Sometimes its just better to steal with pride.
Have fun reading this "lively" post at CW's blog:
Another New CPF Shifting Post Without Informing Affected Members
I would like to take a shepherd's and landowner's angle on the matter.
As a landowner, I only care how much my shepherd makes or saves for me. Period.
So if a talented or sharp-eyed shepherd comes to me with a presentation to help me save millions by simply tweaking a few simple administrative rules, wouldn't I give this shepherd a raise or promotion!?
That's the Save More way of scoring brownie points in the corporate world.
To encourage my fellow landowners to keep old muttons in their flocks as long as possible, I have to give them an "incentive" like lowering the landowners' CPF contributions to their old muttons after age 55.
But that would also mean there's a shortfall in the old muttons' retirement as a pay cut is a pay cut...
This is where the enterprising shepherd with his excellent proposal to "cheerlead" CPF voluntary contributions come in. Brilliant or what?
That would make up the shortfall in their CPF after age 55!
Reminds me of the 3 bananas in the morning; 4 bananas in the evening monkey story no?
That's the Earn More way of getting your boss's attention for the win!
When was the last time you did something like that?
Landowners will pay top dollar to get shepherds who can make or save money for them!
Wouldn't you?
Luckily, there was no 1M55 cheerleading to recruit the faithful; otherwise there will be big followers to Return My CPF
ReplyDeleteCW,
DeleteThere was a time when the minimum sum kept revising upwards until people were scared if they don't spend their CPF money NOW, they'll never ever get to see their CPF!?
Hence the "overreaction" to use CPF to:
1) Buy (money losing) insurance like ILPs...
2) Upgrade medical/hospital coverage that they can't really afford...
3) Took too much risks with CPFIS until the majority lost money...
4) Over invested in properties until asset rich but cash poor... (I think this group turned out the best! Just as long you willing to sell and downgrade?)
Now the pendulum has swung over to the other side for those with memory of gold fish?
Even if big daddy kept raising the FRS, why would it matter?
Not if you are voluntarily contributing to CPF!
Why take excess CPF money above FRS out???
In fact, you would like to keep as much money inside CPF as possible, forever and ever!!!
Why take money out from CPF to invest in a 2nd property?
Why try to earn more with CPFIS?
No, 4% is good enough! Safe and sure win one! Look mom, no brains needed!
Of course it all made sense when inflation is below 2%...
IF there were no inflation, do we need to invest as in Earn More in the first place?
Besides home ownership, CPF is another anchor to "encourage" Singaporeans to stay put and fight in the event someone invades us.
Except those whose CPF is just a minority part of their total net worth...
Smol,
ReplyDeleteIn the past it's rules to lock in CPF monies for longer, when the overriding concern is to try to get every cent out of CPF into your pocket ASAP.
Now with the popularity of CPF cheerleading (and higher earning members), it's rules to drawdown the CPF monies faster, especially for old foggies. Lol.
There's another small tweak late last year where those on RSS will automatically continue their monthly withdrawals from SA & OA after their RA goes to zero. No choice.
This won't really affect those with relatively large RA that can last for 20+ years.
Not so good for those with small RA but yet want to maintain large OA as high-yield savings bank.
Spur,
DeleteSometimes I'm puzzled when people in our community parrot catch phrases like financial freedom, financial independence, etc...
Yet its the same people who just walk themselves into the cage and close the door behind them!?
When pressed why they do so?
"Its a GILDED cage what!? So comfortable! Got free food and water delivered each day with certainty some more... What's not to like?"
Oh!
LOL!
They must have a different dictionary than mine...
Hi SMOL,
ReplyDeleteWhere should I begin? 😂
Can an individual or a couple achieve financial independence using the CPF way? I would think so. Granted this may be easier to achieve for people earning more than the average income. But the point is, it is a possibility. A couple with $3M to $4M or more in their combined CPF accounts will be able to extract meaningful interest income from this savings and monthly payout from CPF Life to last their lifetime and still have leftover for the beneficiaries.
The CPF does not allow people to just dump money into their savings but at the same time it provides an avenue for people to continuously park their savings into it. The younger they start the process, the more they are "rewarded" in the long run. This is how some parents are now using this knowledge to put in "seed" money into their young children's CPF accounts to let compounding interest works its magic.
Moving on to the next point, I see that somehow the key message in the "Save more in the CPF" camp have gotten lost in many conversations. The key mesaage was this : "Build up the CPF savings as your base layer or foundation of overall financial plan!"
The "Kueh Lapis" anaology has been bandied around to demonstrate and reinforce the concept. Once the base layer is intact, people are encouraged to build other layers on it such as stocks and properties and what have you. And the earlier one contributes to this base layer (for parents to note), the faster the foundation can be built and the earlier one can start to build up the other layers.
For myself, it was a bit of the reverse order. I didnt realise I should start with the CPF as the foundation layer but instead went head on into property investment. Lucky it was the right thing to do then. And I think having a stable career was my base foundation.
Now as seniors (got senior discount cards one), wife and I have been turning to CPF to safekeep our savings. Every year we will max out our contribution. Our combined CPF savings have been growing by about $200K yearly with nearly half of it coming from Ah Gong. This is something we want at this stage of our life.
Looking at our dividend and rental income sources, it is always the same anxiety. Will the companies be paying dividends, how much, when etc... for rental it would be the tenant has been late to pay rental, will the tenant extend contract, home repairs, etc..
So really, for us the CPF have been more than an emotional "stabilizer" and has a calming effect especially in the face of market volatility. Think that was the key message from the "Save more in the CPF" camp. 😅
mysecretinvestment,
DeleteIts always a pleasure to have civil debates with people on the other side of the fence - it helps with the sharpening of my saw ;)
Let's start with curry puff seller example - the vocal 1M65 people are walking a similar path...
Its precisely couples with millions in CPF that big daddy will want to target and filter out from "gaming" the system going forward.
The "generous" extra 1-2% above 4% are meant to help those who are struggling to meet the FRS otherwise.
Likewise, the regular 4% is meant for the average Singaporeans riding the ComfortDelgro bus.
Its a matter of time before some sore and unhappy citizens will question why is CPF "subsiding" the well off and super rich???
I mean don't they already qualify for high net worth individual status for access to private banking or hedge funds?
Its a bit like public hospital Class A beds having the same govt subsidy as the Class C beds!?
Looking at the 2022 budget, its starting already - tax the rich more, help the lesser off more. Big daddy finally getting serious on addressing the widening wealth gap...
Its not new. Look at the unhappiness and sour grapes targeted at those "lucky" HDB millionaire owners who bought HDB flats in prime locations.
Now big daddy changed the rules for new HDB flats in prime areas ;)
Big daddy not stupid. Why give fuel to the Opposition?
I don't know. If I'm a child now and grew up 20 years later, I would rather prefer my parents left me a property instead of topping up my CPF...
Then again, that's my own personal track record with CPF versus property. Every one have their own mileage.
I understand and empathise your situation. Everyone is searching for yield in a zero or negative interest rate world.
You are not a fanboy of CPF, you are just interested in the "supposedly" safe and sound 4% (non-inflation adjusted).
If fixed deposits at our local banks give 5% interest right now, you'll never voluntarily contribute to CPF, would you?
Would any Singaporeans during the late 1970s or early 1980s be receptive to 1M65 cheerleading then?
Whether we in Save More or Earn More, everything is a speculation!
Remember those who thought switching to the "lowest" wholesale electricity plan was good, better, best? (Thankfully they were the minority)
Similarly, the 1M65 is making a bet interest rates will remain low forever and ever.
Then there are those who prefer to be in other assets just in case we experience the % price increases like we see at our hawker stalls today!
Especially for bigger ticket items like education, healthcare, car, housing; etc. Its a speculation whether price increases will be lower or higher than 4% going forward.
Nothing too complicated.
Hi Smol
ReplyDeleteThe 1m65 is meant to have good intention, but could be too good to be true.
Have ex colleague in her early 40s shared that she and spouse had constantly top up their Sa to max the FRS, must be the 1m65 campeign that influence alot. They have 3 very young child.
Not sure, will they have a rude shock with this change. Anyways, early 40s still is a long way to go and anything could change.
Small Time Investor,
DeleteIf big daddy believed 4% is all we need forever and ever, why offer CPFIS and introduce the concept of equities ownership to the average Singaporean?
How do the rich benefit from the growth and success of Singapore? Through owning assets like properties and equities ;)
We already got HDB on the property side.
So the discounted SingTel shares and CPFIS were done with the best of intentions to "democratise" equities ownership to everyone and anyone.
Then crash got sound big daddy discovered "not fit for purpose"...
Unlike properties, equities is definitely not for everyone and anyone!
I believe this time, it could be people like your ex-colleague who may discover "not fit for purpose" at their end...
Especially if they wish to impart financial LITERACY to their 3 children.
Being financially rich does not mean we are automatically "financially literate".
Its same same but different!
That's why Rich Dad and Poor Dad struck a chord with so many readers.
It simply meant most of our parents were not financially literate; "poisoning" unintentionally their children with misguided values...
Would Rich Dads encourage their children to Save More?
Smol,
ReplyDeleteI think the real lesson here is to be mentally prepared for anything & be able to roll with the punches.
I fully expect dividends & capital gains to be taxed by 2030. (Also euthanasia to be discussed)
Probably start with dividends first. Afterall if rentals are already taxed... (plus S'pore used to tax dividends, so it's nothing new)
As for CPFIS, they could have just implemented an option for members to be shareholders in Temasek or GIC with a portion of their CPF monies.
But that will mean sharing the spoils with the plebs lol.
Spur,
DeletePrecisely!
We don't want to be like the British who were "male-chicken" sure that any invasion into Singapore would come from the sea...
And have our "Oh shit!" moment when we realised our guns were pointing to the wrong direction!
You think why I've been parodying and railing against the socialists and communists in my posts?
The Western World is moving to the left...
What Modern Monetary Theory and what Universal Basic Income?
Its another way of saying lets rob Ah Tan to pay Ah Kow. Wny? Becasue Ah Tan is rich mah!
Big daddy smart. If they also moved to the left, what's left for the Opposition to talk about?
Argue AGAINST capital gains and dividends taxation in Singapore???
LOL!
I'm a small government guy.
Smol,
DeleteThat's why common "prosperity" & other wag the dog schemes are often used by demagogues to appeal to the mobs and stay in power. Eventually it just leads to common poverty.
And the sad thing is that in Real Life most of the targeted Ah Tan's aren't even rich. Just having "more" than the Ah Kow's.
The really rich will usually navigate their way out, or become part of the ruling elites. If not on this continent, then the next.
Maybe that's why Elon Musk is so eager to build a rocket to fly to Mars! Lol!
Spur,
DeleteThat's how the upper middle class in America got "screwed"...
The super rich are mobile or have hordes of lawyers and accountants to help them move their wealth to tax havens all over the world.
Lucky Singapore is still a tax haven!
Come, we welcome your money!
My previous Swedish boss just moved his tax residency from Sweden to Switzerland ;)
Got a lot of flak in the media.
But who wouldn't do the same if we were in his shoes?