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Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

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Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Sat, 19 Mar 2016 11:49 pm

There is no requirement to withdraw CPF funds upon termination of PR status. Ex-PRs can (and probably should) continue to enjoy CPF's yields. Moreover, if you're going to buy a private leasehold or freehold in Singapore it's better to do that while a PR rather than as an ex-PR since there's a lower stamp duty for PRs.

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Re: National Service Deferment Procedure in Singapore.

Postby Strong Eagle » Sat, 19 Mar 2016 11:56 pm

BBCWatcher wrote:There is no requirement to withdraw CPF funds upon termination of PR status. Ex-PRs can (and probably should) continue to enjoy CPF's yields. Moreover, if you're going to buy a private leasehold or freehold in Singapore it's better to do that while a PR rather than as an ex-PR since there's a lower stamp duty for PRs.


Whether to keep or withdraw CPF funds depends a great deal on how much you have in the account and the direction of the exchange rates of your "normal" country. The new Medishield premiums can eat up a lot of any interest you may earn. The exchange rate with the US dollar has been getting consistently worse over time and I see no factors that are going to make that situation change in the near or mid-term. If you don't want the money for other investment/operational objectives and you don't mind Medishield premiums eating into your returns, then sure, keep your money in CPF.

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Re: National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Sun, 20 Mar 2016 12:08 am

Strong Eagle wrote:Whether to keep or withdraw CPF funds depends a great deal on how much you have in the account...

Only in relation to your total assets in order to determine whether additional diversification is merited.

...and the direction of the exchange rates of your "normal" country.

If you are able to predict future exchange rates with at least some accuracy then you can make practically infinite amounts of money. Most people are not superhuman. ;)

The new Medishield premiums can eat up a lot of any interest you may earn.

No, ex-PRs don't owe any MediShield Life premiums.

The exchange rate with the US dollar has been getting consistently worse over time...

No it hasn't. The Singapore dollar is currently much closer to its record high against the U.S. dollar than to its record low.

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Re: National Service Deferment Procedure in Singapore.

Postby Strong Eagle » Sun, 20 Mar 2016 1:40 am

BBCWatcher wrote:
Strong Eagle wrote:The exchange rate with the US dollar has been getting consistently worse over time...

No it hasn't. The Singapore dollar is currently much closer to its record high against the U.S. dollar than to its record low.


Ya think?

http://www.xe.com/currencycharts/?from= ... GD&view=2Y

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Re: National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Sun, 20 Mar 2016 8:33 am

Strong Eagle wrote:
BBCWatcher wrote:The Singapore dollar is currently much closer to its record high against the U.S. dollar than to its record low.

Ya think?
http://www.xe.com/currencycharts/?from= ... GD&view=2Y

Yes, I do. My statement is factually correct. You're looking only at a 2 year period (why?), a period that includes a near record strong Singapore dollar. Yet even within that two year period the Singapore dollar, today, is approximately at the midpoint of that two year range. (And against a particular currency, the U.S. dollar, which is quite strong against other world currencies.)

Read again what I wrote. Portfolio diversification is an important element of any sensible financial plan for long-term savings and investing (e.g. retirement). That includes some currency diversification, even if you are certain (or near certain) you want to retire to a particular country and currency zone. There's nothing magical about the U.S. dollar or the Singapore dollar. You should most probably have some investments that are correlated with both currencies -- and with other currencies. Note also that traditional CPF SA funds have a yield that is tied to Singapore's inflation rate, and over the medium to long term, even if Singapore's currency were to weaken on something of a permanent basis, such weakening would tend to increase Singapore's inflation rate (due to the higher cost of imports), and that in turn gets reflected in a higher CPF yield. This inflation-to-yield transmission is not instantaneous, but it's there, unlike many other savings vehicles.

Finally, in any sensible financial plan you would not withdraw CPF funds instantaneously upon retirement. You would draw them down gradually, annuity-style, in regular monthly payments. You will not try to time currency markets because you cannot.

CPF SA is, quite simply, a fantastic part of most individuals' overall long-term savings, including most ex-PRs'. There is absolutely no requirement to withdraw CPF funds, and most people (if they can afford not to) shouldn't because their next best alternatives are not likely to be attractive in comparison. This is really quite obvious because you only have to look at how many individuals desperately want PR status precisely because they get to participate in CPF. CPF is quite attractive! It doesn't lose that attraction even when you lose (or terminate) PR.

To repeat, there are a couple caveats that go with this general advice:

1. If you need the money you need the money. If somebody (you?) needs an organ transplant to survive, and CPF funds are the only way to pay for that transplant, then go ahead and withdraw the funds to survive.

2. As I mentioned, consider your overall portfolio and its risks. You want to have good diversification. Your CPF account should not be 100% of what you hold, or at least it would be a good idea to diversify by adding other savings if that's where you are right now. An ex-PR no longer can make CPF contributions, so adding to savings outside CPF is the only choice anyway.

3. If there are "odd" tax or social insurance implications outside Singapore to maintaining CPF funds then you might consider a different or modified strategy. (Probably not, but it's theoretically possible.) However, keep in mind that holding funds with CPF provides some country diversification if, for example, you're concerned about the possibility of a banking system collapse in another country.

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Re: National Service Deferment Procedure in Singapore.

Postby Strong Eagle » Sun, 20 Mar 2016 10:13 pm

BBCWatcher wrote:
Strong Eagle wrote:
BBCWatcher wrote:The Singapore dollar is currently much closer to its record high against the U.S. dollar than to its record low.

Ya think?
http://www.xe.com/currencycharts/?from= ... GD&view=2Y

Yes, I do. My statement is factually correct. You're looking only at a 2 year period (why?),


Because anything that happened in the past is gone and irrelevant and there's no point in me looking at a 20 year window. And while no one has a crystal ball, the forces that caused the SGD to drop against the USD over the last two years remain in place, with no signs of easing, only accelerating.

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Re: National Service Deferment Procedure in Singapore.

Postby JR8 » Sun, 20 Mar 2016 11:53 pm

BBCWatcher wrote:Read again what I wrote. Portfolio diversification is an important element of any sensible financial plan for long-term savings and investing (e.g. retirement). That includes some currency diversification, even if you are certain (or near certain) you want to retire to a particular country and currency zone. There's nothing magical about the U.S. dollar or the Singapore dollar. You should most probably have some investments that are correlated with both currencies -- and with other currencies.


This discussion would be more at home in an investment thread. That said I question some of the presumptions made.

Diversification can be important, and one might consider it increasingly useful the closer you are towards retirement, when you are seeking to lock-in the security of an adequate income. While regions, industry sectors, and individual stocks tend to go in and out of favour you have most latitude and time to weather out those cycles when younger.
But you have to be careful how diversified you go. I've mentioned before the concept of 'diworsification' which is accepting sub-optimal returns in the belief that further diversification for it's own sake has merit.

re: Currency diversification. That depends. If you are taking a view on future currency values then you are speculating rather than investing. For most people that tends to be a dangerous game, since you are armed with less insight than just about all the big players at the table.
Besides if you have a portfolio of big cap stocks it is likely their revenue and currency thereof already provides geographic diversification - even if they're all say GBP listed stocks on the London Stock Exchange. Those companies Treasury departments will have the knowledge to hedge FX exposure as they see fit.

I have exposure to the US$, it's hard not to if you own share of MNCs with US revenues. But S$, why would I seek out a S$ income stream? The management of the economy is opaque, and more so re: CPF. If CPF was a voluntary investment I wouldn't choose to invest in it, not least due the lack of transparency. I wouldn't welcome the political risk either. What might have the govt to lose taking a windfall haircut-tax on the CPF of 'PR-quitters', say, ohhh, right before an election? And giving it to 'hard-working loyal SCs who are committed to this country's future'?

No thanks, I'll stick to transparent products that I understand and specifically select.
'Do it or do not do it: You will regret both' - Kierkegaard

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby Strong Eagle » Mon, 21 Mar 2016 10:14 am

Re: BBCW -

ped·ant
ˈpednt
noun
a person who is excessively concerned with minor details and rules or with displaying academic learning.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Mon, 21 Mar 2016 10:36 am

No, I just don't like bad advice. There's some flat out bad advice posted in this thread. Let me state up front, if it isn't obvious already, that I do not sell investments, work for a bank or other financial institution, or otherwise have any financial stake in what you do or don't do with your money. But if it were my CPF money, I'd be highly inclined to "let it ride," in full, assuming I felt comfortable with my overall portfolio diversification. (Surely and fortunately I would in my personal situation.) There just isn't any other AAA rated government paying 4+%, with inflation adjustment (which is inherently currency adjustment also, to some extent) and annuity features, in any currency to anybody except perhaps to their own government employees. GREAT DEAL! I'd keep it. Find me a better deal for that type of asset, for that portion of my or anybody's long-term savings portfolio, and I'll be interested. But I assure you it doesn't exist for the general public. CPF is unique.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby the lynx » Mon, 21 Mar 2016 11:58 am

True. Ex-PR do not need to worry about MediShield Life premiums (which is by the way, a very painful amount to pay if you are an absent PR - source here: https://www.moh.gov.sg/content/moh_web/medishield-life/premiums---subsidies/how-to-receive-premium-subsidies/subsidy---premium-tables.html)

Only Malaysian ex-PRs are not allowed to withdraw all CPF once PR is renounced, so if I were to be a Malaysian ex-PR I may as well adopt BBCWatcher's strategy and push all monies into SA to gain that 4%. Between Malaysia and Singapore, Malaysia would croak belly-up first, faster than Singapore could spell her disgraced PM's name in full. For others who are less investment-savvy and risk-averse, surely this might suit their appetite, right?

PS: I just looked at the premium table. Crazy - more than $300 annually without subsidy?! You've got to be making less than the mean salary to actually enjoy the subsidy.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby x9200 » Mon, 21 Mar 2016 12:15 pm

Re: CPF. I guess the keyword is optimal. It varies with an individual's skills, knowledge, experience and willingness to take a risk. What may be good solution for the Lynx, BBCW or myslef, is not necessary the same for example for JR8.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby sundaymorningstaple » Mon, 21 Mar 2016 12:25 pm

Crap! I'm looking at 815/mo premiums! I used my medisave 2x in 25 years. Now way around it and virtually paying for nothing. But as I cannot avoid it, at least the interest rates are good and after deducting the Medisave Life premiums, I'm still getting a pretty good nett interest rate.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Mon, 21 Mar 2016 12:52 pm

But that makes sense, SMS. For most people medical care has two big peaks: infancy and childhood, and old age. You're approaching the latter -- as we all are. MediShield Life, like just about every other form of regulated medical insurance, public or private, is not fully age-rated. Yes, older citizens and PRs pay a higher MediShield Life premium, but it's not high enough compared to their medical costs, in aggregate. Yet just like fire insurance it is insurance. You're not hoping for a fire or cancer, but if that calamity strikes then you have insurance to cover it. (Although MediShield Life is not terrific insurance. It's very basic, priced accordingly.)

I'd say MediShield Life is generally a good deal for residents of Singapore, and you are one. (Not that there's any choice if you're a citizen or PR.) It's probably not a great deal for at least these three cohorts:

1. Those who have and maintain some other, much better insurance other than an Integrated Shield plan (which is based atop MediShield Life). If you have fabulous global, unlimited medical insurance from a U.S. carrier (Cigna, Aetna, etc.), and you're going to keep that forever, then MediShield Life is not so exciting.

2. Relatedly, citizens and PRs living outside Singapore, with stable immigration statuses, who live in countries that provide them with excellent public medical insurance and services. (France would be one such example.) I doubt a Singaporean citizen living in France, with a stable immigration status, would run back to Singapore for any medical reason. It's possible, especially if that Singaporean has family back in Singapore -- the Ministry of Health's logic is logical -- but it doesn't seem like it'd happen that often.

3. Truly wealthy people who genuinely can self-insure. (Although for them MediShield Life premiums are a minor irritant. Less than they'd spend on one glass of whiskey, probably.)

All that said, it's not a choice. It's a tax, and MediShield Life is the benefit. The choice then becomes whether to renounce citizenship or PR status if you don't like that tax -- if the disadvantage of that tax outweighs the benefits of your status, including MediShield Life coverage.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby BBCWatcher » Mon, 21 Mar 2016 1:36 pm

x9200 wrote:Re: CPF. I guess the keyword is optimal. It varies with an individual's skills, knowledge, experience and willingness to take a risk. What may be good solution for the Lynx, BBCW or myslef, is not necessary the same for example for JR8.

I don't think this is particularly complicated, though. There is a global financial market that includes Singapore, with some very smart investors -- much smarter than any of us, probably. Those extremely savvy investors are currently (as I write this) willing to lock in their after-tax money, in Singapore dollars, with the AAA rated Singapore government for 10 years and receive a nominal Singapore tax free yield of about 2% per year with zero inflation adjustment. Considering all risks, that's the current market price for Singapore Government Securities in the open global market.

....OK, so you're an ex-PR let's suppose, and you're holding CPF funds that pay a minimum of over 4%, Singapore tax free. You haven't locked up your money for 10 years(*) -- you can withdraw those CPF funds any time you wish. If you need to pay for a kidney transplant next year, no problem. But as long as you have those funds parked at CPF, they'll get over 4% minimum yield and with an inflation adjustment if needed (if inflation increases).

Take a close look. The global financial market is willing to settle for less than half what you're getting paid holding CPF SA funds, even when the global financial market locks up its money for 10 years. GREAT DEAL! By definition.

Again, I don't recommend that anybody hold only CPF SA funds if they can save more. That's not consistent with portfolio diversification, an essential element of protecting and growing long-term wealth. But CPF SA is a tremendously excellent deal, as the global financial markets themselves loudly demonstrate every minute as they trade Singapore government debt.

(*) Yes, you can sell a Singapore Government Security on the secondary market before maturity. So your money is not truly "locked," but you are taking some risk that bond prices will fall/bond interest rates will increase, and thus you might not get back all your principle if you sell early. That's not like CPF -- you don't have that risk with CFP.

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Re: Withdrawal of CPF - Split from National Service Deferment Procedure in Singapore.

Postby x9200 » Mon, 21 Mar 2016 2:19 pm

BBCW, what I mean, there are people like myself who are simply not into any of such subjects - I'm completely ignorant and always look at low risk savings - before the medical insurance robbery I would call it ideal deal. And there are people who take calculated risk and thanks to their experience and knowledge they win much better money. For them, I could imagine CPF may not really be that attractive if somewhere else they could and earn say, 10%.


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