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Upon withdrawal of your money in SRS at the prevailing statutory retirement age, only 50% of the amount withdrawn will be taxed as income.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withdraw the money before retirement, 100% of the amount will be taxed PLUS a 5% penalty will be charged on the amount withdrawn.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.

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!

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.

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!

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.

Families that play together, stay together!

In the process of getting to be number one, we have created a “monster” which many are blind to, some even treat it as a normal part of life in Singapore. Sadly but surely, we will reap what we sow.

I am talking about personal relationships. Relationships in the family, with our neighbors, our relatives and even the way we relate and treat our colleagues, clients and business associates.

We have created the “Touch n Go” monster!

“Touch n Go” technology can be found when we take the public transport, entering restricted areas, office buildings and car parks. We want to be fast and efficient in these areas and these are good to have. We do not have to deal with another human being when we do these things.

In Singapore, our busy work schedule have created “Touch n Go” relationships. See if you have created this monster in your life by answering the following questions:
1) Do you know why your child seems “cold” to you, or the other way could be why your child clings on to you when you leave for work?
2) Why don’t we relax, sit down and talk during a meal with our family?
3) Do you rush through a conversation with your loved ones but can sit in a meeting for hours in the office?
4) Speak harshly and impatient when your loved ones are slow to speak but you are still a gentle listener when it comes to your clients.
5) Do you mumble when your loved ones ask about your day but you are fully alert when your boss talks to you?
6) Do you work on your computer at home when your family needs your attention at 9 pm?
7) Do you rush out to work every morning before your family wakes up and comes home when everyone is asleep?
8 ) Do you shout at your child when she messed up the living room when she was happily playing with her toys, you were too busy to play with her.
9) Do you call your parents, mum or dad at all?
10) Do you spend quiet time with God, spend some solitude time alone to reflect what you have been doing with yourself and your family?

The questions above are not exhaustive but you get my drift……

Yes, we all need to put food on the table and a roof over our heads.

I believe in Singapore, it is more than that. We want to impress the people that we do not know, with things we do not need, bought with the money we do not have.

True and lasting happiness comes when we spend quantity time with loved ones as much as possible, not when you collect the keys to your new house or new car. This feeling will not last. Imagine a house without happy people in them or driving all alone in that fancy sports car.

Wealth without true loving relationship is meaningless. King Solomon said ” Vanity of vanities, all is vanity” The most important relationship is our relationship with our creator, God. Build it and you will find true joy and peace forever.

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!

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!!!

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.