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.

CapitaLand Restructuring Is it good or bad

CapitaLand Restructuring: Is it good or bad?

CapitaLand Restructuring Is it good or bad

CapitaLand Restructuring Is it good or bad

CapitaLand shares was halted on Monday morning (22nd March 2021). Along with it, Ascott Residence Trust, Capitaland Integrated Commercial Trust, Ascendas Reit, CapitaLand China Trust and Ascendas India Trust, was also halted pending a released of an announcement.

On the same day, we got an answer. CapitaLand Limited (SGX: C31)is going to be restructured. In this article, we are going to figure out what is happening and also what is the good or bad about this restructuring. Should it be part of our wealth management journey or in our SRS portfolio?

Disclaimer: This is not a buy/sell recommendation. I do not hold any SGX:C31 shares.

 

Brief Information About CapitaLand Limited

CapitaLand owns 1090 properties in 242 cities spanning over 35 countries (as of 23 March 2021). It is the 3rd largest listed global REIM and Asia’s largest REIM.

They own a stable collection of REITs and business trusts comprising of CapitaLand Integrated Commercial Trust, Ascendas Real Estate Investment Trust, Ascott Residence Trust, CapitaLand China Trust, Ascendas India Trust and CapitaLand Malaysia Mall Trust.

CapitaLand Restructuring Top Real Estate Investment Managers

CapitaLand Restructuring Top Real Estate Investment Managers

That being said, the share price trend has been extremely disappointing over the long horizon. Most investors probably bought into CapitaLand for it’s dividend yields.

CapitaLand Restructuring Share Prices History

CapitaLand Restructuring Share Prices History

 

Summary of Restructuring: The Development Arm is going to be Privatized

CapitaLand Restructuring Development Arm Privatized

CapitaLand Restructuring Development Arm Privatized

Shareholders will now see the development part of the business privatized. They will be “compensated” with a combination of $0.951 cash, 1x CLIM (CapitaLand Investment Management) shares and also 0.155x CICT (CapitaLand Integrated Commercial Trust) shares. It does sounds like a very good deal.

(The assumption here is that CLIM trades at a fair value of 1x NAV. I’m trying to find data to share how CapitaLand has traded on NAV over the years. Do let me know if you can find the source for this.)

CapitaLand Restructuring Proposed Offer

CapitaLand Restructuring Proposed Offer

According to the Chairman of CLA Real Estate Holding response in the news release, the privatization will provide flexibility for the development business to pursue longer gestation and capital-intensive projects.

This is where I felt a bit uncomfortable with the restructuring which I will explain below.

 

The Good Part About The Restructuring

Firstly, I believe that the restructuring is excellent if you think about the conglomerate discount that CapitaLand may be facing. Conglomerates often trade at a discount versus companies that are more focused on their core products and services.

Mr Lee Chee Koon, Group CEO of CapitaLand Group says the same thing but in another way. As listed REIMs generally trade at a premium to their NAVs in the capital markets, we are confident that CLIM will be able to drive returns for our shareholders given its scale, capabilities and a strong ecosystem.” (Developers are usually traded at a discount).

Secondly, for those that feel that the development part of the business is hard to analyze or “risky”, this new structure becomes a “cleaner” and easier to analyze. There is more certainty in CLIM and probably that’s what local investors want. They will be paid a mixture of cash and CICT stocks for the development part of the business.

 

The Not So Good Part About The Restructuring

The growth driver of the company (CLIM) is now gone and the price CLA is paying is cheap (in my own opinion). I personally feel that the $1.279 (cash + CICT shares) are a cheap price to pay for the development arm of CapitaLand. Effectively, if CapitaLand were to grow in future, they have to then acquire new development property from (guess who) the CLA. I have no figures to back any statement down below so treat the following opinion with caution.

At this moment, the price for the development arm is not priced in or in fact, unknown to a retail investor.

I’m certain in the distant future that CLA will sell and offload some of the properties that they are developing now back to CapitaLand. According to FY2020 CapitaLand results, the development arm is pivoting towards ‘new economy’ asset classes. S$3.4 billion of new investments were made in business park, logistics etc. There are mentions of investing in Japan’s logistics sector (completing in 4Q 2022), Korea Data Centre Fund 1 (invest in an offmarket data centre development project near Seoul in South Korea), Two Class A tech office properties in San Francisco, etc. I believe these are interesting developments which may be sold back to CapitaLand in future.

Since the development arm is privatised, we will no longer have a visuals or information on properties/land that are developed. It might be difficult to see if the cost are justifiable or not.

There is also no more vested interest for CLA to give CLIM a good price for those properties. This means that properties that are acquired by CLIM moving forward may be more richly valued and CLIM may need to fund these properties using issuing of new shares.

 

Final Thoughts By Wealthdojo

On a business point of view, I personally feel that CLIM may not be as attractive as before.

On a share price point of view, I believe if people value CLIM differently moving forward, we may see the share price performing better.

If you do have any other views, whether it is similar or contrasting, I would love to hear from you in the comments below.

Invest safe.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

My SRS Portfolio March 2021

My SRS Portfolio and Thoughts [March 2021]

My SRS Portfolio March 2021

My SRS Portfolio March 2021

After a series of SRS related articles in 2020, there are some readers from investingnote and my telegram channel that asked me to be transparent with my SRS investments. After some discussion with some of my readers, I will be doing regular updates on my thought process of investing using my SRS and the reasons why I invest in some of these funds or products.

The Standard Disclaimer: This is not and should not be taken as a buy/sell recommendation.

Before looking into using SRS to invest, these are some links you should read first before continuing.

Start Here: The $1 SRS Strategy

Basic Knowledge: 5 things you need to know about SRS when you are 40 and older

Your SRS Overseas Retirement Guide: 3 things you need to know about SRS if you plan to leave Singapore

For 40s and above: 10 SRS Investments to Consider Especially if you are 40 and older

Income Tax and SRS: How Much Is My Income Taxes [2021 Edition]

 

SRS Objective

To invest in sectors that are growing and balance it with reits exposure.

 

My Considerations

There are 3 instruments that I personally think is interesting and of investing value at this moment of time.

Lion-OCBC Securities Hang Seng TECH ETF (HST.SI)

This ETF is investing into the 30 largest TECH-themed companies listed in Hong Kong. It is diversified across 30 companies ranging from Alibaba to ZTO. While it is undeniable that there may be regulatory risk associated with this ETF, I believe that companies such as Tencent, Alibaba, JD, SMIC is going to propel China’s economy into the future. I’m not going in depth into the reason of investing in this article. Currently, I’m already vested into this ETF.

LGI HST ETF

LGI HST ETF

 

Manulife US Reits (SGX:BTOU)

Manulife US Reits is one that I have been eyeing for a look time. The reits is exposed to income-producing office real estate in key markets in the United States. I personally like the WALE by NLA and also occupancy rates of this reits.

Manulife US Reits Portfolio

Manulife US Reits Portfolio

Let me address one common question about COVID-19 affecting office real estates in USA. USA has been adopting working from home for a long time. Beyond the financials, it is important for the company to have a good working culture. The synergy fortunately is created from social interactions in office.

From the corporate presentation in March 2021, only 5% of companies mentioned that there will no longer be a need for an office. Around 70% of bosses expected employees to working from office at least 3 days a week. Similarly, around 70% of bosses expect that they would need more space due to rising headcount and also social distancing needs. Manulife reits rents to a well diversified tenant base ranging from Legal (21% of gross rental income), Finance and Insurance (18.1% of gross rental income), retail trade (13.8% of gross rental income) and so on. Personally, I’m comfortable with this even with the new norms that we might be experiencing. Currently, I’m vested into this reit.

Manulife US Reits Portfolio Work From Home

Manulife US Reits Portfolio Work From Home

 

Exposure to Institutional Investors (Ballie Gifford, Blackrock, Wellington)

Currently, I’m not invested into this yet because my SRS funds are insufficient to purchase into them yet. As I’m a representative from AIA Singapore, I would not be able to write the product. Feel free to reach out to me for more details regarding this.

The reason why I think it would make an great investment thesis is because of the expertise of the 3 companies. Wellington is famous for their exposure in the value investing companies. Ballie Gifford is well known for investing in growth companies (such as Tesla). Blackrock is famous for their fixed income. Depending on your intended risk profile, the 3 funds will be allocated accordingly.

I am planning to contribute to SRS in 2021 again for tax purposes. That will be the moment of time where I will be investing into this instrument.

 

Final Thoughts By Wealthdojo

I reckon my positions will not be changing much. The next change will probably be after the addition of new funds into my SRS to purchase the plan that give me exposure to the institutional investors. Wishing everyone the best in their investment journey.

Do reach out to me if you wish to explore your SRS options.

My SRS Portfolio

My SRS Portfolio

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

The $1 SRS Strategy Retirement Age

The $1 SRS Strategy

It is 45 days before the end of the year. Have you accomplished your 2020 goals? Whether it is a financial goal or a fitness goal, the good news is that we have another 52 days left.

In the 6 Levels Wealth Karate, we talked about many strategies while you embark on your wealth management journey. Today, I want to congratulate each and every one of you for being invested in your financial journey. If my blog has helped you, I would appreciate if you could comment how you have benefited in the comments below.

If you have not started, it’s okay. This article will be the easiest way to start to start.

 

Supplementary Retirement Scheme (SRS)

Previously, I have already talked about SRS. In this semi viral article, I described the 5 things you need to know about SRS when you are 40 and older. Personally, I believe that SRS may be suitable for someone who is 40 years old and above.

This is because it is likely that your income is more than $80,000. There will be great substantial tax savings. Plus, we might need liquidity for housing/renovation/marriage/children purposes before that. This will post an liquidity issue. Someone 40 and above might fit into such a category.

In the “best case scenario”, you will be withdrawing $40,000 per year and that income will be tax-free (assuming you are not working).

Please read the above post to learn more about the details.

 

The $1 SRS Strategy

This strategy is the most important strategy of all. This is because we need to first start!

Yes. Most goals failed because they have not even started. Think about it, did you “renew” your 2019 new year’s resolution in 2020 because you didn’t accomplished it in 2019? It need not be a financial goal. What about your fitness goal? What about your learning goal? If this seems like the case, you have the opportunity to change now. By doing so today, you will shave off up to 3 years of your retirement age. If that is not enough, all it takes is $1.

How is that possible? Let’s gather a few facts.

You can make penalty free withdrawals from your SRS on or after the statutory retirement age (currently at 62) that was prevailing at the time of your first SRS contribution. In 2019 National Rally Speech, PM had announced the retirement age to be raised to 63 in 2022 and 65 in 2030.

This will mean that if you still refuse to open your SRS account by 2022, your penalty free withdrawal will increase by 1 year. If you still refuse to open your SRS account by 2030, your penalty free withdrawal increase by 3 years.

The minimum that you can contribute is a grand total of $1. If you are above 18, all you need is to contribute $1 to “lock in” your retirement age to be 62.

The $1 SRS Strategy Retirement Age

The $1 SRS Strategy Retirement Age

 

Your 1 Minute Opening Guide

You no longer need to go to the physical bank branch to open up your SRS account anymore. All it takes is 1 minute.

This is the way I do it. My personal SRS account is with DBS (for convenience sake). You can also open your SRS account with OCBC or UOB. It is only 2 steps, click click and you will have an SRS account. If you are unsure how much to contribute, you can always contribute $1 to your SRS account first to “lock in” your retirement age.

The $1 SRS Strategy DBS

The $1 SRS Strategy DBS

This guide serves to let you under how $1 can lock in your statutory retirement age. In fact, do it now! Log into your DBS/OCBC/UOB internet account and do it now!

 

What can you do with your SRS account?

By popular demand on my Telegram group, I’m currently writing on how to invest using your SRS account now. If you have any questions that you want to be addressed in that article, do drop me a comment and I will include that in the article.

Otherwise, this is one question that is commonly asked: 3 things you need to know about SRS if you plan to leave Singapore. This is for people who wants to live in another country during retirement.

 

Final thoughts by Wealthdojo

We wish you the very best in your 2020 goals. Otherwise, we hope that this will be your first financial milestone.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees

3 Brutal Truths about Investment Linked Policy You Wish You Knew

Investment Linked Policies or ILPs have been an ideal target to be bashed by many personal finance groups and investment gurus. In your wealth management journey, perhaps an agent might have ethically (common assumption used by those groups/gurus) told you or sold you an ILP before. Hence, you might start to think whether the ILP does make sense for you.

These Groups/Gurus’ bottom line: Cancel Your ILPs. The fees are expensive. Buy term, invest the rest. You can get better investment returns.

Wealthdojo’s bottom line: ILP is suitable if you are looking for a booster in coverage for a short period of time and plan to accumulate shares/units in a systematic way. You have a more passive approach to investment. An ILP works ideally when you are younger.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Confused

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Confused

So what now? Disclaimer aside, I hope to share with you 3 brutal truths on ILP and the current narration on ILP in the market.

 

Short Recap

Investment Linked Plans are policies that have life insurance coverage and investment components. Your premiums are used to pay for units in one or more sub-funds of your choice. Some of the units purchased are then sold to pay for insurance and other charges, while the rest remain invested. (Moneysense Definition)

In a layman structure, it looks like this.

Pay Premium > Buy units of the funds at today’s price > Some units are sold to pay for insurance > Wait for next month premium

The units accumulates every month via dollar cost averaging and will build up substantially in a long run. Let’s go on to the brutal truths for ILP.

 

Truth #1: You will pay fees.

This reminds me of a story of a man buying cake for his son’s birthday. After looking at various cakes, his eyes soon fell on a 7-inch strawberry fresh cream cake that stood at the center of the display. This shop is famous for their fresh cream and his son loves fresh cream.

Man: “This cake looks beautiful. How much is this cake?”

Baker: “It costs $97 sir”

Man started to be agitated: “That’s ridiculous. It is just a bunch of strawberries, flour, eggs and sugar. This is a rip-off!”

Baker said calmly: “Sir. You are right. Therefore, we have something just for you”

The baker brought him to the corner and showed him a bunch of strawberries, flour, eggs and sugar and said: “Those will be $13”

Man: “I don’t understand. What do I do with a bunch of strawberries, flour, eggs and sugar?”

Baker: “Well, that’s what we are paid to do.”

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees: Source

The simple truth is that there will be fees. When you enroll into an ILP, you are paying for insurance, you are paying for wealth management and miscellaneous administrative fees which includes commission for the consultant. You are paying to enroll to a service which consist of insurance protection and investment accumulation.

The narration in the market is that an ILP’s charges are expensive and expensive is a subjective word. Perhaps, it is better to put things side by side with insurance and investment.

Let’s take a look at insurance. I will be comparing our National Insurance Dependent Protection Scheme (DPS), as compared to XXX company’s ILP charges per age band (I personally believe the charges are very similar across companies). We will compare using a basis of $46,000 sum assured for Death and Total Permanent Disability (TPD).

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Insurance Charges

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Insurance Charges

As you can see, the charges for XXX’s company is lower than DPS for all ages except for 55 to 59. This shows that rates are quite competitive. As you become older, you pay more for insurance as the chances of you suffering from Death and TPD increases.

You can also see an element of the popular advice buy term invest the rest here. On an ILP, we contribute a premium monthly. Part of it is used to pay insurance. In the table, we pay for the required insurance charges at that age and the rest goes into investment. If you add on other unit deducting riders like critical illness and early critical illness, you should pay more premium so that you won’t have too little going into investment.

Note: DPS is due for a change and there could be a chance the insurance companies might follow as well.

 

Let’s talk about investment now. As the strategy for an ILP is mostly passive, it might not be a fair comparison to other investment methods that might be more active. I will give an attempt to compare the fees across various personalities.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Investment Charges

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Investment Charges

The current narrative from investment gurus are that the ILP has high upfront charges of up to 50% of the premium. It is the same for investment courses as well. They do charge a high upfront course fee of around $3000 to $5000. Furthermore, I assume there are no other upsell programs after that.

Another common narrative is that the 1.25% p.a. fund management fee will reduce the investment returns in the long run. This is a true statement as any expenses will reduce your investment returns. Recently, investment courses are also changing to provide continuous support at a fee of $49 to $197 per month. This is akin to having a “fund management fee”.

For those that are self taught investors, he/she might have save on the cost. However, I can only imagine how huge the time commitment he/she dedicated into learning how to invest. One can say to invest in a passive S&P500 index fund with low expense ratio. Then again, how long will you take to reach this decision? How many mistakes might this person make before doing that?

Fees will have to be paid. It is just a matter of to who and how.

Side note: It may not be fair to compare anyway. An investment course does not have insurance coverage. Similarly, an ILP is not an active strategy as compared to some investment courses. The lessons you learn from investment courses are also priceless.

 

Truth #2: If you pay peanuts, you will get peanuts.

Whether it is an ILP, endowment or ETF, if you pay peanuts, you will get peanuts.

This is rather straightforward. I know some people who may have unrealistic expectations on the money they are saving or investing. A $100/month policy or a $100/month ETF is not going to buy you your financial freedom. If you invest $100/month for 30 years with an 10%, you will get $197,392 which is decent but definitely not enough for retirement.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Invest Small

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Invest Small

This year, I presented a few maturity cheques varying from $15,000 to $60,000 to some of my clients. I excitedly told one of my clients that his maturity cheque is coming in August 2020 and told him to look out for it. He took me out for coffee and asked me how much he was getting. After checking my portal, I told him the amount was $22,000.

He took a sip and exclaimed “Why only $22,000? I has been paying for 25 years.”

“Uncle, you were saving $50/month. In total, you saved $15,000. Personally, I think this is a decent return.”

A short while later. He confessed that he should have saved much more when he was younger.

Imagine there is an investment that can give you 100% returns. If you invest $100 in it, the maximum you will get back is $100. $100 in absolute is not a lot. Therefore, it is very important for us to save up our first pot of gold or simply increase the amount of regular contributions every month.

 

Truth #3: Not everyone you meet will be interested in investing

Sometimes, we forget that we look at others with our tinted lens. We tend to judge a decision and call foul when it is a decision that is not consistent to our own belief. In a recent viral article, a young couple in their 30s paid off their $470K HDB loans in 2 years.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Opinions

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Opinions

This is a feat that is not easy to many. However, this sparked off a huge debate on many personal finance groups saying how financial “Illiterate” they are. They could have made use of the low interest environment to pay off their loans and use the money to invest in other things.

First, I would like to congratulate them. They are debt-free and it is something money *ahem* can buy. If their objective in life is to live a life that is debt free, they are already successful.

Not everyone you meet will be interested in investing or willing to spend loads of time to look into investment. Therefore, the ILP gives a simple disciplined dollar-cost-averaging strategy to accumulate the units of the recommended portfolio funds.

If you are a disciplined investor, feel free to buy term and invest the rest. Please do not expect everyone else to think like you.

 

Final thoughts by Wealthdojo

I’m not advocating ILPs. At the end of the day, the ILP is a wealth accumulation and insurance tool that can fit into a certain profile of individuals. It may be suitable for certain groups of individuals. Personally, I feel that the narration of the ILP has been viewed with tinted lens. Those people are right in their own aspects and life stages.

If you are unsure if the ILP is still suitable for you, please feel free to write in to me. I would love to help you understand it together.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.