirement.

  1. Transferring Ordinary Account (OA) monies to Special Account (SA) to have a higher interest (up to 5%)
  2. Retirement Sum Top Up Scheme (RSTU): Top up up to $7000 into your CPF for tax deductible benefits.
  3. CPFIA: Using CPF-SA to invest (with limitations)

However, it is worth noting that the higher interest that the SA earns is not guaranteed. The floor rate of 4% has been extended by the government until 31 December 2021. The SA and Medisave (MA) rates are reviewed quarterly. The 1M65 movement takes the assumption of these rates being at 4%.

5 Things You Need To Know About Your CPF Floor Rate

5 Things You Need To Know About Your CPF Floor Rate

 

Fun Fact #3: Medisave was started in 1984

Medical inflation isn’t new. Medisave was created to help you to pay for our healthcare cost. It is not hard to understand that one of the The Hidden Cost Of Retirement is Healthcare. With healthcare cost escalating at more than 10% per year, tons of measures have been implemented to help you pay for our healthcare cost.

Among which, you can use your medisave to pay for (part of) our integrated shield plans. There are some outpatient treatments that can be paid using medisave. You also have to set aside a Basic Healthcare Sum (BHS) in your CPF. The BHS is adjust annually to keep up with inflation. This is one initiative to help with medical cost.

BHS 2021

BHS 2021

With the new co-payment medical plans now, you will have to plan for your retirement a little differently.

 

Fun Fact #4: Minimum Sum Scheme Was The First Version of CPF-Life

CPF is still about retirement. Before CPF-Life, there was the minimum sum scheme (MSS). However, as your life expectancy increase, you run a risk of outliving your MSS. Hence, the retirement scheme was updated/upgraded to become the CPF-Life. The retirement account (RA) is created at age 55. Your OA and SA monies will be transferred into the RA during then.

CPF Life Full Retirement Sum 2020

CPF Life Full Retirement Sum 2020

Assuming that you have $181,000 (FRS) in your Retirement Account (RA), you will get between $1390 to $1490 per month for the rest of your life starting from age 65. This will form part of your retirement cashflow. There are 9 options for you to choose from at age 55.

 

Fun Fact #5: There is a maximum amount of money you can put into CPF a year

You can’t just simply top up everything into your CPF. There is a maximum of $37,740 of mandatory and voluntary contributions that a person (employee or self-employed person) can make in a calendar year is subject to the CPF Annual Limit.

 

Final Thoughts By Wealthdojo

I personally like the CPF scheme because it really helps a lot of people including myself plan for our retirement seriously. I contribute to my SA every single year so that I can make use of the tax incentive and also hit my FRS in the years to come. Having enough in my medisave gives me the confidence to pay my integrated shield plans yearly and usually the interest on my medisave pays for my shield plan.

To each his own. Love it. Hate it. It is an asset class that we will have with us for the rest of our lives.

If you would like to benefit from CPF more, I have put together a free webinar to share my knowledge on it. Limited seats only. Join us with the link here.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

How Integrated Shield Plans Affect You (All Insurer Edition)

How Integrated Shield Plans Affect You (All Insurer Edition)

Our Integrated Shield Plan (ISP) affects you greatly. It affects whether you have a good medical coverage now. It affects whether you can have affordable healthcare in future. More importantly, it affects if you need to continue working to sustaining your premiums in future.

This is not an April Fool’s Joke. It is real. My readers would already have known about this since last year. If you are lost or do not have a financial consultant to update you on your ISP, the bold statement is a summary of the change in the ISP structure.

Existing ISP supplementary plans will have a co-payment structure.

This means that there won’t be a 100% coverage/reimbursement anymore. Customers will have to pay a XX% co-payment (depending on the terms and conditions of your policy). You can read about co-payment and how to plan for it here.

 

But First: Medishield Life Premiums Increase

How Integrated Shield Plans Affect You (All Insurer Edition)

How Integrated Shield Plans Affect You (All Insurer Edition)

Following the announcement of 21st Dec 2020 new release from the MOH, claim limits will increase. At the same time, there will be premium adjustments to support the rising number of claims and payouts as well as the benefit changes. You will see this reflected in your renewal because Medishield Life is a component of your ISP.

 

Integrated Shield Plan Changes (All Insurer Edition)

In Singapore, there are seven health insurance providers. Each of them have adjusted their premiums and benefits accordingly. You should be more interested in what your existing rider has changed to. Here is a summary for the 7 health insurer in no particular order. These are all public available information and I will be putting a link of each insurer here.

How Integrated Shield Plans Affect You (All Insurer Edition)

How Integrated Shield Plans Affect You (All Insurer Edition)

AIA Singapore

  1. Premium increase for HealthShield Gold Max A
  2. Premium increase for Max VitalHealth A rider
  3. Max Essential riders to be converted to riders with co-payment
    – Essential A convert to Max VitalCare
    – Essential A Saver convert to VitalHealth A with EOCB Booster
    – Essential B convert to VitalHealth B
    – Essential B Lite  convert to Vital Health B Lite
    – Essential C (no conversion but there will be premium reduction)

View the changes in AIA Singapore Shield Support here.

AXA Singapore

  1. Increase in Premiums for AXA Shield Plan A and Enhanced Care Plan A rider
  2. Existing Basic Care, General Care and Home Care riders will no longer be available. All of them will be switched to Enhanced Care Rider.

View the the Enhanced Care Rider.

AVIVA Singapore

  1. Premium reduction for MyHealthPlus rider (Option B-II and Option C-II) attached to Plan 1
  2. Premium reduction for MyHealthPlus rider (Option A, B and C) attached to Plan 1, 2 & 3.

View the MyHealthPlus here.

Great Eastern Singapore

  1. Premium changes for SupremeHealth P PlusA Plus and B Plus
  2. Premium/Benefit changes for TotalCare riders
  3. Premium increase for TotalCare Plus riders

View Great Eastern Enhancement here.

NTUC Singapore

  1. Premium reduction for Enhanced IncomeShield on Preferred, Advantage, Basic and Enhanced C plans.
  2. Premium reduction for Plus & Assist Riders on Preferred, Advantage and Basic plans.

View NTUC changes here.

Raffles Medical

Raffles shield was launched on 1st Aug 2018. Ministry of Health (MOH) directed insurers in March 2018 to stop offering 100% coverage plans so I believe their riders are already on a co-payment basis already.

 

Final Thoughts By Wealthdojo

I believe this will not be the first or the last change when it comes to medical cost. It is therefore, important to have a trusted advisor who communicates the changes in a timely manner and navigate your retirement accordingly. As a financial consultant, I believe that this communication is vital because we never know such treatment and the affordability will arise.

Wishing you the best in your day ahead.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

There were only two things certain in life Death and Taxes

How Much Is My Income Taxes [2021 Edition]

It is the tax season for 2021. If you had an income in 2020, filing of your income tax starts 1st March 2021. You will NEED to file it by 18 April 2021 (e-filing) or 15 April 2021 (paper filing). If you don’t, it could lead to a fine or even a court summon. Don’t say you have not been warned.

We don’t really talk about taxes in 6 Levels Wealth Karate Methodology. In a simple gist, taxes are bittersweet to me. On one hand, I don’t like to pay taxes as it is an expenses to me. On the other hand, if I pay higher taxes, it would mean that my income is higher! I’m just glad that in Singapore, we have a really attractive tax program and we pay significantly lesser taxes as compared to people in other countries. Without going too deep into that, here’s how how much to pay for your income taxes in 2021.

 

Do you need to pay taxes or not?

Yes. You only pay income taxes if your chargeable income is greater than $20,000. Some income are chargeable and some are not. Fun fact: your winning from your TOTO/4D is not a chargeable income. Check out the full list here.

If your chargeable income in 2020 is above $20,000, you will be taxed with the progressive income tax system. Singapore follows a progressive income tax system. This means that the higher your income, the more you pay in taxes. The resident tax rates are as follows.

How To Reduce My Income Taxes Resident Tax Rates

How To Reduce My Income Taxes Resident Tax Rates

However, this does not show the effective income taxes for your income. When I first saw this table, I thought that if I earn $80,000, my tax bracket would be 7% or $5,600. This is untrue.

How To Reduce My Income Taxes Effective Income Tax Rates

How To Reduce My Income Taxes Effective Income Tax Rates

If you are earning $80,000, you will be paying $3,350 in taxes which means my effective income tax rates are 4.19%. Personally, I think it is quite fair. With the same $80,000, you would be paying $23,571 or 29.46% effective income taxes in USA.

 

Is it automatic?

If you received a letter/SMS/form that tells you to file your income tax, you will have to log in and file it yourself. This sms below is one that I received from IRAS. Typically, most of my income have already be pre-filed as I’m a self-employed working with AIA.

Income Tax 2021 Filing

Income Tax 2021 Filing

 

If you received a letter/SMS/form that tells you NOT to file your income tax, you don’t have to do it. But please verify if your information is correct and accurate.

If you didn’t receive anything from IRAS, you will still need to file a tax return if your:

  • annual net business income exceeded $6,000, OR
  • annual income (inclusive of rental income) was more than $22,000 last year

 

Tax Deductibles

Since 2020 is over, you can’t really do much changes into your deductibles. You can start planning for 2021 instead. In Singapore, we have a list of deductibles given to encourage social and economic objectives such as filial piety, family formation and the advancement of skills.

Income – Deductibles = Chargeable Income

As mentioned above, you will pay taxes on your chargeable income. This means that deductibles will play a big role in the taxes you are paying.

IRAS has created a personal income relief checker to see how much deductible you are allowed. These deductible includes SRS Top Ups, CPF cash Top Ups, just to mention a few. There is a maximum of $80,000 tax reliefs.

 

Final thoughts by Wealthdojo

There were only two things certain in life Death and Taxes

There were only two things certain in life Death and Taxes

Co-incidentally, these two can be well managed by proper financial planning or using insurance tools to achieve your financial goals. This article is meant to be a general article on how to pay taxes in Singapore. If you would like to know more, just comment on this post or contact me and I would love to have a conversation with you on the above.

Stay healthy. Stay Safe and pay your taxes.

Thank you for your contribution to nation building.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

Top 3 Money Wasters At The Supermarket.

Top 3 Money Wasters At The Supermarket.

During the Lunar New Year, I was spending more time in the supermarkets to buy my Chinese New Year goodies. As I am price sensitive in nature, I cannot help but noticed that there are many items that are “extremely” marked up in the supermarket. While this article is probably going to minimally affect your Wealth Management journey, I hope this awareness can save you hundred of dollars in the future.

Top 3 Money Wasters At The Supermarket.

Top 3 Money Wasters At The Supermarket. Source

 

#1: Herbs and Spices

Herbs, Spices and Seasonings are the most common culprits. If you are like me, I tend to cook in the spur of the moment. As most of us do not really have the full set of herbs and spices at home, we head over to the supermarkets to purchase our herbs and spices which we may only use once/twice.

In the supermarket, prices of herbs and spices range between $3 to $10 from the common pepper to saffron. We probably would have bought a few of those and it was left on our shelves ever since.

Top 3 Money Wasters At The Supermarket Herbs And Spices

Top 3 Money Wasters At The Supermarket Herbs And Spices

The long story short, these spices can be easily found in the local markets such as Chong Pang Wet Market. Most of the spices are available and can be bought at $1 per packet.

Save yourself some money and head down to your local markets if you have a cooking spur.

 

#2: Pasta Sauce

If you are like me (again), the first dish we learn to cook and be impressed with ourselves is the pasta. After graduating from cooking maggie noodles, cooking pasta has a more “atas feeling” to it. Throw in some sausage now!

Similarly, pasta sauce cost between $4 to $8 a jar depending on which brand you decided on. Health aside (read the labels, they contain a lot of added sugar and salt), I learnt from a Italian chef in my travels that pasta sauce can be easily made with diced tomato, olive oil, garlic and salt. Diced tomato cost around $1 and if you are into pasta, this trick is going to save you your health and your money.

Top 3 Money Wasters At The Supermarket Pasta Sauce

Top 3 Money Wasters At The Supermarket Pasta Sauce: Source

 

#3 This Refreshing Beverage

It might be forgivable if you need to buy this overseas. But if you are in Singapore, drinkable water is everywhere. I know it is for convenience that people just take water off the shelves. All it takes is your water bottle and you can bring whatever you need out. Some shopping malls (like NEX) do have water coolers for you to top up.

Enough nagging.

Top 3 Money Wasters At The Supermarket Water

Top 3 Money Wasters At The Supermarket Water. Source.

Final thoughts by Wealthdojo

Save yourself some money. There are more things you can do with the money that you have saved. You can either impact the next generation, accumulate your emergency funds or the good old self care.

We wish you a Happy Lunar New Year!

 

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money?

Happy Lunar New Year! Wishing everyone here good health and may your wealth multiply in the years to come. Hopefully, the last 4 days have been one where you have been giving/receiving or your child has been receiving hongbao. One common question that I go from parents with regards to financial planning is what they should do with the money. Most of them are keeping it for their children as emergency funds. This is a good initiative. That being said, is this an opportunity to share money lessons with your children?

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money (Source)

 

Your intention sets the tone

What do you want your child to learn from receiving the hongbao? Is it gratitude? Is it charity? Is it spending? Is it emergency funds? Your intention sets your child’s tone. By default, people will stick to the easiest thing of all: Not doing anything. This is precisely why most parents are keeping their children’s money as emergency funds. (PS: I’m not saying that emergency funds is a bad thing. It is also important.)

However, as the child do not have much ownership of the funds, they do not really learn from that concept. To them, it is their parents are keeping their money for them.

So what can you do this year to inspire your children to take charge of their money. This may or may not be applicable and felt by you depending on your relationship with money. Here are some suggestions.

 

Happiness of Spending Money

Wait a minute. A finance blog asking me to spend money? Yes. It came to my attention that “saving money” or “spending money” has became such a pain for people. As our education on money commonly involves parents screaming at us to save money (or that they don’t have money), it has become very hard for some people to spend mentality. Each time you spend, you will feel a pinch when you see your bank balance drop. That’s commonly known as the poverty or scarcity mindset. Eventually, you might grow up with enough money in your bank but feeling miserable that you don’t have enough.

What To Do With Your Children's Hong Bao Money Spend It

What To Do With Your Children’s Hong Bao Money Spend It

As parents, one of the best thing you can do for them is let them buy something that they have already wanted for a long time. Take 20%, $30 or whatever amount (be reasonable) in their hongbao money and bring them to the shopping center. Let them buy whatever they want. Let them feel the happiness of what money can buy. You will be surprised that some children will buy books, stationaries and of course toys. You can take this chance to introduce to them the 4 Quadrants Shopping Guide.

Let them take charge of their finances, the earlier they do, the more responsible they will become.

 

Delayed Gratification

To balance it up with spending, delayed gratification is next. A simple game you can play with your children is called The Marshmallow Test. I won’t explain too much here. Wait this hilarious video on how children wrestle with waiting to eat a marshmallow in hopes of a bigger prize (more marshmallows).

In finance, the timeline would be longer than this test. The intention is to get the children to save their hongbao money for a longer period of time so that they can get back more at a certain age. This could be done by a simple endowment plan or just Singapore Government Bonds that matures after a set period. When they receive the money after xx years, you can calculate with them (do it with them) how much they have put in and compare it to how much they have received. This can be done with your financial advisor.

 

Investing Lessons

This opens up many lessons for young children. You can share with them about volatility, about index (example if you invests in a Country ETF), about companies (example: when apple makes money, you “make” money too), about value or about growth.

One of the easiest way is to invest in companies that they already know. For illustration, my example will be SBS Transits.

Disclaimer: Not a buy/sell recommendation here.

For children, they probably will be familiar with certain products such as the IPhone, Bus services, Netflix etc. When you invest their money (they can only open a brokerage account when they are 18) for them, they get to see if their money grows in terms of capital appreciation or dividends. You can consider investing for them once a year as a dollar cost averaging approach for them to build up their portfolio.

For those of you would like to have something simpler, consider investing into country ETF like the STI Index, China ETF or S&P500. When the particular country does well, they are able to see the value of their investment grow as well. Similarly, do consider a dollar cost averaging approach for your children and invite them to ask questions. This is a great opportunity to for your children to learn about investing either with yourself or your trusted financial advisor.

What To Do With Your Children's Hong Bao Money Investing

What To Do With Your Children’s Hong Bao Money Investing (Source)

Final thoughts by Wealthdojo

I cannot imagine how much of a head start your children will have if they start learn these money lessons as some adults take decades to learn these. Let me know what you guys think in the comments below.

We wish you a Happy Lunar New Year!

 

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.