Archive for category Financial Planning
Supplementary Retirement Scheme (SRS)
Posted by Stephen Mok in Financial Planning on 24/08/2010
Your Nest Egg
What is the SRS all about?
The Supplementary Retirement Scheme (SRS) was implemented by our Singapore government on 1 April 2001 (Definitely not a April Fool’s joke) to complement our Central Provident Fund (CPF) savings. Our CPF savings were meant to provide for housing and medical needs and for basic living needs after retirement. SRS contributions are voluntary and are tax deductible on the following year. Contribute in 2010, tax deductible in 2011.
Upon withdrawal of your money in SRS at the prevailing statutory retirement age, only 50% of the amount withdrawn will be taxed as income. You are allowed to spread your withdrawals over a period of up to 10 years to meet your financial needs. This will result in greater tax savings since you do not have an active income.
If you withdraw the money before retirement, 100% of the amount will be taxed PLUS a 5% penalty will be charged on the amount withdrawn. The 5% penalty will not be imposed if the withdrawal is due to death, medical grounds, bankruptcy and a full withdrawal by a foreigner who has maintained the SRS account for 10 years.
The computation of the SRS contribution cap is calculated by multiplying the SRS cntributin rate by the absolute income base. The absolute income base is 17 times of the prevailing monthly CPF cap of $4500. The SRS contribution rate for Singaporeans and Singapore Permanent Residents (SPRs) is 15% while the SRS contribution rate for foreigners is 35%. That means the maximum contribution per year is $11,475 for Singaporeans/PRs and $26,755 for foreigners.
Since 1 October 2008, employers have been allowed to make SRS contribution directly into their employees SRS accounts and deduct them as business expense.
All Singapore Permanent Residents (SPRs) and foreigners who make a withdrawal from their SRS accounts will be subject to a withholding tax on their withdrawal. The withholding tax rate is the prevailing non-resident tax rate of 20% at the point of withdrawal. There is no withholding tax on withdrawals by Singaporeans.
Please read the Supplementary Retirement Scheme Booklet 2009 for more details.
Are You Saving For Retirement?
Posted by Stephen Mok in Financial Planning on 23/08/2010
Singapore
A recent survey revealed that two in five Singaporeans are lagging behind in their retirement savings after the global financial crisis. They have suffered serious losses because of the financial crisis.
As Singaporeans are expected to live longer due to the high quality of medical aid here, we are expected to live longer than our parents after retirement. Most Singaporeans are expected to live another 20 to 30 years after the official retirement age of 62.
Just picture this… How much will you need for a basic level of living? Just the bare minimum, no frills, no luxury, no extravagance. Do you need $1000, $2000, $3000, $4000, $5000 a month? This amount is very important as it represents basic living life style, any amount less than this means you will have to compromise your standard of living. Are you or your spouse willing to lower the standard of your lifestyle when you retire?
Next, you need to find out exactly how much you need to accumulate when you retire. Based on 3% p.a. inflation, you will need double the amount in 24 years time using the rule of 72 concept.
For example, you are 38 years old now and you intend to retire at age 62. If you need $2000 a month for retirement in today’s dollar, you will need $4000 a month in 24 years time for the same standard of living. If you are expected to live for another 28 years ( till age 80 ) you will need $1.344M.
That’s a lot of money by most Singaporean standards. There are two ways to save this amount, lump sum investment plus regular savings investment.
If you have $100K to invest at 6% p.a. now, you will have about $405,000 at age 62. The shortfall of $939,000n can be achieved if you save and invest $1540 a month at 6% p.a.
This show that the earlier you start saving and investing, the lesser you need to set aside every month. If you delay your savings till you are in your forties, you will be very hard pressed to save with so much commitment with your family expenses.
Come and have a FREE no-obligatory discussion with me to find out how to achieve your financial security and success. Free consultancy for a limited time only!
Insurance Is The Foundation Of Financial Planning
Posted by Stephen Mok in Financial Planning on 20/08/2010
IPP Financial Advisers Pte Ltd
Many people mix up insurance planning as financial planning. This is partial truth only. Why? Financial Planning involves 4 areas of planning, namely wealth protection, wealth accumulation, wealth preservation and wealth disribution. As you can see now, insurance falls under the wealth protection portion.
Why is wealth protection a vital part of financial planning? A simple ananlogy is like a trapeze artiste who flys through the air without a safety net below or worse still if the net is there but with holes all over it. Imagine if the trapeze artist makes a small mistake and falls down, will the net hold him or just tears apart when he hits the net. It would be disasterous for him if the net fails on impact!
Now you get the picture… yes, insurance will cushion us financially when we need it most. As we climb the corporate ladder, build our business empires or simply earning a simple living for our families, we need this financial cushion should we “fall”.
How do we fall? 4 things that will cause us to fall are premature and unexpected death, partial disability, total disability and finally a major & critical illness that stops us from working completely. Our loved ones will suffer financially if we are the sole bread winner of the family. We will suffer financially, become a financial burden to our family and relatives if we were to become disabled due to an illness or accident.
Yes, it is true, insurance IS the foundation of all financial planning. It is of paramount importance that we get adequate insurance coverage for a complete peace of mind as we build our financial kingdom.
Revocable Nomination
Posted by Stephen Mok in Financial Planning on 18/08/2010
Insurance
Since 1st September 2009 a new Insurance Nomination law allows you to nominate who you wish to receive the proceeds from your insurance policy in the event of your death.
It is not compulsory to make a nomination, but if you choose not to, the insurance company can pay up to $150,000 of the policy proceeds to anyone who qualifies as a “proper claimant” under the Insurance Act .
For more details, please visit this website
You should call up your insurance agent to get you the forms for the nomination. One form per insurance policy. Each form has the individual insurance company logo, please don’t mix them up if you have multiple insurance company policies!
Are You Type 1 or Type 2?
Posted by Stephen Mok in Financial Planning on 16/08/2010
Type 1 or 2?
In financial planning, there are two types of people…
Type 1.
People who save first and spend the rest. They know what they want in life. They have set their financial goals clearly. They have the quiet confidence that they can spend without guilt because they have already set aside for their future financial needs.
Type 2.
People who spend first and save whatever is left. They live for the moment. They know at the back of their minds that they must save for their future needs but never got around to it. They give excuses for not saving first as they have too many bills to pay now. It is all a matter of lifestyle. It is the high lifestyle cost that is weighing them down, not the high cost of the lifestyle. Living cost in Singapore is still manageable as compared to other first world countries.
So which type of people are you in? One or Two?
May I suggest you spend sometime reflecting on your lifestyle and decide on how you are going to live your life from now on.
Have an awesome start to your work week.
FREE MEDICAL COVERAGE FOR YOUR CHILDREN
Posted by Stephen Mok in Financial Planning on 05/08/2010
Aviva MyShield & MyshieldPlus Brochure
Hospitals are not Charitable Organisations
Yes, look no further than Aviva’s medical insurance called MYSHIELD. This medical insurance policy is approved by CPF and you can use your CPF Medisave to pay for the premiums. Both parents must be covered under MyShield Plan 1 or 2. Your children will be covered under Plan 2 for FREE.
MyShield is the only integrated Shield plan in Singapore to provide free medical coverage for your children ( up to 20 years old, age next birthday )
You will be saving $109.61 per child per year for 20 years!
Who says that nothing is free in Singapore?
Please contact me if you want free coverage for your children now!
No Such Thing as High Returns, Low Risk – Straits Times 4 Aug 2010, Page A2
Posted by Stephen Mok in Financial Planning on 05/08/2010
Low Risk, High Returns???
This saga will go down in Singapore history as the largest ponzi-like scheme drawing $180 million of funds from thousands of people. It was set up in July 2006.
The article goes to teach us how to identify potential scams…
1) Beware of promises of quick gains – Just sign up and recruit others, sit back and enjoy the quick gains.
2) Know your financial scams – it happened before during the 1970s, the Gemini Chit Fund which wound up in 1972.
3) Deal with regulated providers – Ask if the company is regulated by the Monetary Authority of Singapore (MAS).
4) Check MAS’ Alert List at http://www.moneysense.gov.sg/check_our_list/Consumer_Portal_IAL.html
5) Questions to ask:
a) Is the financial product provider regulated?
b) What are the returns dependent on?
c) When will the returns be paid?
d) How long must you stay invested?
e) How can you monitor the performance of the investment?
6) Risk-Return Trade Off – If anyone offers you high returns and zero or low risk, warning bells should ring: SCAM ALERT!!!
New IPP 3D Term Insurance
Posted by Stephen Mok in Financial Planning on 09/07/2010
TM Asia Life
Our company, IPP Financial Advisers Pte Ltd has tied up with Life Insurer TM Asia Life to launch an exclusive 5 years insurance term plan called IPP 3D Term.
The premium payable is very very affordable and you will receive a 50% discount on the initial payment.
Main Product benefits
1. Death – On death, the sum assured is payable and the plan will terminate.
2. Terminal Illness – On diagnosis od terminal illness, the sum assured is payable.
3. Total & Permanent Disability (TPD) - In the event of TPD, the sum assured is payable.
4. Accelerated Dread Disease Coverage (DD) - On diagnosis of DD, the sum assured is payable.
Guide lines for the 5 years term plan
Age at entry (minimum) – 17 age next birthday
Age at entry (Maximum) – 65 age next birthday
Max expiry age – 70 years old
Minimum sum assured – $150,000
Coverage Term – 5 years
14 days free look applies – you can return the policy within 14 days after you receive the policy documents if you decided that you do not want the plan. The premiums paid less medical fees incurred in assessing the risk (if any) under the plan will be refunded.
Annual Premium for $150,000 sum assured
Age Male Female
25 $382.50 $364.50
30 $415.50 $454.50
35 $504.00 $592.50
40 $792.00 $774.00
Best of all, a very useful feature is that you can convert part or all of the plan into a whole life plan or an endowment plan up to the original sum assured amount within the 5 years, without any medical evidence. The remaining sum assured of the term plan must be at least $150,000. You may convert the plan on the premium payment due date.
This is very helpful if you are experiencing a tight cash budget now but you need the high insurance coverage.
If this fits your financial planning, please call me for an appointment soon.
Financial Planning For Young Working Adults
Posted by Stephen Mok in Financial Planning on 12/06/2010
Financial Freedom Starts Now
High up in their agenda is to spend on whatever they want! That’s the danger sign!
Most young adults when given their first pay cheques would most probably go on a buying spree. With so much cash in hand, they will be very tempted to buy that iPhone 4, buy that dream car, eat at fine dining restaurants, go for multiple holiday trips in a year. They are free to spend whatever they fancy.
They have never been taught financial planning in school and most parents are not sure how to educate their children in this area because their parents did not teach them either.
Here’s my advice for you, if you have just joined the Singapore work force.
1) Save first, then spend the balance. Not spend first and save whatever is left at the end of the month. How much to save? 50% of what you earn is a good figure to start. Why? Because you are still staying with your parents, you do not need to pay for the utilities and other family expenses. 50% of your salary can go into your bank savings account, start an regular investment savings plan, buy an endowment policy which can be a short term or long term savings plan. Delay gratification is the first discipline you must master here.
Do not be tempted by quick rich schemes or “no money down” investments. If you don’t understand fully what you are getting into, stay out of it because most likely you will not even know it when you have lost all your money! Be prudent and patient when it comes to investments. Keep at least 6 months of your expenses in the bank and invest the rest using the other ways mentioned above. Yoour financial planner can calculate exactly how much you should save per month to achieve your wealth accumulation goals.
2) Protect the most important factor in your income producing model – YOU! Your ability to generate an income is the most vital component of your wealth accumulation plan. You must create the foundation of your financial plan, that is your wealth protection, that is your life insurance policies. You must cover premature death, total and permanent disability, critical illness and disability income. There are many insurance products out there, so getting an independent financial adviser will help you get the best value for your money. Don’t buy from your friend who joined an insurance company just to help him out. You will be paying the premiums for the next 10 to 25 years, so it is very important that you are not over paying for your insurance policies.
3) If you already have a boy friend or girl friend, who is also working, you must instill this financial planning mindset in that person so that both of you will not quarrel or separate because of financial issues. Most couples split because of financial problem. One save while the other spend. Different value sysytems will create havoc in your relationship.
4) Don’t sign up too many credit cards, two cards are enough for most people. You have to keep track of your credit spending. Pay off your credit card bills every month, don’t ever roll over and pay the minimum. If you have done that, quickly pay it off now! Credit cards are for convenience, don’t buy the product if you can’t afford it now. Many adults have fallen into this trap and have declared bankrupt. It is not a joke to be declared a bankrupt. Your bad record will follow you for life.
If you need “uncle Mok” to help you design a financial plan, just make an appointment with me one of these days.
What Happens To Your CPF Savings After You Die?
Posted by Stephen Mok in Financial Planning on 26/05/2010
Central Provident Fund Board
CPF has clearly stated in it’s website that ALL the CPF savings in the Ordinary, Special and Medisave accounts as well as the discounted SingTel shares bought in 1993 when SingTel went public, will be distributed to his nominees according to the proportion stated in his nomination form.
If you have not made a nomination, your CPF savings will be distributed to your family members according to Singapore’s Intestacy laws. Muslims will have to follow the Inheritance Certificate from the Syariah Court.
If you have invested your CPF savings, the Dependent Protection Scheme (DPS) claims proceeds and properties bought using CPF savings are NOT covered by the CPF nomination. You should have a valid will to cover these assets. Properties held with the legal status of “Joint Tenancy”, usually with your spouse, is not affected as it will automatically vested in the spouse name. But your spouse should have a will too, in case both die at the same time.
If you are getting married soon, make a new nomination after marriage as your previous nomination while you were single will no longer be valid.
If you are divorcing your spouse soon and no longer want to leave any money to your spouse, make a new nomination as your previous nomination is still valid even when you divorce!
Click here for the nomination form and instructions.
CPF Nominations – What is covered
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