A view on financial planning

COMMENT POSTED IN MY BLOG (EDITED)

Mr. Tan,

Would you then agree that the government should only make it compulsory for "people who do not have enough money, and need to stretch it for their lifetime" to purchase an annuity?

In view of protecting local citizens, I agree that some form of scheme is neccessary especially for the mid to lower income. However, I do not see how a payout of 400-500 dollars for the rest of a person's life a month can significantly help. For example, 400-500 dollars for today is probably okay. Do you think it would be sufficient in 30 years time? What would 500 dollars buy you in the future?

Singapore should review once again the possibility of gaining higher returns on the CPF or even looking into the main purpose of CPF itself. Is the CPF for you to buy a home? Or for you to have some financial independance when you are unable to work? Why not force more money into the SA since it is already at 4%?

I for one believe that the OA CPF purpose in Singapore is to allow everyone to purchase a home and not something you can fall back on when you retire. Simply put, pay for your home with your CPF. Keep the minimum sum in your SA (because you have no choice but to comply).

Make sure you save at least 30% of your earned salary (WHY? because you don't have to pay the housing loan with your personal cash, so SAVE it!). Invest your savings into low and medium risk money markets or high dividend paying stocks with strong management and fundamentals.

Last but not least, educate your children. If you're stuck in this boat, a wise person once said to me 'one generation must always suffer for the rest to prosper'. How willing are you to give a better life for your children. As Chris Gardner says 'Education is a way out'. Educate, educate, educate.

Good luck.

MY REPLY:

I agree with your views, in particular:

1. Buy an annuity to stretch your limited savings for a lifetime
2. The annuity should increase to cover inflation
3. Save 30% of your earnings (but invest in and invest in a low cost, high return, well diversified fund).
4. Educate your children (but make sure that it has its payback).