As a Certified Financial Planner™, whenever I even mention the word “investment”, people are way too eager to ask about “stocks/equities”, “bonds”, and “funds/unit trusts”, thinking that these are the best, sure-fire way to financial security and financial freedom. But they are always surprised when I instead mentioned CPF. Although most people think CPF is a retirement tool, I’d like to think of CPF as an investment tool. What other investment is low-risk (or virtually no-risk) and has a guaranteed return of 2.5% up to 6%? What other investment is adjusted for inflation, is commission-free, is out of reach by creditors, and has an annuity payout that you cannot outlive? To learn more about CPF, please visit the CPF website. (more…)
It seems that everywhere you look, there’s some guy hosting a free seminar who’s going to divulge the latest secrets on how to pick winning stocks and other too-good-to-be-true tactics. Sometimes these talks are hosted by financial services companies like RHBInvest and Phillip Capital, or by notable experts in the field, like Mark Lin and Nicholas Tan. Other seminars are held by financial education companies, like Wealth Mentors, where much of what they teach could be found in a good book (free, from the library). As a former financial educator who was not tied to an investment company or to selling certain products (and therefore, I had absolutely no conflicts of interest), I can honestly say that for the vast majority of people, all these seminars are really “barking up the wrong tree.” These are what I found that the vast majority of people need to invest in: (more…)
I recently attended a focus group discussion on various aspects of CPF, including the minimum sum scheme, how much one needs for retirement, how much of a part should CPF play in retirement, the possibility of a partial lump sum withdrawal, and different considerations on the life annuity payouts. My discussion group was very diverse – there were people in their mid-20s, who have just started their careers, and retirees who were in their early-70s. These are my insights and take-away points from the discussion: (more…)
When Prime Minister Lee Hsien Loong listed the various ways in which a “cash poor” senior can get extra income from his/her home in retirement, he said, “It is better if you keep your property. Even if you rent out the whole flat, it does not matter, it is yours, and you can fall back on it for your old age, just in case anything happens.” I disagree, though I understand and appreciate where he’s coming from. He’s worried that many people who end up selling and cashing out their property would not be able to appropriately ration the lump sum earnings and make their windfall last throughout the remainder of their lifetime. This is why he put constraints on taking lump sum withdrawals of one’s CPF. Additionally, owning a home provides some assurance that you will have shelter, which is a basic need. But in the case of selling your own property, I believe if you are prudent with your money (perhaps you can buy an annuity with the proceeds, or just keep it liquid in an account), the option to cash out your property should be a viable consideration for seniors.
The Singapore government has the difficult task of finding the right balance between flexibility and sustainability. CPF is a prime example of how the government is trying to allow some individual flexibility while ensuring that the retirement scheme is sustainable for years to come. The CPF Minimum Sum scheme aims to provide Singaporeans with a monthly income to support a basic standard of living during their retirement. The portion of CPF that exceeds the Minimum Sum can be drawn out by age 55. Compared to other countries, the CPF is actually quite flexible. As an American under age 67 (what is considered “full retirement age” for my cohort), I cannot draw on my Social Security contributions to pay for my home; in fact, I can’t draw on them at all until age 62, the early draw age in which I’d have to pay a penalty. Even the idea that Social Security is “my money” is an almost laughable thought. (more…)
I’ve heard a lot of concerns and complaints recently about the Singapore CPF. It seems that there are three main camps of concerned people – those who think their CPF is not generating enough returns (they believe that CPF is cheating them from earning higher returns, and that they can do better if they invested the money themselves); those who believe CPF is too restrictive or confusing (they do not like the regulations and rules, particularly the ones on meeting the minimum sum), and those who flat-out think the CPF is operating like a ponzi scheme. Regardless of which camp the concerned citizens belong to, nearly all of them have one thing in common – they want access and full control over their “hard-earned money” and they want it now. (more…)
There have been many articles and blogs lately about the fairness and viability of the Singapore CPF. As a new PR to Singapore, I know that I have much more to learn and understand on this topic; in no way do I claim to be an expert in it. But I am quite familiar with the US Social Security scheme, its current status and future viability. Since one blogger in particular has compared the two retirement schemes, skewing his findings in favor of these western schemes, I would like to shed some light on some of the “heart truths” about the US Social Security system (all backed by references, of course).