3 things you need to know about SRS if you plan to leave Singapore

3 things you need to know about SRS if you plan to leave Singapore

It is the Supplementary Retirement Scheme (SRS) contribution season. If you are 40 and above, do check out my previous post on the 5 things you need to know about SRS. Interestingly, someone emailed me on my 6 Level Wealth Karate System Page to ask about what will happen to their SRS account if they leave Singapore.

In this article, we will talk about 3 potential scenarios (i) if you are a foreigner and continue to stay in Singapore (you should!) (ii) if you are a foreigner but decide to leave Singapore (iii) if you are local and intend to retire in overseas (Thailand, Phuket, you name it).

3 things you need to know about SRS if you plan to leave Singapore

3 things you need to know about SRS if you plan to leave Singapore: Don’t leave =(

I’m a Singaporean and proud to be one. Singapore is a wonderful country. You should not leave =). Unfortunately, I do meet people who love Singapore but have no choice but to leave because they were asked to relocate to another country. Anyway, let’s set the context for the SRS. Most people will probably be concerned if it is worth it to contribute to their SRS when long term stay in Singapore is not confirm. We will touching on that.

I would also need to point out the withdrawal tax concession and the 5% early withdrawal penalty.

 

SRS Early Withdrawal Penalty (Local and Foreigner)

Withdrawal after retirement age (current age 62): You can start making penalty-free withdrawal from your SRS account. You will only be taxed 50% of the amount you withdraw for the calendar year.

Withdrawal before retirement age (current age 62): Although you can make withdrawal from your SRS account at any time that you want, you will be subjected to a penalty of 5% of the amount withdrawn. In addition, the full amount withdrawn will also be subject to income tax.

There are other special circumstances which we will not be going into detail (Death/Medical Grounds/Bankrupt)

 

SRS Additional Withdrawal Criteria (Foreigner)

As a foreigner, you can withdraw your SRS monies without the 5% penalty if you meet the following criteria:

(i) a foreigner for a continuous period of at least 10 years preceding the date of withdrawal.
(ii) one lump sum after maintaining your SRS account for at least 10 years from the date of your first contribution.

For such withdrawal, you will be taxed 50% of the withdrawal amount.

After understanding the above criteria, let’s consider a the few scenario that might happen to you.

 

Case #1: Foreigner and continue to stay in Singapore

James is a foreigner who is staying in Singapore for many years. When I first met James, he told me that he really love Singapore. He likes the sunny weather, he likes the hawker food (his favourite is chicken rice) and also a father of 2 beautiful young children.

He has an intention to stay in Singapore to raise his family.

James contributes to his SRS account every year. This is because as a foreigner, he does not have CPF contribution. By contributing to the SRS, he is able to reduce his taxable income, save on taxes and also save for retirement.

James is 45 this year and he is plan to contribute the full $35,700 into his SRS every year. He makes around $160,000 a year. Assuming no other personal tax deduction.

Without SRS: James pays $13,950 of taxes that year.

With SRS: James pays $8,595 of taxes that year. (His chargeable income is $160,000 – $35,700)

In total, he saves $5,355 worth of taxes that year. He also saves $35,7000 in his SRS which he can use to invest for his retirement.

In 10 years time, he save a total of $53,550 worth of taxes. At the same time, he would have accumulated nearly $481,462 if he decides to invest his monies in his SRS assuming it grows at 4%. He can decide if he wants to withdraw the lump sum.

If he does so, he have to pay 50% taxes on withdrawal amount. Let’s assume he does not have any income that year. He will be taxed on $241,000 (50% of $481,462). He pays a tax of $28,945. He saves about $24,605 ($53,550-$28,945) if he contributes to SRS. In this case, he benefits from this.

However, James may not want to do this at all. At age 55, he is still young and most likely have a good income, saving or investment to depend on if he does proper wealth management. James is a happy man.

3 things you need to know about SRS if you plan to leave Singapore happy family

3 things you need to know about SRS if you plan to leave Singapore happy family

 

Case #2: Foreigner and decides to leave Singapore

In an unfortunate case where you have to leave Singapore, there are some strategies that you might want to consider for the SRS. I met Lucy a few years back. Lucy has been in Singapore for 3 years now but have not contributed to her SRS. She’s working in an MNC in Singapore and earns around $160,000. She fears that the economic downturn will affect her job opportunities in Singapore and asked to be returned to her country. This has been escalated due to COVID-19. Similarly, if she contributes $35,700 to her SRS, these are her numbers.

Without SRS: Lucy pays $13,950 of taxes that year.

With SRS: Lucy pays $8,595 of taxes that year. (Her chargeable income is $160,000 – $35,700)

In total, she saves $5,355 worth of taxes that year. She also saves $35,7000 in her SRS which she can use to invest for her retirement.

What if Lucy were to leave Singapore? Her fears are valid. It would mean that $35,700 would be stuck in her SRS. What if she leaves Singapore AND really needs the money? In this unfortunate situation, she will have to pay a 5% penalty and also be taxed on 100% of the withdrawal amount. This can be avoided if Lucy plans using the 6 Level Wealth Karate System.

Ideally, she can wait for 10 years from her first contribution to avoid the penalty and be taxed on 50% of the lump sum.

3 things you need to know about SRS if you plan to leave Singapore Sad Woman

3 things you need to know about SRS if you plan to leave Singapore: I don’t want to go

 

Case #3: Local but wants to retire overseas

This has been a dream of many Singaporeans. Andrew has been working in Singapore all his life and contributes to his SRS account regularly. He has been telling his colleagues about his retirement which is happening in a few years time. He dreams that he will be able to retire in Thailand. He enjoys Thai food a lot and can’t wake to wake up on the beach of Phuket every day for the rest of his life.

3 things you need to know about SRS if you plan to leave Singapore Phuket

3 things you need to know about SRS if you plan to leave Singapore Phuket

We are in the midst of checking if SRS will be taxed differently due to the change of tax residency. We will update this article accordingly.

Update: SRS will be taxed according to tax residency and it depends on the following factors.

3 things you need to know about SRS if you plan to leave Singapore Tax Resident

3 things you need to know about SRS if you plan to leave Singapore Tax Resident

Final Thoughts

Please check in with your tax advisors for the above strategies. We also note that the rulings change from time to time so we want to be mindful about that.

Whether you are a local or a foreigner, it make sense to contribute to SRS (as discussed in the previous article). I will be talking about what to invest in using your SRS in the next article. Stay tune.

 

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.

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

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

During the end of the year, the topic of Supplementary Retirement Scheme (SRS) and Central Provident Fund (CPF) contributions will become frequently searched topics for wealth management. This is because for every additional dollar contributed, we might pay lesser in taxes. If you are 40 and older, this article is for you. We are going to talk about taxes, retirement and worse case situations.

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

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

 

#1 Quick Summary of SRS

SRS is a voluntary program started in 2001 to help individual (local and foreigners) to save more money for retirement. You are eligible for tax reliefs by contribution to SRS subjected to the cap of the personal income tax relief (currently $80,000). There is also a maximum that you can contribute to SRS (currently $15,300 for Singapore Citizens and Permanent Residents; and $35,700 for foreigners).

For example, I earn $100,000. I contribute $15,000 into my SRS. My taxable income will now be $85,000 (assuming I have not hit the cap of the personal income tax relief).

Your returns in the SRS account will be tax-free and 50% of the withdrawals from SRS are taxable at retirement.

Your contributions must be made before the 31 Dec of the year to quality (hence, the interest at the end of the year).

You can make withdrawals on or after the statutory retirement age (currently at 62) for you to enjoy penalty free withdrawals. Withdrawals are made in a 10 years window.

For investments in life annuities, the 10-year withdrawal period does not apply. So long as you continue to receive your annuity streams in perpetuity, 50% of the annual stream will be subject to tax.

A 5% penalty will be imposed for early withdrawals.

For more information about withdrawals, head over to IRAS withdrawals to understand more.

 

#2 The Best Case Scenario

The best case scenario is to have $400,000 in your SRS account at the age of 62 and you are not working by then. We assume that we will be drawing out $40,000 evenly over the next 10 years. Since 50% of the amount withdrawn will be taxable, the taxable income is $20,000 (assuming no other income). At $20,000, there is no income tax payable.

This rigid best case scenario creates a conundrum because it creates a happy problem that you have ALOT MORE than $400,000 due to excellent investment returns AND you still have a well paying job by then.

 

#3 The “Worse Case” Scenario

Suppose you are 30 year old today and contribute the maximum of $15,300 into the SRS account every year until age of 62. If your ROI is 20%, you would have $31 million in your SRS account. You would have to withdraw around $3 million yearly and be subjected to the highest income bracket.

If we manage our expectations and have a reasonable ROI of 5%, you would have $1.2 million in your SRS account. In this case, you would have to withdraw roughly $120,000 yearly. If you are still working and at the peak of your career getting a good income, you will be possibly subjected to a highest income bracket.

The “worse case” is to have really good investment skills and still be working by then. However, I feel this as a “happy” problem to have.

 

#4 What if I’m just a normal human being?

$1.2 million sounds big and you might not even be sure you will still have a job then at 62. Most of my client ask me what if they are a normal human being, how does SRS still make sense to a layman?

Firstly, we have to start with the question of contribution. How much should you make a year before SRS contributions make sense?

5 things you need to know about SRS when you are 40 and older income tax contribution

5 things you need to know about SRS when you are 40 and older: income tax contribution

SRS is a tax planning tool. Hence, it is important to know at which chargeable income bracket (after CPF contribution, tax relief) will it make sense for us to contribute to SRS.

Personally, SRS contribution will start to make sense after the $80,000 chargeable income bracket. Any other income after the $80,000 is subjected to a tax rate of 11.5%. Hence, I find it reasonable to contribute to SRS unless I can find an investment instrument that can give me 11.5% easily. Of course, there are other reasons as well.

#4.1 Tax Savings

To give an example, Amy earns $120,000 annually (after all personal tax relief).

Without SRS, she pays $7950 on taxes.

With SRS, her chargeable income becomes $104,700. She now pays $6190 on taxes.

She saves $1760. (which is a probably an extra month of family expenses)

However, in a situation where by you need liquidity for big purchases such as down-payment for a property, you might want to skip this year’s contribution. The balance of liquidity and tax saving should be taken into consideration.

#4.2 Emergency Funds

If you already have money in your SRS and have a URGENT need for cash, you can still withdrawal from SRS with a 5% penalty instead of having it locked up like the CPF. Of course, we ideally do not want to withdraw from our SRS. However, in an event of a unforeseen circumstances, the funds are still available.

 

#5 Then why after age 40?

I’m assuming that after age 40, it is likely that our income is more than $80,000. Plus, we might need liquidity for housing/renovation/marriage/children purposes before that. There is also an (irrational) fear is that if we contribute too early, we might compound it too much by then.

Hence, 40 years is ideal because there will be possible substantial tax saving, not having a liquidity issue and also closer to retirement age (lesser compounding period).

A potential solution to the “worse case” scenario is to get an annuity (but you will still be effectively taxed on half the annuity’s payouts every year).

 

#6onus How should you open a SRS account?

To open a SRS account, simply go to the 3 SRS operators (DBS/POSB, UOB & OCBC) website and you can do it online. You can register an account with any of them. There is little difference which bank you choose because you can invest in SRS approved assets from any institutions.

OCBC SRS Account

UOB SRS Account

DBS SRS Account

I suggest that you wait until the end of the year before applying. Typically, there are promotions to open a SRS account at the end of the year. On a side note, I’m don’t think there will be a promotion this year (2020) due to the COVID-19 situation. The banks have also been reducing their benefits this year.

5 things you need to know about SRS when you are 40 and older OCBC Promotion

5 things you need to know about SRS when you are 40 and older OCBC Promotion 2017

 

Final Thoughts

I believe that SRS is a great tax saving tool for you if you are 40 and above. Your contribution might save your family one month worth of household expenses. When we are younger, it is important to balance tax-saving and liquidity. Upon retirement, SRS can  provide a source of income for us in addition to possibly rental, dividends etc.

 

 

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.

The hidden cost of retirement

The Hidden Cost Of Retirement: Healthcare

Many of us look forward to retirement. It is the time when we can finally enjoy our lives and the fruits of our labor. We envision that we can use the hard-earned money that we have save and invest in our wealth management journey to spend on the finer things in life.

The hidden cost of retirement

The hidden cost of retirement: I wonder why are retirement photos all at the beach.

However, as we grow older, there is this cost that keeps creeping up. If uncareful, may derail our retirement.

(This is a joint-post together with Life Finance. Do check them out. I think the quality of their article are great. They are certainly one of the better writers out there and I’m happy that there is someone like them writing on these important topics)

 

Healthcare costs in retirement

Healthcare costs will form a significant part of retirement spending. In Life Finance previous article, he documented that healthcare costs will shoot up from a bit less than 7% of household spending for a typical household before retirement to more than 12% after retirement. This is on top of health insurance spending. This 12% of overall spending is made up of the deductibles, co-payments and other outpatient expenses tat actually comes out of the retirees’ pockets (or Medisave account).

The hidden cost of retirement healthcare cost

The hidden cost of retirement healthcare cost

The higher percentage does not mean that a retired household spends less on everything else. In fact, once household size and inflation are accounted for, retired households actually spend the same amount after retirement as they do before. Hence planning for higher healthcare costs is crucial as part of retirement planning.

 

Why does healthcare costs go up in retirement?

It is no secret that while inflation has moderated for most goods and services in the past few years with slowing economic growth, healthcare inflation has continued unabated. But the rate at it is going up is not well known. Let’s look at some data.

From the data.gov website, we can see that healthcare inflation has outpaced general inflation, in the last few years.

The hidden cost of retirement healthcare inflation

The hidden cost of retirement healthcare: Inflation

But this chart gives a relatively benign view of healthcare cost inflation, showing that it is still manageable. This is however, not true at the patient level, especially for retirees. As life expectancy increases, Singaporeans are also seeing an increase in the number of years spent in ill health to more than 10 years out of a lifespan of 84 years. This means that the corresponding bills for healthcare will increase, as hospital stays becomes longer, and procedures become more complex.

To get a better sense of the increase in healthcare costs at the patient level, we can look at the Ministry of Health’s Fee Benchmarks Committee Report from 2018. While Class A public hospital bills grew by 4.9% per year between 2007 and 2017, private hospital bills grew by 9% a year in that same period!

The hidden cost of retirement healthcare bills

The hidden cost of retirement healthcare bills

Beyond that, healthcare costs have kept increasing. Mercer in 2019 indicated that in 2018, Singapore healthcare cost inflation was 10% and the same is projected for 2019 and 2020

In addition to hospital bills and healthcare costs going up, retirees are faced with the fact that the frequency of their hospital stays will also increase. The likelihood of hospitalization in any year will go up from between 20% – 27% for retirees in their late 60’s and early 70’s, to a staggering 70% – 80% when they reach their mid 80’s, or a three-fold increase at a minimum.

The hidden cost of retirement healthcare hospitalisation episodes

The hidden cost of retirement healthcare hospitalisation episodes

A three-fold increase over 20 years corresponds to a growth rate of hospitalization of 7% per year.

Hence, to get the true rate of healthcare cost increase in the retirement years, we need to consider both:
a) The higher frequency of hospitalization and healthcare needs
b) The growing rate of healthcare inflation

Putting both these figures together:

• Retiree patients in Class A wards in public hospitals will be faced with a 12% increase in healthcare costs per year (4.9% and 7%)
• Retiree patients using Private hospitals will be faced with a 18% rise in healthcare costs on a year-on-year basis

While it is true that with healthcare insurance, such as Medishield Life or an Integrated Shield plan, much of these rising costs can be transferred to the insurer, the retiree patient is still faced with the prospect of rising co-payments and other out of pocket costs. Furthermore, rising healthcare costs will ultimately be reflected in higher insurance premiums as well, which is what we discuss next.

 

Rising healthcare insurance premiums

As healthcare cost increase as explained above, premiums from medical insurance will go up due to the risk pooling nature of insurance policies. From 2015 to 2020, Singapore’s medical insurance premium began its steep incline. The Ministry of Health has stepped in on many initiatives such as co-payment, the use of preferred doctors and also pre-authorisation to help cope the medical inflation rates in Singapore.

The Medishield Life Committee gave their recommendation in 2014 with the proposal of the upgrade from Medishield to Medishield Life. In a nutshell, it means that the scope of coverage will increase and at the same time, the premiums will increase. There were a series of government subsidies over the last 5 years to help Singaporeans cope with the rising cost of medical insurance.

As the Integrated Shield (IP) plan is made up of Medishield (Now Life) and Additional Insurance Coverage from Insurance company, this directly increase the overall premiums that consumers have to pay.

The hidden cost of retirement healthcare medishield life

The hidden cost of retirement healthcare Medishield life

To the same time, insurance companies were making underwriting loses as net claims faced by the insurers outpaced premiums earned, particularly for plans covering private hospitals. Net claims are made up of the absolute cost of healthcare and the frequency of healthcare. The absolute cost of healthcare has gone up over the years as written above. At the same time, with medical advancement, it is more common for people now to seek medical treatment as compared to the past. These has made premiums unsustainable in the long run.

Between the years 2016 and 2019, the premiums of riders and the private insurance component of IP increase on average of 24% and 10% respectively each year. These trends are largely reflective of increases in private hospital insurance claims.

The raise in questionable claims also push up the claims experience of the insurance companies. (Quoted from source almost fully to retain the meaning of the article)

In one example, A 37-year-old woman stayed seven days in hospital for abdominal hernia repair. Of the $46,000 bill, the surgeon’s share was $31,900, or five times the norm. It transpired that while in hospital, she also had her breast augmented, and a tummy tuck with the fat transferred to her buttocks, but since these are not covered by insurance, none of this was stated in the bill.

A second example is for a woman was warded for 42 days for cervical sprain and strain (or pain in the neck) but received treatment only on seven days. She was given physiotherapy and painkillers for the other 35 days, something that could have been done as outpatient treatment. The bill was $84,000.

The combination of Medishield Life premiums increase, healthcare cost inflation, frequency of healthcare and the raise of questionable claims made the previous premiums charged unsustainable. This led to an inevitable increase in medical insurance inflation and also tightening of the claim procedures in the last 5 years.

 

Cost of Hidden Cost of Retirement

Medical insurance is one cost that people don’t usually take into account during retirement. We generally assume we will be well (why will we not) and plan for our living expenses with occasional holiday or two. However, we have to bring this to you to share with you the cost of medical insurance at your age of retirement.

The hidden cost of retirement healthcare great eastern shield

The hidden cost of retirement healthcare great eastern shield

The hidden cost of retirement healthcare great eastern totalcare

The hidden cost of retirement healthcare great eastern totalcare

Taking Great Eastern medical policy as an example (Disclaimer: We are not advocating any insurance policies from any company. We are using Great Eastern as an example for premium calculation. In my experience, the premiums for the other companies should be around the same).

At age of 65, we will need to annual cash premium of $2,226 ($967+$1259) for a private hospital coverage (with 5% co-payment). This comes out to be around $185/month.

In 5 years time, at the age of 70, we will need to pay an annual cash premium of $3,234 ($1695+$1539) which comes out to be around $269/month.

If this don’t scare you, at age of 75, we will need to pay an annual cash premium of $4,685 ($2650+$2035) which comes out to be around $390/month.

In Singapore, our life expantacy is around 85, I cannot imagine how one can afford those premiums when that time happens. All this is assuming that there is no future medical inflation which does not inflate the current premiums now.

PS: If you thinking that you can self-insure and not have any insurance, I hope that I have to burst your bubble.

 

Final Thoughts

The hard truth is that healthcare cost is going to continue to increase due to the factors explained above. The first thing I get my client to plan for is their paycheck. Remember that during retirement, there is a paycheck and a playcheck. The paycheck consist of items such as healthcare cost, phone bills, utilities, basic food and beverages and so on. Usually, we allocate money from “safer” asset class  to take care of those cost because it will have to be paid at whichever market conditions.

The playcheck is the one we are more familiar with. It consist of items such as exotic holidays, a roadtrip, etc.

Whichever the paycheck or playcheck, it is part of our retirement journey.

Thank you Life Finance for your contributions. If you like this article, do comment before and leave a message for me or Life Finance.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

CPF Accrued Interest Trap Can You Downsize and Retire

CPF Accrued Interest Trap: Can You Downsize and Retire?

“My plan is to downsize my house to use the (capital appreciation) money for retirement.”

I was walking past a coffee shop and I happened to hear the above statement. The man who looked like he was in his 50s seemed to radiate confidence about his statement. I wonder if it was possible. While we are going to explore that today, do check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

CPF Accrued Interest Trap Can You Downsize and Retire

CPF Accrued Interest Trap Can You Downsize and Retire

Context Setting

To buy a home in Singapore, I would say a good majority of us will take a loan. As we are able to take up to 90% (HDB loan) or up to 75% (Bank loan) of the property prices, this means we have to put a down-payment. To illustrate, a $400,000 HDB property would require us to fork out at least $40,000 as down-payment.

To pay for this down-payment, I know most people would use their CPF-OA to pay for it. At the same time, most people will also use their CPF-OA to service their home loans.

This means that our CPF-OA might be wiped out throughout our loan bearing years.

What most people fail to recognized is that we are charged interest for using our CPF-OA, this is known as accrued interest.

 

CPF Accrued Interest

Accrued interest is the interest amount that you would have earned if your CPF savings had not been withdrawn for housing. The interest is computed on the CPF principal amount withdrawn for housing on a monthly basis (at the current CPF Ordinary Account interest rate) and compounded yearly.

(Source: How does the Board calculate the accrued interest on the amount of CPF used for my property?)

As CPF is meant for our retirement in our planning of Wealth Management, to safeguard the “loss of interest” during the years the monies are used for property, we need to refund the CPF-OA the following.

  1. The down-payment that was used
  2. The monthly installment that was used
  3. The accrued interest (interest that we would have received from our down-payment and installment if we didn’t withdraw from CPF)

 

Will the plan work? Let’s put it to the test

Let’s fixed a few reasonable assumptions to form an illustration. We will looking at downsizing from a 4 bedded HDB to a 3 bedded HDB after the loan tenure of 25 years.

HDB 4RM Value: $400,000

Down-payment: $40,000 (10%). Buyer Stamp Duty (BSD): $6600. Legal Fee: $3000.

Loan amount: $360,000. Monthly Installment: $1634. HDB Loan: 2.6%

CPF Accrued Interest Trap Can You Downsize and Retire Calculations

CPF Accrued Interest Trap Can You Downsize and Retire Calculations

In month 1, we add the down-payment, BSD, legal fee and the first monthly installment of $1634 to get $51,234. From day 1, the accrued interest would already be $106.74. In 25 years time (300 months), the total accrued interest would have already accumulated to $184,698!

Assuming the property market grows at 3% annually, your $400,000 property will now be worth $837,511. Isn’t that great? Your profited $437,511!! Before you think that your profit will be $437,511 and can be used for retirement, here is when the accrued interest trap comes in.

When you sell your house, you have to return back to your CPF the down-payment, the monthly installment and also the accrued interest. This would mean that you have to return $724,498 ($539,800 + $184,698) into the CPF. Your cash proceeds will only be $103,013.

Wait there’s more! 

Because you are downsizing, you can use your existing CPF-OA to acquire a HDB 3RM. Using time value of money, a HDB 3RM wroth $300,000 now will be worth $628,133 in 25 years time if it grows at the same 3%. You have to make sure that you have enough money to acquire that HDB 3RM.

Wait there’s even more!

You have to pay the HDB resale levy of $30,000 (as of 2020), agent fee of $8,375 (1%) and also legal cost of $3000.

Wait there’s even some more!

After the age of 55, you have to set aside your Full Retirement Sum (FRS) which is a combination of your Ordinary Account and your Special Account. This might post some problems to use your CPF-OA to acquire a HDB 3RM if you are unable to reach your Full Retirement Sum.

And lastly..

Assuming that you can acquire the HDB 3RM without problems, would $113,013 be enough for retirement?

CPF Accrued Interest Trap Can You Downsize and Retire

CPF Accrued Interest Trap Can You Downsize and Retire: Oh Damn

 

Conclusion

Retirement planning is often more than a single solution. There are many caveats that stumble the best of us. To ensure your retirement is secure, work together with someone that you trust and exhibit good expertise in this matter.

In my experience helping people plan for retirement, I realised those that retire in comfort usually have a combination of retirement tools ranging from properties, stocks, annuity and also insurance.

Thank you the uncle at the coffee shop who inspired me to write this article. Please help to share this article so that this article may find its’ way to him.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

One in 3 adults doesn't invest OCBC survey

Most Singaporeans behind on retirement plans, many unsure how to grow wealth

“Most Singaporeans behind on retirement plans, many unsure how to grow wealth: Study”

This made the headlines on the 15 July 2019 with OCBC being the one doing the financial wellness index. It also made headlines when all the insurance consultants in Singapore started to share it on Facebook as well.

From the article, Singaporeans are really good at 2 things: saving regularly and sticking to a budget. This is not a surprise as most of us grow up in an environment where saving was enforce down our throats and we were repeated told the stories of Ah-Longs if we borrow money.

One in 3 adults doesn't invest OCBC survey

One in 3 adults doesn’t invest OCBC survey

 

The more shocking fact I read is “One in 3 adults doesn’t invest”

To me, I hope that the other 2 make money from their investment. Most Singaporeans are familiar with only conventional money management habits such as saving regularly (Read more: money maximization: REV) and getting some sort of insurance coverage (Read more: Insurance for investors). The ones that are suffering are those in the Sandwich Generation (Sandwich Generation: Is it still possible to be rich?). Even if they are investing, they might not have the time and energy to invest properly.

After speaking to many people on the ground, I realised that many people’s idea of investing is to put it into fixed deposit or invest into the Singapore government bonds. While both are financial instruments in their own rights, it is not the best way to accelerate retirement.

In Wealthdojo,  we believe that it is a process to be financially free and it is our job to identify where people are stuck at in their financial journey. Some people may be stuck at budgeting while others might be stuck at getting an appropriate insurance package. However, the number 1 most important reason why people feel that they are stuck is because:

They simply don’t believe they can retire anymore.

Is Retirement Still Possible in Singapore

Is Retirement Still Possible in Singapore

I believe many are engaged in the work they do everyday, living day by day and are unable to see it pass the next month. I agree that in Singapore, it is stressful and we do work more than our counterparts in other countries. That’s why we have to do more so that can retire in Singapore.

Ms Tan Siew Lee, OCBC Bank Singapore’s head of wealth management, said that locals generally look to bank websites, financial advisers and “coffee shop talk” in gleaning knowledge about managing their money. I encourage this kind of behavior and hope that money will not be a taboo word in Singapore.

I hope to live till a time whereby Singaporeans won’t have to say “Money Not Enough”

For those that have read till here, we thank you for taking money into your own hands. We will be running our yearly seminar talking about Sandwich Generation: Is it still possible to be rich? . We hope to be the “coffee shop” where people come to talk to get knowledge about managing their money. Tickets are limited. Hope to see you then.

All the best in your financial journey.