Friday, August 22, 2014

I Love Using Credit Cards (Revision 03)

Revision 03 (last paragraph): updated on August 28, 2014
Revision 02: updated on August 23, 2014

I am a big fan of credit cards. I once owned more than 20 credit cards but I have canceled some (due to zero chance of using them) and I still have about 15 credit cards with me. I get annoyed when there are so many articles, interviews, saying they hate using credit cards. They claimed it is bad to use future money. Credit is dangerous, etc. I have no clue what are they talking about, obviously nonsense.

Last Sunday "Me and My Money" article, this guy said he spent about S$4,000 to S$5,000 per month and he did not use credit cards. Oh dear, what a waste for a big spender like him. I will make sure every single cents go into my credit card expenses if they accept credit card. Let me share with you, what are credit cards mean to me.

 

Singapore credit cards are all free, unlike Malaysia credit cards, you have to pay RM 100 to use the second credit card. It is like a compulsary credit card fees. If you were in Malaysia, I would suggest you to minimize the quantity of your credit cards. In Singapore, banks reward you to sign up for credit card. Of course, it is not the FREE luggage that attract me to sign up for the credit cards although I have MANY free luggages from the banks. In good days, they even pay you FREE cash to sign up for credit cards. Maybank Singapore gave SGD100 free cash upon application, Standard Chartered and UOB gave SGD80 free cash upon application, etc.

Credit card is extremely good if one can control the expenses. There are people who have no control over their expenses, they just use credit card to "defer their payments". In that case, you better stop using it. Although Singapore credit cards impose annual fees charges (usually after second or third year of usage), what you need to do is to dial their 1800 toll-free number to request to waive the annual fees. My requests to waive the annual fees were 100% approved for the past 11 years in Singapore. There is no problem to waive the annual fees at all. One disadvantage to own too many credit cards is you can forget to make the payment. I did have 3 encounters of late payment and I was charged the late payment fees with interest! Thanks goodness, I got all of them waived. I was shocked that they waived the late payment charges too! I now make sure I remember to pay the bills. In short, I DO NOT pay annual fees or late payment fees for any Singapore credit cards, NEVER!

For frequent traveler, it is extremely good to own a right credit card especially if that is a business trip. I make sure all the charges are transacted with credit cards. The oversea hotel charges help me to accumulate spending really fast within a month. I wish I can use my credit card to pay for the business trip airfare! I love my current job and I have the privilege to choose to travel at least once in a month or not to travel at all if I don't feel like to.

As for now, the best Singapore credit card (for me) is UOB Signature VISA card. It gives 5% oversea cash reward! I use it all the time for my business trip until it reaches the cap of S$2,000 per month. Then, I will stop using it and use my second best Singapore credit card, UOB One card. It has quarterly cash reward up to 3.3% and additional 2% oversea spent cash reward up to S$5,000 per calendar year (S$100 cash rebate a year).

You just need to make sure all the tricks that the banks require. It is not difficult to meet the criteria.

UOB Signature VISA card: All oversea transaction must be made in local currency, not Singapore dollars. For example, if you swipe the card in Malaysia, make sure the transaction is in Ringgit and not Singapore Dollars. The monthly minimum foreign transaction must be at least S$1,000 in order to enjoy the 5% cash reward. The maximum cash reward they give you is 5% of S$2,000 per month, which means, you get FREE cash S$100 per month from UOB. I get this free cash all the time. Really damn shiok!

If you have a lot of oversea transactions (e.g. more than S$4,000), I recommend you to ask your spouse to apply for UOB Signature VISA card and you get the supplementary card from him/her and you swipe the supplementary card as well up to S$2,000 per month, you can get FREE cash of S$200 per month. :) You have two UOB Signature VISA card (one primary and one supplementary card). Shiok?

UOB One card: All you need to know is you need to make MINIMUM 3 transaction per month, and CONSISTENTLY for 3 months for more than S$300 spents, then you will be rewarded S$30 cash in quarterly basis. Of course they have higher tier of S$800 and S$1,500 per month (cash reward of S$80 and S$150 in quarterly basis). In additon, you get 2% oversea spent cash reward up to S$100 per year (cap at total S$5,000 oversea spent per calendar year). Maybank recently launched a similar credit card, or I would say exactly the same feature as UOB One card, totally the same cash rebate percentage (3.3%) with NO MINIMUM transaction required per month. That can be a good alternative but I have too many credit cards, ha ha.. I do not have that Maybank credit card. I am thinking to get one.

I have a habit to put all my travel photos, expenses claim report nicely in one folder for each business trip and I just realized I had 48x business trips for the past 4 years (almost once per month), that exclude my personal vacation trips. :)


Beside the best two credit cards (both from UOB bank) I mention above, I also use the following Singapore credit cards very often.

(1) Citibank Dividend Card. It is because of 10% cash reward of Starbucks. In every business trip, I enjoy my breakfast and tea break at Starbucks at Changi airport. That is why I don't go to Starbucks elsewhere in Singapore (sianz liao la ! ). Ha ha. Citibank had great GSS promotion in year 2013 May, June and July for 3 months. They as well gave 5% cash reward for oversea spent, with minimum spent of S$1,200 per month up to S$2,000 spent per month. Same great deal as UOB Signature VISA card. This dividend card gives 0.5% cash rebate for all spent but Citibank rewards you only when the cash rebate amount accumulated to S$50. Take note on this. Many people do not aware of this. It is like you have to spent a total of S$10,000 in order to get your cash rebate of S$50. But my savings in Starbucks (10% cash rebate) easily more than S$50 by now. 

(2) POSB Everyday Card. I use it for 20.9% discount on SPC fuel (bundle with the SPC member card). This is the highest fuel rebate in Singapore, of course I take it. I also use this card for my SP Power utilities bill payment through GIRO to enjoy 1% cash rebate. I pay HDB car park monthly fees using this card as well to enjoy 1% cash rebate (used to be 3% cash rebate! ). That's all the Everyday card for.

(3) OCBC Robinsons Card. I love Robinsons store. I am very happy that they now have Robionsons store at JEM, Jurong East, just a stone throw from my house! I love their in-store purchase cash rebate, member private sale events, etc. That is why I have the card and I don't need to go to Orchard anymore. Woo hoo !

(4) OCBC 365 Card. They give 6%  and 3% cash rebate when you dine locally on weekend and weekday (oversea dining too). There are some rules and I have yet to strategize and materialize the benefits. I have the card but I need to do some homework in order to hit the minimum spent of S$600 per month. I will share more next time about this card if I manage to reap the benefits.

Many of the time when my oversea spent at UOB Signature card is accumulated to say S$800 only, that's this month, August, example shown below (S$200 more in order to hit the minimum spent of S$1,000 per month), I will just make a visit to AEON at Bukit Indah, Nusajaya, Johor to have shopping spree on milk powders (biggest saving!), diapers, petrol, etc. (NOT FACIAL, FOOT MASSAGE or FREE LAUNDRY? NO, THANK YOU.) That easily helps me to have the minimum spent of S$1,000 and I get all the 5% cash reward. Hey, it is 50% cheaper for the milk powder in Malaysia too!

You do not need to make multiple trips into Johor (who ask you to pay custom fees, VEP all the time?). You just need to make ONE TRIP and get enough inventory for 10 months supply. Why not? The baby milk powder expiry date usually last for 2 years and your kid will consume them all within a year. Typically for me, one Nusajaya trip helps to save at least S$500. Not bad indeed. :) 

Singapore credit cards grant me 4 digits cash reward every year.
Why don't you love using Singapore credit cards?




Refer to my blog written in May 2012 too, "Who Say Credit Card is Not Good?".


Updated on August 23, 2014
====================
Yes, 90% of my oversea spents are business trips related, hence, they are all claimable from the company. When I joined the company, they immediately issued me a corporate American Express Card. After I know I got zero benefits of owning such corporate credit card, I canceled it.

Guess what, the company is paying annual fees to issue me such corporate American Express Card and there is no reward point system at all for the corporate credit card. What is the point to own a corporate credit card then?

The only benefit of owning such corporate credit card I can think of now is you DO NOT have to pay a single cent out from your own pocket. The company will pay the credit card bills on behalf of you. Well, I do not mind to pay the credit card bills myself first and claim it from the company as my company is able to refund the expenses claim within 30 days. I am fine with that. To make it worse, in Malaysia, particularly at Penang, the merchant stores don't really like American Express card, they still prefer VISA !

So, throw away your corporate credit card and own one beautiful UOB Signature VISA card! (UOB bank should pay me referral fees from now, don't you think so?)

Updated on August 28, 2014
====================
Biggest SCAM ever!

I suddenly realized my cash reward points down to S$17 when I am making a payment for my Citibank Dividend Card. I remember clearly I have definitely more points than this. I made a phone call to Citibank and guess what? They told me the cash reward points will be expired exactly 1 year and 3 months time. WHAT? This is not mentioned anywhere! The worst thing is, Citibank only rewards you the cash reward points after you have accumulated up to S$50 (that's quite a big mark to hit !).

Surprisingly, the Citibank officer immediately told me that he can reimburse those expired points to me and it well passes S$50 this time, total 56 reward points. So, in my next billing cycle, a cash reward of S$50 will be granted. How nice is this Citibank officer? The bill statement immediately updated after I hang up the call. That is really efficiency!

For those who owns this Citibank Dividend Card, most likely you have forfeited many reward points after the 15 months expiry date. Go and check it out!


Too bad, I will NOT recommend Citibank Dividend card anymore. I will only use it for 10% Starbucks instant cash rebate (not the same as rewards points). Bye Bye , Citibank Dividend Card.


UOB bank is still the BEST!

FREE cash from UOB ONE card. :)


In short, the BEST Credit Card in Singapore is the following (my choice):

(1) UOB SIGNATURE VISA - 5% Oversea Cashback
(2) UOB ONE VISA - 3.33%  Local spent Cashback + 2% Oversea Cashback
(3) MAYBANK PLATINUM VISA - 3.33% Local spent Cashback + 3% Oversea Cashback (until Dec 2014 only)
(4) STANDARD CHARTERED MANHATTAN - up to 3% local spent Cashback.
(5) CITIBANK DIVIDEND VISA - 10% Starbucks Cashback 
(6) POSB EVERYDAY MASTERCARD - 6% SPC fuel Cashback (on top of 17% SPC U Card discount).
(7) OCBC 365 VISA - 6% local dining Cashback on weekend and 3% local dining Cashback on weekday. Oversea dining Cashback 3%. Singtel/Starhub/M1 - Cashback 3%.
(8) CIMB INFINITE VISA - 1% local spent Cashback, 2% Oversea Cashback

I used the above 8 credit cards frequently. Please refer to their individual credit card Terms and Conditions in order to enjoy such Cashback percentage stated above.

For Singapore Credit Cards, go for Cashback feature. It is the best. Do not accumulate points to redeem vouchers. It is not worth it. Cash back percentage (3 to 5%) is so much higher than than voucher redemptions (usually only 0.2 to 0.3% of your total spent amount). 

p/s: yet to explore the new CIMB SIGNATURE VISA. 

Tuesday, August 12, 2014

Moment of Truth: CPF - Having a Good Retirement Life in Singapore (Revision 12)

Revision 12 (last paragraph): updated on December 9, 2016
Revision 11: updated on August 29, 2016
Revision 10: updated on August 24, 2016
Revision 09: updated on March 20, 2015
Revision 08: updated on March 15, 2015
Revision 07: updated on March 14, 2015
Revision 06: updated on March 4, 2015
Revision 05: updated on August 28, 2014
Revision 04: updated on August 25, 2014
Revision 03: updated on August 18, 2014
Revision 02: updated on August 14, 2014

How many of you really calculate how much CPF money you can withdraw by the age of 55 ?

I do not see anyone writing a blog to demonstrate how CPF can benefit us for a good retirement life in Singapore. Many chose to complain about Singapore government without knowing the true benefits of CPF. I feel pity for them.

Let me tell you a typical scenario of Singaporean/Singapore PR of PMET (Professionals, Managers, Executives and Technicians) by the age of 34. 

You have to make some assumption. If you don't, your discussion will go "NO WHERE".

The benefit of Singaporean/Singapore PR is to have extra CPF money from your employer (16% of your monthly salary) and the cap of the monthly salary is S$5,000 per month. Meaning to say you only get maximum of S$800 extra from your employer when you have monthly salary of S$5,000 or more. Even if you earn S$1 million per month, your employer will still only give you S$800 per month max., cool ?

So, here are the assumption for the two scenario below.

Scenario 1: (by the age of 34)
(1) Monthly salary over S$5K.
(2) CPF OA contribution including 13th month bonus (Of course some have more bonuses. I only put 13th month bonus for easier calculation.)
(3) Contribution of S$7K into CPF SA every year. (CPF SA top up to enjoy tax relief) - Okay, that is just for my own benefits of calculation as I contribute S$7K into CPF SA every year now. :)
(4) I have ignored the extra 1% given to the OA and SA for the first S$60K to ease my calculation. Therefore, the final figure will be more.
(5) You have to start somewhere. So, I assume certain balances of CPF OA, SA and MA at the age of 34.
(6) Let's assume you have fully paid the HDB housing loan (OK, I have scenario 2 for servicing the housing loan).

For scenario 1, can you imagine how much cash you will receive by the age of 55, any wild guess?

The answer is a grand total of S$ 915,000 cash! Woo hoo ! (Total amount of CPF is S$1.11 million!)

Minimum Sum of RA, S$155,000 (OA and SA converted to RA by age of 55) and MA, S$43,500. So, we are complaining S$915,000 a lump sum cash by the age of 55 is not enough for retirement ? Take note by the age of 65 onwards, the governemnt will also give you S$1,200 per month until you die. Still not happy?

Of course, one can argue that by the time you reach age 55, the Minimum Sum will be increased again but I do not think it will go up tremendously. Even if they increase the Minimum Sum, you will receive more in monthly payout from age 65 onwards. So, I am still OK if they increase the Minimum Sum. I expect Minimum Sum will be around S$250,000 by the time I reach age 55 and the monthly payout at age 65 will be S$2,000 per month (by linear regression anlysis). That is my estimation.

Please take note that I only take 1 month bonus as calculation (we surely have more bonuses throughout the years) and I exclude additional 1% interest for the first S$60,000 in OA and SA, the compound effect of that 1% extra interest can be substantial ! If I have time, I will generate a separate excel spreadsheet for that 1% extra interest.

Scenario 2: (by age of 35) - (point 1 to 5 are the same)
(1) Monthly salary over S$5K.
(2) CPF OA contribution including 13th month bonus (Of course some have more bonuses. I only put 13th month bonus for easier calculation.)
(3) Contribution of S$7K into CPF SA every year. (CPF SA top up to enjoy tax relief) - Okay, that is just for my own benefits of calculation as I contribute S$7K into CPF SA every year now. :)
(4) I have ignored the extra 1% given to the OA and SA for the first S$60K to ease my calculation. Therefore, the final figure will be more.
(5) You have to start somewhere. So, I assume certain balances of CPF OA, SA and MA at the age of 34.
(6) Let's assume you own a fully paid HDB unit and you bought a new condo, TOP 3 years later and you want to wipe off OA monthly contribution to pay for the private housing loan.

Take note you have to set aside S$77,500 (combined OA and SA) first before you can start to use the CPF OA to serve your private housing loan. Again , I have to assume certain amount of balance available by the age of 35, then within 3 years, you have more than S$77,500 requirement (see example below). Therefore, you can fully wipe off your OA to serve the monthly housing loan when your condo is ready for TOP.

The example is "cut and paste" from scenario 1 and I didn't change the age to 55, so I just say age 56 for withdrawn as an example.

So, even if you now wipe off all the CPF OA for the private housing loan, by the time you want to withdraw CPF money by age of 56 (you can do it at age 55, OK?) , you still able to receive a lump sum cash of S$563K.
This is why, I am very confident that many people can still have a very good retirement life in Singapore.


Just to take note that the Minimum Sum right now is S$198,500 in total.

Are you amazed by the sum of money that you can withdraw at age of 55 ? Well, I am.

Furthermore, this is only CPF money for retirement life. We must know we have another saving vehicle for retirement planning , which is SRS (Supplementary Retirement Scheme) account. That is another good vehicle for investment and to enjoy further tax break. :)

I love both systems, CPF and SRS.



By the way, I did not exaggerate the numbers above. If you are a fresh graduate now, your starting pay (average now) is S$3,200 per month. Let's assume you have 5% pay increment every year (average). By the time you work for 10 years, you will hit the maximum CPF of 16% employer contribution, which is S$5,000 max.

Not to forget some will have bigger pay raise for the promotion (usually 10%) or job switch (usually 20% pay increment or more). You will be there.


Updated on August 14, 2014
====================
The Straits Times published an article, "CPF 'not enough' for retirement" right after I posted my entry yesterday, "CPF- Having a Good Retirement Life in Singapore".

There are some interesting points:

(1) 47% felt that their savings would not be enough and 44% felt the returns were too small. I hope they calculate the figures carefully. Of course, I cannot assume everyone in Singapore earns more than S$5,000 per month. That is why I said the above two scenarios assumption are for typical PMET. You will be surprised to know most of the people complaint about CPF are actually PMET. Hence, take care of yourself first before you talk about others.Singapore government will help those who are really in needs.

(2) 26% of investors made additional voluntary contributions to their CPF accounts. That is quite a number of people. Good job indeed.

(3) 63% of CPF memebers called for greater flexibility in withdrawing funds. This is very contracting to the next point which said 45% of investors would prefer to take a lump sum after leaving the required minimum balance in the CPF Retirement Account once they reach 55. You see the point here ? There are 55% of the people REFUSED to take all the money out from RA account after they have put aside the Minimum Sum. They have A CHOICE to take all the money out but they are not, that is 55% of the people (I will be one of them).Then, it said 63% of the CPF memebers called for greater flexibility in withdrawing funds. How flexible you want to withdraw your CPF fund? Anything extra besides the Minimum Sum, you can withdraw any amount anytime you want, that is still not flexible enough?

(4) 56% wanted government or employer contributions to be raised. Oh ! That is a good idea! Currently it is 16%, can we raise to 20%? That would be a S$1,000 per month from employer instead of S$800.

(5) "The CPF is an important element of every Singaporean's retirement plan, but it is not the only one". Yes, you have SRS account, your own stocks portfolio, fix-deposits, foregin currency fix-deposits, investment-linked funds, endowment funds, real estate property investment, rental returns and most importantly, your own saving account , right?


Updated on August 18, 2014
====================
I am surprised that PM Lee spent a lot of time during the National Day Rally 2014 yesterday to explain the CPF system clearly and carefully. I have to say he explained it very well and it is in line with my analysis that in order to have retirement monthly payout of S$2,000 per month, we need this Minimum Sum of S$250,000.

The Minimum Sum that a peson has to set aside in his CPF account will also be raised to S$161,000 for those turning 55 from July 1st next year, but, BEYOND THAT, THERE IS NO NEED FOR ANY MORE MAJOR INCREASES. It may still have to be adjusted from time to time as people are living longer and they will need more money for their retirement but the scale will not be big. I believe for 80s generation, the Minimum Sum will go up to S$250,000 in due time but it MIGHT NOT be that much after PM mentioned there will be no need for any more MAJOR increases.

CPF members now also allowed the option to take out part of their savings in a lump sum, if they need to, subject to limits- 20% at the age of 65 (not at the age of 55), for example. I think this is a responsible government act. If I am the government, I also will not let everyone just takes out all the money by the age of 55, this is dangerous, you will not get any single cents thereafter. As a responsible government, I will try to avoid giving such wild option. But, I think the option can be further revised to withdrawal of lump sum up to 50%. Take note, by withdrawing 50% (that's my example, not PM example), you only get S$600 per month at age of 65, you sure you want to do that ? I will NOT.

We must have a right mindset about CPF. I think SG governemnt can gradually increase the CPF OA interest rate say 3.5%, and SA to 5%,  especially Singapore is doing pretty well now but we should also embrace the interest rate cut back to 2.5% again if the economic hits hard to Singapore again. Fair and square. Lastly, I think Singapore government will consider to revise the CPF interest rate. :)


Updated on August 25, 2014
====================
DEFINITION:
(a) Minimum Sum (OA + SA) = S$161,000
(b) Minimum Sum (MA) = S$48,500
Many of the time we are talking about Minimum Sum of (OA + SA), do take note that there is a separate Minimum Sum for MA account. By the age of 55, (OA + SA) will be converted to RA (Retirement Account).
(c) For owners who have used or are using CPF for an existing property, they must set aside half of the prevailing CPF Minimum Sum (OA + SA) before they can use the excess savings in their Ordinary Account (OA) for the second or subsequent property. Any funds in the SA used under CPF Investment Scheme (CPFIS) will be counted towards meeting the Minimum Sum. The principle (and not market value) of CPFIS-SA funds is used in the calculation. So, the half of the prevailing CPF Minimum Sum now is S$80,500 ($161,000 divided by 2).

I had made two phone calls to CPF Call Centre: 1800-227-1188 this morning and I received crystal clear answers from the sweet lady. I should document down before I forgot! Ha ha. :)

(1) CPF SA $7K top up (tax relief) has nothing to do with Voluntary Contribution (VC).

(2) You cannnot enjoy the S$7K tax relief once your CPF hits Minimum Sum (for me, S$161,000 as for now). It means, you cannot contribute CPF SA $7K anymore.

Once we set aside, S$77,500 (OA & SA), we can use OA to buy stocks and SA to buy solid unit trust, e.g. Arcons of Asia, Singapore growth funds, STI ETF, etc.

Money invested in OA account WILL NOT be counted into Minimum Sum.
Money invested in SA account WILL BE counted into Minimum Sum.
So, if you like, you can use OA money to buy stocks and reduce your Minimum Sum and get "the rooms" to contribute SA $7K to enjoy tax relief.

(3) Mandatory contributions (MC) made within the year: Maximum amount of VC = $30,600 – MC
Typical example,  CPF contribution of $1,800 per month x 13 months (include one month bonus) = S$23,400 so, you can contribute further up to S$7.2K maximum into any CPF account per year but there is no benefit of doing so (NO TAX RELIEF) unless you just want to have higher interest rate in the CPF account. Personally, I will not do voluntary contribution here.

(4) Once your CPF MA (Medical Account) hits the cap of S$48,500, the MA monthly contribution will go into your SA account! BUT, if your SA account hits the Minimum Sum of S$161,000, then your MA monthly contribution will go into OA account. Yes, it is your SA account hitting Minimum Sum of S$161,000, not the total CPF account hitting Minimum Sum of S$161,000. Take note. Hence, it will be quite rare that you can hit S$161,000 in your SA account easily unless you are drawing many months of bonuses. The max. monthly SA contribution cap at S$299.88, you need 42 years to hit that Minimum sums (if you calculate 13 months contribution per year without SA $7K top up).

With the above information, my two excel tables are SUPER WRONG.
Scenario 1 case will hit the Minimum Sum at the age of 38.
Scenario 2 case will hit the Minimum Sum at the age of 40.
Both scenario means you are no longer allowed to contribute SA S$7K to enjoy tax relief. That is really bad indeed. Ouch!

I will revise my two examples (Scenario 1 and Scenario 2) excel tables in my revision 05 but not anytime soon. It takes some time to re-strategize now. Stay tuned !

Updated on August 28, 2014
====================

The scenario 1 & 2 are updated based on the more accurate information as follow:

(1) The different percentage of wage contribution into OA, SA and MA accounts (see table below).


(2) Minimum Sum (OA+SA) = S$161,000, once this Minimum Sum (OA+SA) is hit, the CPF SA S$7K top up will not be allowed (no more tax relief )

(3) Minimum Sum (MA) = S$48,500 , once this Minimum Sum (MA) is hit, the MA contribution will goto SA account. Once SA account hit S$161,000, then MA contribution will go to OA account.

Scenario 1: Updated table is shown below.

(a) Using the correct percentage of wage contribution into OA, SA and MA at different age stages.
(b) Minimum Sum (MA) is hit at age 37. No more MA contribution from age 38 and onwards. MA contribution will go to SA then later to OA once SA hits the S$161,000 at the age of 43.
(c) Minimum Sum (OA+SA) is hit at age 38. No more CPF SA $7K top up from age 39 and onwards.


Scenario 2: Updated table is shown below too.

Take note you actually have more money in OA to fully wipe out for housing loan payment as MA contribution will eventually go into OA account once your SA account hit the S$161,000 sum at age 45.


With more accurate calculation, this is the final cash amount you will get by the age of 55.

  
Updated on March 4, 2015
====================

 
 
 
By now, you should know the CPF salary ceiling will be raised from S$5,000 to S$6,000 on January 1st, 2016.
 
For age 35-45 group: (as I am in this age group by this year)

OA contribution - S$1,050 will increase to S$1,260
SA contribution  - S$350    will increase to S$420
MA contribution - S$450    will increase to S$540

So, the total contribution of CPF will increase by S$370.

Out from this S$370, S$170 is from your boss (employer).

So, you can proudly say because of this CPF ceiling increased to S$6,000, you have a pay increment of S$170 per month !

Assuming you have at least one month bonus (AWS):
13 months x S$170 = S$2,210.

You have S$2,210 more from your employer per year!

With the extra money from your boss in your CPF, earning fat interest, by the time you turn age 65, these amount will balloon to a handsome S$100,000 (with compound interest). Can you believe it?

You may visit the nice blog below:
 
I made a call to CPF officer today to check on CPF partial withdrawal after we hit the age 55.

If we do not want to withdraw all the money by the age 55, after putting aside the Minimum Sum ( I still love Minimum Sum term even though they now scrap the MS term), you can do partial withdrawal by using the same form RSD55.

Please take note, CPF only encourages you to do such partial withdraw up to 2-3 times per year. If you need more withdrawal in a year, they will look into the cases. They can't expect you to withdraw the money frequently like drawing money from the ATM machine.

It is a bit strange for me but it is OKAY. Take note, any excess in RA account will continue to earn the FAT 4% interest rate (in fact, this year the first S$30K in RA enjoys 6% interest rate!). I don't see a reason why we want to withdraw money from CPF instead of POSB Saving Account that give you a mere 0.5%.

Even if you need to do so, just do a larger amount withdrawal, say S$30K, ONE time per year. :)

Updated on March 14, 2015
====================
 
After 10 days of my last revision, I finally have time to update the entire worksheet for the CPF salary ceiling increment from S$5,000 to S$6,000.
 
Besides, I also update the right percentage of CPF contribution based on the NEW CPF contribution and allocation rates table published at The Straits Times on February 24, 2015.There are many changes on the contribution rates as well as the percentage of the CPF going into OA , SA and MA respective accounts if you compare to my previous table.
 
The LATEST CPF Contribution and Allocation Rates Table

 
The Straits Times @ February 24, 2015
 
Key differences are: both scenario 1 and scenario 2 will hit the MA Minimum Sum and (OA+SA) Minimum Sum one year earlier due to the higher CPF contribution. That indirectly reduce one year opportunity to do the CPF SA top up of S$7,000 to enjoy the income tax relief. That is bad.
 
At the end of the analysis, you can see both scenario 1 and scenario 2 have a huge 27% increase at the CPF CASH withdrawn amount by the age of 55.
 
With the new rules, you are able to bring home a CASH of S$911,937 by the age of 55.That is a S$193,244 more compared to the old rules. These numbers will be realistically even more because I exclude the extra 1% interest given in the first S$60,000 in the (OA+SA) account. Imagine the absence of 1% compound interest for 20 years. :)
 
Anyway, the CPF rule changes are MASSIVE to the end results.
 
But again, there is another new rule: Medisave Minimum Sum S$43,500 requirement will be removed and it will be replaced by Basic Healthcare Sum (BHS) of S$49,800. Once we have better clarity on this new rule, I shall update the blog accordingly again.
 
 
Scenario 1

 Scenario 2

 
Updated on March 15, 2015
====================
 
Okay, curiosity kills the cat.
 
I always exclude the extra 1% interest given in the first S$60,000 in the (OA+SA) combined account at all my above calculations.
 
OA account capped at S$20,000 and (OA+SA) account capped at S$60,000.
 
So, the 1% compounded interest for the first S$60,000 in CPF for 20 years is S$13,943
 
You can just add this extra amount of S$13,943 at the above grand total. That would be it for the extra 1% interest earned. :)
 
For those who have an idea to transfer OA money into SA account to enjoy extra 1.5% interest, please do take note that the amount in your SA account must not exceed the current CPF Minimum Sum (S$161,000) after the transfer.
 
So, if your SA account has reached S$161,000, you are not able to transfer OA money to SA account.
 
 
Extra 1% interest given to the first S$60,000 in CPF
 
 
Updated on March 20, 2015
====================
 
Let's talk about Minimum Sum.
 
From year 2003 to year 2015, the Minimum Sum had climbed pretty wild from 5.6% up high to 10.4%! Only recently , the increment is below 4%, which is 3.9% to be exact and now the Minimum Sum stood still at S$161,000.
 
 
 
The Government has accepted CPF panel's recommendation by raising the Minimum Sum by 3% per year. See the reply below by Ministry of Manpower.
 
 
 
20 years later when I hit age 55, the Minimum Sum will become S$290,000.
Interestingly, 52 years later, my kid will need to meet a Minimum Sum of S$750,000.
 
It is a big shock to find out the large Minimum Sum required in the future, especially the S$750,000 Minimum Sum for my kid generation.
 
The table below is generated based on 3% increment on Minimum Sum. I would think this Minimum Sum somehow shall stop climbing or climb at even slower pace. Don't you think so ? I simply cannot imagine if the increment is beyond 3% like the past 10 years. The final figure might able to choke a donkey.
 
 
Updated on August 24, 2016
=====================

The Straits Times has a nice article about CPF lately on how one strategizes to increase CPF by S$1 million at the age of 65. It prompted me to simulate the cash payout at age 65 instead of age 55.


They also talk about transferring the OA to SA to enjoy 4% interest instead of 2.5% interest.


This is the simulation table until age 65. (Scenario 1)


And if you wipe off OA for property monthly mortgage payment , the simulation table will be the following. (Scenario 2).


It is good to realize the big difference by delaying the cash withdrawal from age 55 to age 65. You can have S$1,530,000 by the age of 65 instead of S$911,000 by the age of 55. With 10 years delay of withdrawal, the compound interest has a difference of S$619,000. We all should wait for another 10 years to withdraw the cash in the CPF, it is worthwhile to wait!



Of course, the above simulation is based on current Minimum Sum. We shall expect 3% rise each year on both Minimum Sum of (OA+SA) and MA.


Also, I now started to transfer the OA to SA to enjoy 4% interest. I have done my first OA to SA transfer in August 2016. I transferred S$20,000 from OA to SA to enjoy higher interest.


For my curiosity, I just simulate the OA transfer to SA from age 38 to age 65, the final amount difference is only by S$80,000. That is not very encouraging actually. Take note, my strategy now is to just keep S$20,000 in OA, because the first S$20,000 in the OA will enjoy additional 1% on top of 2.5%, that work out to be 3.50%, so it is close to SA 4.0%, so, you don't really need to wipe off OA to S$0 to SA just to enjoy a mere 0.50% difference.

Below information are from CPF website. It seems like CPF has finalized the figures for Full Retirement Sum (FRS) from year 2017 to year 2020. That is indeed about 3%+ increase per year. For example, by the year 2020, the FRS is S$181,000 .


Updated on August 29, 2016
=====================
Many good articles about CPF again on The Sunday Times. Below is one good example.


It is a good reminder that our Retirement Account will enjoy interest of 6%, 5% and 4%.


For my curiosity, I want to find out the magic age number for the "breakeven".

If you stick to the Full Retirement Sum (FRS) of S$161,000, monthly payout of S$1,250, then, by the age of 82, you are drawing more monies than you have put in. The magic age is 82.

(1) First of all, Retirement Account (RA) is created when you reach age 55. I will choose FRS, transferring (OA+SA) of S$161,000 into RA account. In the RA account, the first S$30,000 will enjoy 6% interest, then the next S$30,000 will enjoy 5% interest, the remaining balance will be enjoying 4% interest. So the table below, simulate the total interest of 6%, 5% and 4% from age 56 until age 65. Your Retirement Account (RA) shall have a balance of S$249,125.

(2) Then, government starts to give you S$1,250 per month (S$15,000 per year). Of course, the remaining balance will continue to enjoy the interest of 6%, 5% and 4% in the RA account until you deplete the  monies in RA at the age of 82.

(3) In other words, if you die before age of 82, there shall be bequest for your loved one.

Age 82. Interesting. :)
 

Should you choose Life Basic or Life Standard ?
The answer is : Life Basic is value for money.
Here is why.

First of all, you log in to the CPF website for the CPF LIFE Payout Estimator. You key in the S$161,000 into the Retirement Account. Below are the breakdown and the bequest values.





 

The table below shows the LIFE Standard payout at S$1,250 per month.
Based on my calculation, at the age of 65, the RA account shall have S$249,125.
But the bequest at age 65 shows only S$192,775. A shortfall of S$56,350.

RA account will have S$99,125 at the age of 75 but the bequest at age 75 only S$42,870.


The table below shows the LIFE Basic payout at S$1,137 per month. Only S$113 lesser than S$1,250 per month in Life Standard payout.

Based on my calculation, at the age of 65, the RA account shall have S$249,125.
The bequest at age 65 shows S$231,176. A short fall of S$17,949.

RA account will have S$112,685 at the age of 75 and the bequest at age 75 shows S$167,622.

Most importantly, by the age of 84, you already took out all the monies in the RA but the bequest at age 85 still have S$76,225.

Is that possible ?

 
 
Updated on December 6, 2016
======================
 
I had transferred OA savings to SA account for a few times and I made a large decision today.
I had finally transferred all the money in OA to SA account.
 
Wiping off OA to S$0 balance.
 
 
Mission accomplished.
 
The first S$60,000 in SA account will enjoy 5% interest.
The remaining balances in SA account will enjoy 4% interest.
 
So I will let the money in SA account to roll for the next 19 years to age 55, witnessing the power of compound interest.
 
I also hit one milestone this year. Medisave Account (MA)ceiling of S$49,800 was hit. Subsequent MA monthly contribution will flow directly into SA account.
 
 
I had utilized CPF OA money of S$103,552.04 for my HDB private housing loan payment.
 
If I sell the HDB today for example, I have to return this same CPF OA amount of S$103,552.04 back to my OA account + the accrued interest of S$13,145.54.
 
It also means if you have not used this amount of money, you would have earned this CPF OA interest (2.5%) of S$13,145.54 by putting the money in the CPF OA account.
 
I as well had utilized CPF OA money for stocks and gold investment. I have since sold Ezion, Gold US$ ETF with profits. I now hold SembCorp Marine and FJ Benjamin only, 2 counters under my CPF OA Investment. I intend to keep this until age 55 and see how's their returns versus the SA account of 4% compound interest. :)
 
My next strategy would be transferring OA monthly contribution directly to SA account in monthly manner too.
 

PERSONAL MONEY - AUGUST 2014

Hee... Hee... Hee..   I won a 3 days 2 nights hotel stay (worth RM2,200++) at Bukit Bintang.... :)