Ryan Yap

12/04/2023

An infographic on the 5 Tools You Must Know For Estate Planning

If you have yet to do up your CPF nominations/LPA/insurance nominations or simply wish to know more about estate planning and what is the best way to leave behind your assets for your future beneficiaries,

Do kindly reach out to me and I’ll be happy to give you greater clarity on how you can go about settling these nominations yourself. Thank you.

28/03/2023

Have you read today’s Straits Times article on “Integrated Shield Plans will no longer offer as-charged cancer coverage from April 1”?

Here are 6 important points the article raised:

1. 70% of SGC/PRs have Integrated Shield Plans (ISPs), but out of these 1 in 3 don't have riders.

With these changes to the cancer claim limits, ensuring you have a rider attached to your existing health policy becomes more important than ever.

Without a rider, an Integrated Shield Plan will only pay up to five times the amount of coverage for cancer treatments that the basic MediShield Life does.

This is likely to be insufficient, so unless you are prepared to come up with hefty out- of-pocket expenses to foot your treatment costs, you should relook at the option of getting a rider while you are still healthy. (As recommended by oncologists in the article)

2. Your ISP can pay for only the most expensive drug used when more than one drug on the Cancer Drug List is prescribed.

I.e. two drugs used simultaneously, one has a claim limit of $200/month, the other $400/month, you will only be claim based on the $400/month limit, instead of claiming for both at $600/month limit

3. Another fact that some may be unaware of is the fact that if a drug is on the CDL list but not being used according to the clinical indication specified in the list, it will not be claimable under your ISP as well.

4. CDL limits are based on post subsidised bills (up to 75% or more) at Public Hospitals. The limits are too low for private hospital bills with no subsidies.

5. Fixed monthly claim limit is a problem for some patients on treatment regimes that require them to claim as much as double on some months.

6. Patients with complications that need intense/complex treatments may find themselves facing bill shock

With these changes, how confident are you in dealing with the necessary out of pocket expenses when it comes to cancer treatment?

Do feel free to reach out to me if are unsure of how these changes may affect your hospitalisation benefits when it comes to the available cancer treatment options.

Have a great week ahead ☺️

Integrated Shield Plans will pay up to 5 times Medishield Life coverage. Read more at straitstimes.com.

23/03/2023

PSA 📢:

Currently, there is a fee waiver for doing up your LPA by 31 March 2023, which will otherwise cost you $75!

A lasting power of attorney (LPA) allows us to choose a deputy to make financial and other important decisions in the event that we are mentally unable to.

Doing up our LPA provides us with certainty and reassurance, as well as avoiding potential conflicts in the future.

Here's how to do an LPA (it's not that difficult!):

Stage 1: Visit OGPO at https://opg-eservice.msf.gov.sg/OPGO/Home.aspx to appoint your donees

Stage 2: Visit a Certificate Issuer to sign your LPA. (there will be fees incurred for this)

Should you face any difficulty in the process of applying for an LPA, please feel free to reach out to me on by leaving a comment on this post/sending me a DM! I’ll be happy to help ☺️

Additionally, here’s an article if you will like to know more.

https://www.straitstimes.com/singapore/from-nov-14-lasting-power-of-attorney-can-only-be-made-online

Remember to do your LPA before 31 Mar 23 to avoid paying the $75 fee!

07/02/2023

In the previous post, we explored the benefits of leaving behind a lifelong income stream for your family, as opposed to a lump-sum.

In this post, we will be looking at the 2 main categories one’s retirement income source can be classified under - guaranteed and non-guaranteed income.

Guaranteed income is monthly income that you will receive with 100% certainty. The monthly payout is typically constant.

For example, CPF Life and annuities are considered guaranteed income sources as a legal arrangement has been made by the government and insurer respectively to pay out a constant stream of income.

Moreover, certain annuities and the escalating CPF Life plan allow one to receive income that increases at a constant rate every year, which is useful in combating inflation.

Non-guaranteed income is monthly income that you may or may not receive. This monthly payout typically fluctuates.

For instance, rental income from property is considered a source of non-guaranteed income. That is because whether you will continue receiving rental income depends on whether the tenant decides to continue his/her lease after it expires.

Fixed income instruments such as Treasury bills (T-bills), fixed deposits and bonds, while being seemingly safe investments, also cannot guarantee a constant income stream for the rest of your life.

For instance, while Treasury bills (T-bills) may give an interest rate of higher than 4% currently, we cannot be sure that 6 months later, when the T-bills expire, that interest rates will remain this higher.

In fact, the average interest rates for Singapore Savings Bonds, T-bills and fixed deposits are only 1-2%. Such a low rate of return is not enough to combat the effects of inflation.

The last example will be REITs or dividend stocks, which can be used as another source of retirement income. However, their dividends (basically the payouts) will typically fluctuate from year to year.

How much dividends will be paid out depends on the amount of income that is distributed to their shareholders.

This amount is in turn decided by how much revenue and profits the company earns for that year.

Therefore, in an economic downturn where most companies experience declines in their financial performance, dividends given out to shareholders will likely fall as well.

A potential decrease in dividend income highlights the dangers of solely relying on non-guaranteed sources of income for your retirement.

This is because, in a bad year, the dividends you receive might not be sufficient to pay off your monthly expenses.

So, which one is better? Non-guaranteed or guaranteed income?

On the 5th picture is a table comparing the pros and cons of both guaranteed and non-guaranteed income.

Through proper retirement planning, I aim to achieve a peace of mind for my clients. Therefore, it is very important to ensure that they will have enough cash coming in every month when they have retired.

In that sense, the bulk of one’s retirement income should be derived from guaranteed sources. This is to reassure clients that they will receive a constant amount of cash every month, for as long as they live, regardless of economic conditions.

In contrast, clients can never have that same level of security in non-guaranteed income sources. How the market/economy is performing, how their investments are doing, how much payouts are they going to receive for that year will be questions that no one has the answers to.

This can result in unnecessary worries for themselves, which contradicts the entire purpose of retirement planning - to not have to worry about finances when they retire.

What’s the point if you still have to actively manage your investments even while you are retired?

On the flip side, solely relying on guaranteed income, may not generate sufficient returns to cover one’s monthly expenses. That is because with the promise of guaranteed payouts, there is a limit to how much risk can be taken with the investments.

Whereas for non-guaranteed income, there is the potential to achieve a much higher rate of return with the same amount of capital.

However, achieving this higher rate of return usually means taking on higher risks, which may not be ideal when one is nearing their retirement.

Lastly, how much time will you want to spend on managing your assets when you have retired?

While you may currently be managing your own investments in the present, will you want to continue actively managing and monitor your portfolio when you retire?

Or will you rather think about something else (other than your portfolio returns)?

CPF Life and annuities, the two most "hassle-free" ways of getting income during retirement.

Essentially, all you have to do is put in a lump sum at the start, and you will receive a monthly income from the payout age for life.

What about properties?

Imagine you are 80 and all of a sudden you get a call from your property tenant, asking you to fix the toilet that is leaking. Now, how would you feel?

You see, when you get to a certain age, you don’t want to be managing your assets. Rather, I am sure all of us will want to receive a steady monthly income so that we can enjoy a worry-free, stress-free retirement.

So what’s the conclusion?

Your portfolio need not be made up of either one or the other.

While guaranteed income sources should form the bulk of your income, however, having some non-guaranteed income sources can be helpful in giving an extra boost to your income.

Now, what are your plans for how you will want your retirement portfolio to look like? How much of guaranteed income vs non-guaranteed income sources will you have in your portfolio? And why?

Would like to hear your thoughts in the comments below!
If you would like to learn more about the different types of annuities available, please feel free to reach out to me.
There are many different annuities, each with its own unique features. Therefore, it is important to find one that is best tailored to your current financial situation and objectives.

If you find such content on retirement planning helpful so far, do follow me on my social media accounts, so you don’t miss out on future posts about retirement planning & more! In the next post, we will be exploring the 3rd source of retirement income one can have, so stay tuned!

26/01/2023

To all those who celebrate, happy Chinese New Year!

As CNY approaches once again, something many of us look forward to is receiving Ang Baos.

On the other hand, those of us who are the ones giving Ang Baos may not be as excited about it.

But... What if you can give yourself and your loved ones an Ang Bao every month (even when it is not CNY!) without having to tap on your savings?

In fact, you can do just so through an annuity.

In the previous post, we discussed the pros and cons of annuity plans as a source of income when we retire.

In this post, we will be exploring the benefits of using annuities as an inheritance tool for estate planning.

Specifically, we will be looking at the benefits of leaving behind a lifelong income stream for your family, as opposed to leaving behind a lump-sum.

You have worked hard over the years to make sure your loved ones are comfortable.

Many of us will want our loved ones to continue leading a comfortable life even after we're gone.

But what will be the best way to pass down our wealth to our beneficiaries?

The simplest way will be to transfer your assets to your beneficiaries in one lump-sum upon your death.

However, is that the best way? I, for one, will be unsure and even fearful of doing anything careless with the money should figures that I have not even dreamt of before start appearing in my bank account statements.

Some of us may also be concerned about our nest egg disappearing very quickly when it is passed on to our beneficiaries.

This “sudden wealth” approach to transferring hard-earned savings is a real concern for many people.

It can be daunting for someone to manage such large sums of money that is 10x or 100x the amount of money he/she used to manage previously, even for someone who is savvy with their finances.

Hence, you may want to consider leaving behind an income stream for your beneficiaries instead.

Here are five reasons why giving an income stream (instead of assets) to your family is important:

1. Financial stability: An income stream can provide a reliable source of income for your family, helping to ensure that they have the financial resources they need to meet their expenses.

2. Flexibility: An income stream can give your family flexibility to pursue their goals and make financial decisions that are right for them.

3. Independence: An income stream can help your family to become more independent, as they will not have to rely on you for financial support.

4. Security: An income stream can provide financial security for your family in the event of your death or incapacitation.

5. Educational opportunities: An income stream can provide financial support for your family to pursue educational opportunities, such as college or skill based training.

Benefits: Children/Beneficiaries can either use the property for their own stay or as an investment tool (via rental yield and/or capital appreciation)

Disadvantages:

1. Will your children prefer to inherit the property or will they rather receive a constant stream of monthly income for the rest of their lives? Most children will sell the property for cash anyways after it has been passed on to them from their parents.

2. If you have more than one intended beneficiary, distributing in percentages may be the fairest way. However, disputes may arise when co-inheritors disagree on how to deal with the property, along with many other issues?

3. If you decide to let only one of your children inherit full ownership of the property, will it cause unhappiness among them? To avoid such a scenario, will you want to consider leaving behind something else for your other children?

So long as we are still well and alive, we will continue to receive monthly payouts from the annuity.

When we pass on, we can choose who we want to be the beneficiaries receiving this income stream.

And, this intergenerational wealth transfer does not end there.
Suppose this income stream has been transferred to your children after you pass on.

When your children pass on, there will be a lump sum passed on to your children’s intended beneficiaries (which could be their own children (i.e. your grandchildren), their spouse/siblings, etc.)

Not only does this allow us to pursue our ideal retirement lifestyle, it is also a lasting gift that will enrich the life of up to two generations.

What are your thoughts on annuities as an inheritance tool?

If you were the one receiving an inheritance, would you prefer to receive a lifetime income stream or a lump sum, and why?

I would like to hear your thoughts in the comments below!

If you would like to learn more about the different types of annuities available, please feel free to reach out to me.

There are many different annuities, each with its own unique features. Therefore, it is important to find one that is best tailored to your current financial situation and objectives.

If you find such content on retirement planning helpful so far, do follow me on my social media accounts, so you don’t miss out on future posts about retirement planning & more! In the next post, we will be exploring more about annuities, and how it stacks up against other income streams one can have during retirement such as fixed income, dividend stocks and properties.

20/01/2023

To everyone who celebrates, happy Chinese New Year!

Once again, it is that joyous time of the year for us to gather with our friends and family.

Yet, this also marks the time for us to think (or fret) about how much Ang Bao we intend to give to our relatives.

According to online guides, one red packet can go up to $888 for each of our parents and up to $288 for each of our siblings, children & grandchildren!

Phew, good thing that I am at an age where I still get to collect Ang Baos.

But…I want you to consider this, imagine if you could be the one receiving an Ang Bao every month for the rest of your life, even when it is not CNY.

Wouldn't that be great?

Imagine how useful that will be when you are no longer working and want to enjoy your retirement without having to worry about whether you will have sufficient money left for the next month.

You may be thinking that this is too good to be true.

Yet, in fact, there is a financial instrument that allows you to receive cash every month, which is none other than an annuity.

(In the previous few posts, we have thoroughly discussed how you can generate a steady stream of income for yourself via CPF Life. So you may want to check those out as well.)

The picture on the 4th image illustrates how an annuity works - you put in a lump sum of money at the start, and in return you will receive regular payments over a period of time.

This is similar to how CPF Life works.

Annuities are especially useful for those of us who want a higher monthly income when we retire.

That is because CPF Life gives a maximum payout of up to $2,370/month under the Enhanced Retirement Sum (ERS). This amount is probably not enough for most of us to sustain the kind of retirement lifestyle we want, especially after taking into account inflation. (and also, that is assuming we hit the ERS in our Retirement Account (RA))

Most of us will probably want to treat ourselves when we retire. Maybe we have plans to go overseas, try out new hobbies and who knows what else may be on our bucket list (literally, as a list of things we want to do before we kick the bucket.)

To gain greater assurance that we will have enough income every month during our retirement, or simply to have a higher quality of life, one can consider topping up their income with an annuity.
In addition, annuities have many more features that are customisable.

1. Payout Start Date

One of the most important features include giving you the option to choose when you want your payouts to start.

Some annuities allow you to start your payouts from as young as 50 years old, or even a few years after you put in the initial sum.
This is especially useful for those looking to retire as soon as possible and rely on a passive income stream that effectively replaces their monthly salary.

In contrast, the earliest one can start their CPF Life payouts is at the age of 65.

2. Option to reinvest payouts instead of withdrawing them

When your annuity starts giving you monthly payouts at your chosen retirement age, you may or may not need the entire sum of the payout.

In that case, for some annuities, you can choose to reinvest the payout with the issuer of the annuity.

This will allow the payout to compound and grow to a greater value which you can then withdraw in the future when the need arises.

In contrast, we cannot reinvest payouts from CPF Life back into our RA.

That means that if we have no use for the payout, we will most likely be leaving the money in a savings account which compounds at a much lower return.

3. Intergenerational Wealth Transfer

Another significant advantage that annuities have over CPF Life is the ability to benefit both your children and grandchildren, while at the same time, supplementing your own retirement income.

On top of our own retirement needs, some of us may also want a peace of mind that our loved ones can continue to lead a financially stable life after we pass on.

If that is one of our concerns, this feature that annuities provide may be especially appealing. And that is the option to transfer the income stream we receive from annuities to our intended beneficiaries after we pass on.

In other words, so long as we are still well and alive, we will be able to continue receiving the monthly payouts. When we pass on, our children, spouse or other relatives (up to your choice) will be the ones receiving this income stream.

And, this transfer of wealth across generations does not end there.

Suppose this income stream has been transferred to your children after you pass on. When your children pass on, there will be a lump sum passed on to your children’s intended beneficiaries (which could be their own children (i.e. your grandchildren), their spouse/siblings, etc.)

Not only does this allow us to pursue our ideal retirement lifestyle, it is also a lasting gift that will enrich the life of up to two generations.

This is especially attractive for those of us who wish to leave behind a legacy for our future generations.

In contrast, under CPF Life, the bequest left behind for beneficiaries will decrease over time.

Most of the time, once you are past 80 years old, there will not be any money left behind for your beneficiaries when you pass on.

4. Liquidity

While not recommended, private annuity plans also allow for policyholders to surrender their policy prematurely.

The ability to withdraw cash from policy whenever needed is especially important in the case of an unexpected emergency or events that may arise.

In contrast, CPF Life is an illiquid instrument as we are unable to withdraw sums that were committed to CPF Life in our RA.

Now that we know the benefits that annuities can give us, we should also be aware of its downsides.

1. Potentially Higher Returns, but Non-Guaranteed

While annuities can give a higher return than the risk-free 4% return that CPF RA gives, the return from annuities is typically a combination of guaranteed and non-guaranteed returns.

Having a non-guaranteed portion means that it can go either way - if the fund does well, annuities can give a higher return than CPF Life and vice versa.

That being said, most annuities invest in low-risk funds that are mostly comprised of bonds.

It will be useful to check the past performance of the funds as a proxy of the competence of the fund managers.

2. Early Liquidation is Disadvantageous

While one of the advantages that annuities offer over CPF Life is its liquidity, surrendering an annuity prematurely comes with certain penalties.

For instance, if you surrender your annuity in the first few years, there is a high chance that the payout (or what is known as surrender value) will be less than your premiums paid.

Therefore, you should set aside about 3 to 6 months of your monthly expenses as an emergency fund before investing in an annuity.

Doing so will reduce the likelihood of having to liquidate our policies in the future.

Therefore, annuities are useful for those who want:
(i) Higher Monthly Income During Retirement
(ii) The option to transfer this income stream to our intended beneficiaries after our death
(iii) To retire early (before 65)
(iv) The potential to earn more than you saved
- The total payouts that you receive may be greater than the initial sum you put in, depending on how long you live
- In addition, leveraged annuities can potentially allow you to receive a much higher monthly payout with the same amount of capital (although this strategy comes with own sets of risks that you should be familiar with)
(v) To stretch their Supplementary Retirement Scheme (SRS) withdrawals beyond 10 years
- The allowable withdrawal period for SRS is only 10 years. That means, at the end of 10 years from our prescribed retirement age, whatever money that we have yet to withdraw will be automatically transferred out of SRS.
- An annuity allows you to stretch your SRS withdrawals over a longer period of time (more than 10 years). Useful since most of us will probably still be alive after 72/73 based on the average life expectancy of Singaporeans (82 for males, 85 for females).

Annuities vs CPF Life - Which is better?

Each plan has its own unique features and benefits, as they cater to different needs.

While CPF Life gives higher monthly payouts for the same amount of capital committed, the sum of money left behind for our beneficiaries will decrease over time.

In contrast, some annuities leave behind a lump sum that increases over time and this lump sum can be greater than the initial capital committed.

In addition, there are many other features that different annuity plans can provide, as we have explored in this post.

Instead of viewing the two as competing products, why not consider how they can complement each other in our retirement plans?

For example, we can use CPF Life as a base and add on a private annuity to supplement this base retirement income, while giving us greater flexibility to start receiving the payouts earlier, or perhaps even giving us the option to leave more behind for our loved ones.

What are your thoughts on annuities? And will you be considering getting one? I will love to hear your thoughts in the comments below!

If you would like to learn more about the different types of annuities available, please feel free to reach out to me.

There are many different annuities, each with its own unique features. Therefore, it is important to find one that is best tailored to your current financial situation and objectives.

If you find such content on retirement planning helpful so far, do follow me on my social media accounts, so you don’t miss out on future posts about retirement planning & more! In the next post, we will be exploring more about annuities.

17/01/2023

In the previous post, we talked about 4 ways we can grow our CPF Retirement Fund. This is to help us receive as much payouts as possible under CPF Life when we retire.

In this post, we will explore the last way you can increase the savings in your CPF account.

As a bonus for reading this far, I will be adding one extra bonus way to grow your CPF Retirement Fund.

It is common to worry about not having sufficient money to last us during our retirement years. To make things worse, we may be approaching our retirement soon but have yet to accumulate an income generating portfolio that can sufficiently cover our monthly expenses, when we retire.

If you find yourself in a similar situation, monetising your greatest asset - your home, may be something you will want to consider to supplement your retirement funds.

Some of us may have previously bought a 4-room or 5-room flat, to have enough room to accommodate your entire family.

By the time you retire, your kids will most likely have moved out to find their own places to settle down.

And that’s when many of us will feel that having such a big house for just two people (you and your spouse) is a waste of space or even a hassle (i.e. more areas to clean).

Do you know that besides renting out a spare room, there are two other ways you can monetise your home?

5. Lease Buyback Scheme (LBS)

The LBS enables you to supplement your retirement income by selling part of your HDB flat’s lease while you continue to live in it.

Part of your net sales proceeds will be used to top up your Retirement Account to boost your lifelong monthly payouts under CPF LIFE.

For households with 1 owner, he/she will have to use the proceeds to top up the RA to the current age- adjusted Full Retirement Sum (FRS).
For households with 2 or more owners, each owner will have to use his/ her share of the proceeds to top up his/ her RA to the current age-adjusted Basic Retirement Sum (BRS).

Depending on the top-up amount made, you can also enjoy a cash bonus of up to $30,000.

To be eligible for LBS, refer to the 3rd post for the list of criteria that you will need to fulfill. Some of the key criteria include all the owners having to be at least 65 years old and having occupied the house for a minimum period of 5 years. Your house should also have at least 20 years of remaining lease to sell to HDB.
As for the lease period (i.e. length of the remaining lease you want to retain), the options depend on the age of the youngest owner.

Looking at the table on the fourth post, one who is aged 65 to 69 can participate in the scheme, provided their house has a remaining lease of at least 30 years after selling part of its lease back to HDB.

The reason why there is a minimum lease requirement is to ensure that the owners will continue having a roof over their heads till 95 years old.

What happens to the house if you pass away before the lease expires?

In this situation, your spouse or child who is living in the flat will be given the option to:
- Live in the flat for the balance of the lease period; or
- Return the flat to HDB

If your lease is terminated prematurely, HDB will reimburse the remaining value of the lease to your beneficiaries.

In other words, you will not have to worry about being shortchanged if you do apply for this scheme.

Bonus Tip: Silver Housing Bonus (SHB)

Another way of monetising your home is via the SHB.

The scheme incentivises seniors in Singapore to downsize their home and use the proceeds to contribute to their CPF Retirement Account (RA).

On the 6th post, you can find the list of criteria you will need to fulfill to be eligible for the SHB.

The size of the bonus received depends on the net proceeds and how much homeowners contribute to their CPF Retirement Account.

The maximum cash bonus one can receive under the scheme is $30,000. And how one can receive a bonus of $30,000 is by topping up at least $60,000 to their CPF RA, using the net proceeds received from downsizing their home.

If the top-up made is less than $60,000, one will receive a $1 cash bonus for every $2 top-up made.

Now, let us take a look at some of the figures to see how the SHB works, in detail.

In this example, Mr and Mrs Lim have already retired. Their children have their own families and are no longer staying with them. They decide to downgrade their home from a 5-room to a 2-room Flexi flat, as they find that they no longer need such a big space for just the two of them.

They managed to sell their current 5-room flat for $470,000 and purchased their new 2-room Flexi flat for $141,000. After taking into account their outstanding house loan and the resale levy, they manage to gain a net profit of $184,000 from the entire exercise of downsizing their home.

Under the SHB, Mr and Mrs Lim are required to top up $60,000 into their CPF RA. This will increase each of their CPF RA amounts by $30,000, which will give them higher CPF Life payouts from age 65 onwards.

Because of the top up made to their CPF RA, Mr and Mrs Lim will be eligible for a $30,000 cash bonus. Therefore, they will receive a net of $154,000 in cash, on top of a higher CPF Life payout.

Conclusion: Possible Monetisation Options for your Home

So as you can see, there are many ways for you to monetise your home, besides renting out a spare room.

Unless you are comfortable co-living with a non-family member, you may want to consider the LBS if you want to supplement your retirement income, yet wish to continue living in your current home.

On the other hand, if you do not mind downgrading to a smaller flat, you can consider applying for the SHB.

Are you thinking of monetising your home? If so, which monetisation option are you most likely to go for? I would like to hear your thoughts in the comments below!

If you find such content on retirement planning helpful so far, do follow me on my social media accounts, so you don’t miss out on future posts about retirement planning & more! In the next post, I will be moving on the second income source we can have for our retirement.