Monthly Archives: September 2010

CPF Latest Update: One–Year Extension of 4% Floor Rate for all SMRA Monies

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Money

Money Not Enough?

CPF Latest Update: One–Year Extension of 4% Floor Rate for all SMRA Monies

Since 1 January 2008, savings in the Special, Medisave and Retirement Account (SMRA) have been invested in Special Government Securities (SSGS) which earn an interest rate pegged to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%. This is a market-based rate for instruments of comparable risk and duration, and will ensure that members receive fair and reasonable interest rates.

However, to help members cope with the transition, the Government had committed to providing a 4% floor rate for SMRA interest for two years up to December 2009. This was extended to December 2010, in light of the global economic conditions and exceptionally low interest rate environment a year ago. The Government has decided to further extend the 4% floor rate for interest earned on all SMRA monies for another year until 31 December 2011. Thereafter, interest rates on all CPF account monies will be subject to a minimum rate of 2.5% per annum.

Minister for Manpower Mr Gan Kim Yong said, “Despite our strong economic recovery, interest rates have remained low this year. The sharp drop in interest rates at the expiry of the 4% floor rate may impact CPF members who may not have benefited fully from the economic recovery yet. Therefore, the Government has decided to extend the 4% floor rate on SMRA monies for another year.”

Ladies and gentlemen of Singapore, do you understand the future inplications of such a reduction in your CPF interest rates? Let me give you a simple example:

$40,000 @ 4%p.a. will grow to $87,645 in 20 years, @2.5% p.a. it will grow to $65,545. That means you will lose out $22,100. ( a loss of 25% !!! )

You must start to consider saving more of your cash, not in the bank which pays less than 1%p.a. but in other financial instruments like endowment policies, money market instruments, fixed income unit trusts. Your retirement plan will be affected by this news.

See your financial adviser to check how this reduction will affect you when you retire.

Is Cash Really King?

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Cash Is King?

We have heard many times that “CASH IS KING” when the stock market or property market crashed. We lamented that if we had the cash in hand we would have grabbed the opportunity to pour in the capital investment and reaped a huge return when the market rebounded. Any uncle or auntie in Singapore would have said the same thing!

 
If you had $1,000,000 in your bank account now, would you have “plough in” $500,000 when the stock market was at it’s lowest and darkest moment in March 2009? If you did, you would have reaped a handsome return of more than 60% and got back $800,000 now, simplistically speaking.
 
It takes courage to act when others are quivering under the intense pressure from everyone, including fund managers! It takes courage to step forward when many others are hesitating to make their moves. It takes wisdom to say “Let’s do it now” when others are saying “Maybe tomorrow”…
 
Yes, even if you had a million bucks, you would have hesitated, I am sure because of the herd instinct. It is very natural and human to follow the leader instead of being the leader.
 
So what do we do now? The markets are reasonably valued and have gotten off the bottom since March 2009.  We have missed the bottom but definitely we are not at the peak now. Investing in batches is the way to go if you are considering to get into the equities market.
 
I wrote in one of my blog posting in July 2008 that it was time to start investing into the equities market but many people were fearful and indeed the market went down even further till March 2009. But looking back, by now you would be in a much healthier position, right?
 
Investing is all about holding power and your time horizon, if you have the extra cash sitting idle in the bank and have a time horizon of 3 to 5 years, you can seriously consider investing.
 
Inflation is around 3%, if you are still holding a ton of cash in the bank, your money is LOSING it’s purchasing power by the day! Open your eyes and look for opportunities. Closing your eyes will not solve this problem, plan and act on that plan to succeed or else your dream will alsways remain a dream. Reality comes when the dream plan is put into action!
 
See your financial adviser today to put that dream plan into action TODAY. Everyone is unique so you need to discuss with your adviser first before you invest.
 
No adviser? Let me help you by calling me for a discussion at my office next week.
 
 

Early Stage Critical Illnesses Insurance Plans

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Be Prepared When You Are Healthy

Recently, insurance companies in Singapore have been launching early stage critical illnesses insurance plans. These plans pay a lump sum of money should a person contract stage 1 cancer, lower severity of heart attacks or other less severe critical illnesses. Normally the payout is about 25% of the original sum insured amount for a full blown critical illness.

Should you jump in straight away and get this plan immediately?

There are two schools of thought here… 1) Buy it as it is good to have and you have the excess cash waiting to be spent. You have heard of cases where insurance companies did not pay when someone got “carcinoma in situ” of the breast, now this type of plan will pay upon a claim. 2) Don’t buy it as you already have a solid 100% as charged Hospital and Surgical (H&S) plan to cover all your hospital expenses. You have a good savings amount to tie you over a period of time and you have a good critical illness plan that will pay you 5 times of your annual income should it worsen to stage 4 cancer.

Whatever it is, you should discuss this with your financial adviser and decide if you need to improve on your wealth protection plans.

Let me know if you need more details of these pre critical illness plans.

Guaranteed Retirement Income

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Happy is a man whose wife is happy!

Many Singaporeans will face a lot of uncertainty when they retire at age 62, 65…

After 10 years in the financial advisory industry, I realised that most young Singaporeans and PRs are very much occupied with putting bread on the table, upgrading their homes, getting that dream car, sending their kids to the best schools, paying the utility bills, buying the latest IT gadget, going for overseas trips. Most of us do not or will not bother to take a real hard look into their future, especially their own retirement needs. Maybe it is too far away to even think about it… 20, 25, 30, 35 years later…

Stephen Covey’s book, “7 Habits Of Highly Effective People” advised us that one of the habits was to “begin with the end in mind”. A successful person will plan to succeed and not just hope to succeed. Nobody plans to fail, they failed because they failed to plan!

May I urge you to really set aside a weekend afternoon with your spouse to discuss about this very important but often neglected event of your life. If you are single and intend to remain single, it is even more important for you as you may not have financial support from anyone when you retire.

Let me know if you need help to determine the amount of money you need at retirement.

If you are looking for a guaranteed income for your retirement, I have the solution to meet that need of yours. A visit to my office will clear the air for you and you will enjoy your “golden years” not sunset years.

Deciding to take action and really taking action are two completely different matters.

Taking action will transform your life but just deciding to take action will lead you to nowhere!

Guarantee Yourself a Holiday Trip or New Computer Every Year!

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Life's a beach!

I read with amazement that the August 2010 NATAS Fair at Singapore Expo netted a cool record breaking $85M of sales with 70,469 visitors over a 3 days period.  Each visitor paid $4 per entry. Another record breaking event was the recently concluded COMEX Fair 2010 at the Suntec Convention Centre which reaped in a whopping $68.5M of sales with 815,000 visitors over a 4 days period. Entrance to COMEX was free.
 
 
 
 

 

Singaporeans are really crazy about travelling and getting their hands on the latest IT gadgets! I believe alot of the buyers paid for the purchases with their credit cards to enjoy further discounts and gifts. Most importantly, I hope they will pay in full at the end of the month and not just the minimum amount. Roll over credit attracts up to 24% p.a. interest!!!

Are you interested to lay your hands on the latest iPhone every year, get the latest pc netbook, pc notebook, Mac book or are you always craving for a yearly or twice yearly holiday trip?

I have the perfect deal for you!!!

Depending on your expected yearly expenditure, I can work out a guaranteed annual payout to you! When you retire, you will also receive another lump sum of money! You will earn more than the measly bank interest rates, get your yearly fix of travel and IT gadgets PLUS get a good lump sum of money when you retire!

Best of all, you DO NOT owe the banks that issue the credit cards at all.

Interested? 

Please contact me now because the annual payout starts at the end of 2 years, you will be ready for NATAS 2012 and COMEX 2012 and beyond!


“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term is the indispensable pre-requisite for success” By: Brian Tracy

I look forward to hear from you soon.