Growing up, I used to have some relatives and friends telling me not to buy 4D. 

It is one Singapore lottery that seems to be less popular as I grow older. My parents used to buy it. Strangely, non of my colleagues, or co-worker mention buying it.

Now TOTO, which is another form of lottery, that is another story all together. During Chinese New Year, when the pool of money snowballs to a large million, it is a must purchase for many.

I guess a common gripe about 4D might be that, people don’t commit a lot to buying 4D or TOTO.

With the amount, you will win perhaps $2,000 to $10,000 with 4D. With TOTO, the winning is much more. However, strangely, I thought the odds that people win 4D is much higher.

I think the problem is that people do not think a $2,000 to $10,000 windfall of money is going to change their lives. 

And that they are not going to win so frequently that it will matter to them. 

And this is one of the problem that I ponder about.

How useful is $10,000 to $200,000?

I wrote an article explaining how you should look at wealth building as a series of milestones. It is called the 11 Stages of Wealth. 

You identify where you are. And then you take a look at what is the stage next and try to aim for it, if its compelling enough.

At each stage, you realize that the wealth that you build up has a functional use for it. (you should check it out. its a good conversation starter to circulate among friends. At most they will say how ridiculous these stages are)

At some stage, it provides a cash flow to pay for your current expenses. At some stage, it fortifies you against negative monetary surprises. At some stage, it reduces financial anxiety.

The difficulty is that  after paying off all your high interest debts, leaving you with perhaps your mortgage loan (Stage 3), there is a wiiiiiiiiiide gap to reaching a level of wealth where your wealth assets are able to provide a cash flow to pay for your annual basic expenses (Stage 7)

So I inserted 3 stages in between. These are building up lump sum of wealth that can be rather useful in life. 

You could cash flow them by just spending them like this. 

But the question is, what is so useful of these lump sum?

These lump sum, might not be very big (not my opinion. Its what a lot of you think. Purely because we lived in such a high income and expense place). 

In order for me to tell you to put them away, and not spend them now, I got to give you a compelling enough reason.

It is not that I cannot come up with one, but that writing them would be rather bland. 

Until I read this article in The Topic that I thought explains what this amount of wealth is useful for.

The Topic asked how gifts, insurance payouts, the MacArthur Genius Award, book deals—ranging from $8,000 to over $1 million—were spent. So these are like windfall of money, that people get from winning a competition, winning a lawsuit, from an insurance payout, winning a prize, doing a side hustle. While they are not very famous people that you would know, some of them are rather accomplished in their own fields (including a long term HIV survivor).

And I pick out some of the case studies that illustrate what kind of utility a lump sum of money, that is not outrageous, can give you.

1. Giving it Away. Because Relationships provide more Financial Security than Money

Maddy inherited $250,000 when she was 18 years old. Her Jewish ancestors passed these money down so that their next generation can have a comfortable life. 

Maddy discovered Resource Generation, a multicultural organization of young people with wealth and privilege, who are organizing to reinvest the money back into the communities that they were taken from. 

So she decided to give away $160,000 of it. 

Most adults told her that she should “keep some money for herself”. 

What I like was the way she said about financial security:

I take it into account, but I also know that I want to try something different than what the generation before me has primarily done in my socioeconomic group. I’m still figuring out what financial security looks like for myself. But so far it’s meant working, and it’s also meant building relationships, because to me relationships have a lot more security than wealth.

Most of all she doesn’t like to be a gatekeeper of wealth. That means she gets to decide where the wealth goes. 

I think out of all the accounts, I feel I admire Maddy the most. I always say that I know what is enough looks like.

However, if I have enough, then why do I keep those excess? Why don’t I give it away? 

If I don’t give it away then do I really have enough?

If $XXX is really enough for financial security, and you are not giving that away, it seems that we are always chasing a moving wealth target. 

As a 39 year old looking at Maddy’s situation, I felt that where you come from drives the way you look at money. She probably came from a background where money was less of a problem and that allowed her to weigh money versus other things of value in life. 

And she thinks that relationship is a stronger security.

I am not sure. 

I came from a situation where money is more scarce, so money will always take a central place in my decision making. I gave money more power than Maddy did. 

And since no one helps you, you always try to be as self sufficient as possible because, no one will help you. 

It is a totally different way compared to a privileged background where help is always around. Thus, we look at relationships very differently.

I always think money will be a better bet than relationship. Except that over time, as I do Investment Moats, BIGScribe and my day job more, I can see how relationships and network can buy you financial security.

2. Buying Joy for Herself and Other People

Joy is a moment of great pleasure. Usually, as they say, it came about because of something you do or something that came along with an experience.

Like Maddy, Heather McHugh came into possession of a large sum of money ($500,000).

Heather is the second person in this article who won the Macarthur “Genius” grant, for her work in poetry. This grant is from the John D and Catherine MacArthur foundation for USA individuals who demonstrated “extraordinary originality and dedication in their creative pursuits and a marked capacity for self-direction”

Heather took part of that money and founded the nonprofit Caregifted. Heather never had children, but the child she was closest to had his first child, who was microcephalic and needed a lifetime caregiving. 

Heather used part of the money to get them the care they needed to find new work nearer to the wife’s parents, so that they can create a local support system (perhaps this is what Maddy talked about that relationship is a better financial security than money)

With Caregifted, Heather worked with caregivers of the most severely disabled family members, caregivers who had been at that devotion for 10 years or more:

We asked what their dream vacations would be if they could choose, given the locations we had lined up (on islands, mostly). Some simply wanted to sleep late. Some wanted a meal out. Some read a book for the first time in years. Some brought a spouse for a much-needed recharge of strained relationships. All wanted to see new territories, visit the ocean, visit gardens, wineries, fishing, markets, tourist excursions.

People who heard about Caregifted often came to us because of my life in the arts—many were artists who had not been able to reflect or catch their breath since giving birth to a child who had to battle severe challenges. All of them recovered some perspective on their own choices, chances, and changes in life. Some person they’d not been in years began to start a conversation with their futures.

And Heather explains the intangible feeling of joy that came with giving the money away:

It was a jolt of joy to give away that money—the kick of actually materializing a dream for someone who unquestionably needs it. No fancy home or golden furniture or vacation indulgence of your own can ever give you back the gift this gifting does.

McHugh was elected a Chancellor of the Academy of American Poets in 1999. She taught for some 40 years at American colleges and universities, including the University of Washington in Seattle; and she still takes some students through the low-residency Warren Wilson College MFA Program for Writers.

In 2009, she was awarded the MacArthur Foundation “Genius Grant” for her work and in 2011-2012, she started the non-profit CAREGIFTED ( http://caregifted.org ) to provide respite and tribute to long-term caregivers of the severely disabled and chronically ill. For her work there she received notice from Encore.org’s Purpose Prizes.

3. Reinvest into Capital Expenditure for the Business. And Buying some Financial Security

Tony Hightower won $250,000 on Who Wants to Be a Millionaire? 

So what he did was to take the money and reinvest back into his small trivia business in NYC. The trivia business hosts one trivia night a week at a bar. 

The business was doing fine, but Tony was living month to month. Without money, he cannot expand it.

When he won Jeopardy! and earned $23,000, he put it into a nice lounge and some nice things. With this bigger winning, he hired 2 people.

And he finally go a retirement account. 

Two hundred and fifty thousand dollars felt like I should do something meaningful with it, because I didn’t want to wake up one morning and have it be gone.

I was in my late ’40s, and I had never been anything other than a subsistence worker my entire life.

I’ve always lived as if I were two bad weeks away from sleeping in a cardboard box. This is the very first time in my life where I feel like that might not be the case.

His trivia business is now doing well.

Was it the business that gave the financial security or was it the retirement account?

I think the retirement account assured him that he is not doing stupid things with his money. In the event that if something goes wrong with the business, at least he has the retirement money.

But it has to be the thriving business that provided that financial security.

4. Gifts and Worry/Guilt Free Spending

Danielle Henderson works as a story editor for Maniac. She shares about what her first script fee which is estimated around $27,000, mean to her.

Danielle grew up poor since her parents were on welfare. Thus, financial security was an issue. 

So even with a job, and small windfalls such as this, she still does not trust it.

Danielle spoke about what having a larger budget brings to her life:

My grandma’s getting older—she’s 86—and she’s starting to exhibit signs of dementia, and I’m able to send groceries and not think about it. I’m able to send her a little bit of extra money so that she’s not stressed out about paying for things. I set up automatic payments for a lot of her accounts through my accounts.

That’s the best feeling of all. It is kind of nice to be able to go to Trader Joe’s and just go HAM on snacks and not worry about it. But more than anything, I feel better about my life and my career when I’m able to give that back to other people. I cannot understand how a single person can have a million dollars in this world and feel like they need it all for themselves.

Some times we get so comfortable in Singapore’s affluent middle income life that we failed to notice that some of these spending that we could easily afford is a luxury that gives others very high job and satisfaction.

5. Buy Household Help

Astrophysicist Sara Seager’s first husband got cancer and died in 2011. She was working 60 hours a week and she had a child.

She is a professor at the Massachusetts Institute of Technology and is known for her work on extrasolar planets and their atmospheres. She is the author of two textbooks on these topics, and has been recognized for her research by Popular Science,Discover Magazine,Nature,and TIME Magazine. Seager was awarded a MacArthur Fellowship in 2013 citing her theoretical work on detecting chemical signatures on exoplanet atmospheres and developing low-cost space observatories to observe planetary transits.

A lot of the money is spent to exchange for time and help. 

If you have kids, or a person who relies solely on you, not only do you have to take care of them and want to spend time with them, but you have to make their breakfast and their lunch, if they’re really little. And then clean up after them. There’s this endless series of chores. I got tons of responses from people saying, “I can’t believe you said that,” because people won’t admit that. People don’t want to admit the price you pay for working.

Because I was having to get up and go to my job and be at work, get my work done, and come home. You can’t have the job I have as a single mom without a lot of extra support. Maybe you have your parents living with you, or you happen to have extended family who live on your street, but you just cannot do this alone.

Then when she won the MacArthur “Genius” grant ($625,000), she spent the money on baby sitters, bringing the family on conference.

Without the MacArthur money, all my time was spent thinking about household problems, things I had to do. When you’re driving in your car, or you’re walking outside, or taking some time off, what are you thinking about? “I’ve got to get the laundry done.” Or, “I’ve got to get groceries.”

And this is what you would do if your windfall is on an insurance policy against your spouse. 

The money is meant to cover the living expenses for the years before your child becomes productive. 

If you have saved up a lump sum, you could view it as providing a cash flow so that you can get your family over the hump for 3 to 4 years.

Like Sara, Lydia Kiesling saw the windfall wealth that she got as a way to offset her daily living.

Lydia sold her book in 2018, The Golden State (2018) in San Francisco and got a low six figure amount. A six figure income might look big (debatable for the Investment Moats audience), but she got it in 4 separate payment over 3 years.

And each year, she has to pay 35-40% in estimated quarterly taxes. 

She would put a portion of it into her SEP IRA, or her retirement account. 

The way she looked at this lump sum, is as if suddenly she became a middle income six figure worker. 

It just goes to her expenses:

So for three years I have a salary of some kind. It works out to having a job that pays $15 an hour, which is a minimum-wage job in San Francisco, where I live.

I was able to sell the book, so I was like, “Thank God I did it, I did the thing,” but basically we had been paying for childcare for my daughter in that time, and my Millions thing didn’t even totally cover that. My husband has a full-time job that covered rent and expenses; my freelance income mostly covered the daycare, but we had been kind of operating at a loss.

She explains how expensive it is to live in San Francisco (she described $117,000/yr as low income for a family) and how much childcare was pivotal in her writing another book. 

6. Buy into a Wealthier Social Circle. Firewall against Financial Anxiety

We all fantasize about taking small bets, and those small bets giving us a pile of money.

Well for Bill Wasik, the deputy editor of New York Times Magazine, that happened.

In 1996, Bill was out of college. He didn’t know what he wanted to do. So he took on a low level research job that made investments in start-up tech companies. One of the advantage is that the firm allows you to make investments in companies the firm was investing in, up to $5,000 per company, per investments. 

As he does not have any money, he have to take from the little money he made that time. So he would put $250 to $500 into companies. 

3 years later, he moved to New York and worked as an unpaid intern at a magazine. It is during this point where those small investments started paying off. A $300 investment became $10,000. A $500 became $50,000. In total that came up to about $100,000.

$100,000 may not be super, but we have to see the context where Bill was. The people around bill was scrounging and making very little money. 

Bill let us in on the money culture in New York during that time, and how $100,000 can be life changing:

At the time I came to New York, everybody pretended they had the same amount of money. Even people who you knew or suspected were very wealthy would act like they didn’t have wealth, and people who really were living close to the bone would still feel like they wanted to or had to come out and get beers, get a drink, and do things socially to the same extent as everybody else. Because of the money I made, I was able to live in a very expensive city and do the things that people around me were doing, without the feeling of anxiety that so many people had hidden—or didn’t hide—about money in an industry where nobody gets paid very well.

Bill was able to get access and network with people. If he didn’t have money, he would have to do what his peers did, pretend that he could afford it and put drinks on credit card debts to network.

You are not going to show it on the outside, but deep in the night, you are going to get haunted by that financial anxiety.

This networking allowed Bill to realize the real truth in this “bubble” as he called it:

Americans love to tell themselves lies about class. And of course, wealthy Americans like to tell the biggest lies about class. And I feel like having this money, it was like I was a secret trust-fund kid. I hadn’t grown up with that kind of money, but the fact that I got it in this weird and unexpected way wound up giving me insight into the bubble that people who have a lot of available money live in. I’d like to say that it made me realize how soulless it is inside that bubble. But in fact, it’s super nice inside that bubble. And I only wish that my own version of the bubble had been bigger, such that I feel like I could still be living inside it. But it doesn’t quite feel that way.

I would contend that this amount of money buys Bill a perspective of what people spent their whole life chasing early in life, let him see it as it is, and so that he do not spend his whole life chasing.

This is what some of my friends who grow up wealthy, or those that mixed with those more wealthy friends said.  They are not like those you see on Instagram and such. They try to remain as grounded as possible, even though there are times they didn’t know their privilege.

Because they have access to a lot of what a lot of us is chasing all our lives, they discount those stuff massively because they know people overvalue them too much.

Bill also explained that the stream of cash flow generated by that lump sum windfall was able to let him patiently wait for the spot of editor to come up:

After I did the unpaid internship, I got a job as an editorial assistant at a magazine. And about a year into that, the other magazine that I had done the internship at said that there was an editor there who was going on maternity leave, and if I was willing to quit my job, I could come and be an editor there. I’d be on the masthead and get to do my own editing, but with no guarantees that when the other editor came back three months later, I would have a full-time job. And I did it. I think I never would have done that if I wasn’t sitting on a nice big bank balance. And lo and behold, that did turn into a permanent job. And it put me on a career track working at magazines that I don’t think would’ve happened otherwise.

This is the privilege of the more wealthy:

An external stream of cash flow to cover large part of expenses ==> You can focus on your craft/technical competency with less financial anxiety and distraction ==> Part of the process to get better to eventually earn a higher income ==> Greater and more valuable human capital.

7. Medical Help and Creating a Business at the End of Your Life, then Realizing Your Life Might not End

Perhaps one of the most fascinating sharing was by Sean Strub. 

Sean was diagnosed with AIDS in 1985. And he is still around today. He survived HIV for 34 years. His case study will show you how you look at money when you do not have time left, and then realizing maybe you have more time left. 

Sean got around $500,000 via settlement of viatical life insurance policies. Basically you know you are going to passed away soon, so you name another person as a beneficiary of your life insurance. In return, the person give you a sum of money that is much smaller than the payout.

It works for the other person because you are going to passed away soon. It works for you because you get the money needed for medical aid and enjoyment.

Sean took the money and started Poz magazine. He was tired of the information provided to people living with HIV that was invariably cheaply printed on newsprint not in color. He wanted to write about friends he are affiliated with.

His loved ones thought he is risking it by putting all his resources into starting a magazine that had a very uncertain future.

Sean reveal something that I seldom read about money: It is a different feeling :

1. When you are going to die
2. You do not have to worry of old age
3. You do not need to think about long term financial security
4. Don’t have a direct responsible to support people

Sean lasted longer than he and a lot of people expected. Combination therapy came out in 1996 and he got better. 

By 1997 he realize he has been around for much longer than he anticipated, how long  could he last.

I realize that had he been spending that money away frivolously to enjoy his end of days, he might not have the financial ability to live an even longer life. 

Money can be an Enabler for Sensible Living

You can buy a fair bit of things with $10,000 to $200,000. In Singapore, you could top up a bit and buy a rather nice car. Great clothes, nice vacation can be purchase with this sum of money.

However, we can group what these folks do with their money into the follow categories:

1. Taking care of the essential expenses. For themselves if not for others. This frees them up to focus and do the best work. And this builds up their human capital
2. Buy experiences and education. Enables them to participate in activities that otherwise they cannot. Think 1 semester overseas study program. What they learn builds their human capital
3. Capital expenditure for their business. Enables them to execute their plans to take their business to the next level
4. Buying Joy for themselves or others
5. Eliminate Distress

I reckon a lot of us would do 2 to 4 well. What we are less aware of are #1 and #5.

For each of us, every $1 can be used to be put away to some other delayed goal, or we can spend on essential expenses and non-essential expenses. 

If we spend on each, we can be very happy, or not feel much. If we could not spend, we will feel sad or don’t feel much. 

Due to the affluence of this place, we seldom do not realize that a lump sum of money is able to eliminate extreme financial distress or increase joy. The boxes marked in red is where we should allocate the money to.

Solve someone’s problem of not being able to spend on the essentials. Because this probably give them enough stress. 

Help someone who couldn’t get some non essentials that you know will make them very happy. 

There are some more windfall case studies that were not mentioned and you could check out the article to read more about it.

Now it is your turn. If you came across a story, or you have spent $10,000 to $200,000 and have benefit in unique ways from it, let me know in the comments below.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

I saw this article that came up on my Facebook. It’s purpose looks more like to gain sympathy from us and to educate us on the problems of CPF that people are not telling us about.

Christopher Pereira was a die-hard PAP supporter. He was known for making figurines of some prominent PAP leaders in the past. 

He got a shock of his life when he was told by a CPF staff that he should starting saving to top up his CPF savings. He was told he needed at least $171,000 in his retirement account to get a monthly payout of $458/mth for 28 years. 

Mr Pereira felt that $458/mth is not enough to pay for his expenses. He is quite disappointed so he decide to switch to making figurines of former Secretary General of Workers Party Low Thia Kiang.  

The following is what was posted:

If you are interested in the article you can Google “61 years old die-hard PAP supporter shocked that CPF staff asked him to “save” to top up his CPF”

If you understand the CPF payout, or have used one of their calculators, you would have realize this is closer to a post that is trying to mislead people than to bring some grave to our attention.

Mr Pereira falls under the age where he will auto enrolled in CPF Life, so what the CPF person is talking about should be the Full Retirement Sum (FRS) that he had to hit, to get the designated payout. 

However, the payout is abnormally low. 

Whether it is real or not, we can probably draw reference from an article in The Online Citizen where a reader wrote in that he is quite shocked  that the payout that he would received $482/mth from the Retirement Sum Scheme (note this is different from the FRS stated earlier. Google “Totally illogical to suggest CPF payout term of 28 years where there is no one to receive balance payout”)

The payout is rather similar and in this case we can see the balance that the reader had in the retirement account. In this case, the reader gets a annual yield close to 6.3%. This is hard to find anywhere else. 

It is likely Mr Pereira’s CPF retirement account is around this range, and have not reached the FRS of $171,000. In any case as a 61 year old the FRS in 2013 should be closer to $139,000, which is what is applicable for him at age 55. 

If we use the CPF Life estimator for half the FRS, which is equivalent to the basic retirement sum, the payout is higher than this $458/mth he said. 

The FRS payout for $171,000 is pretty high compared to what is posted as well.

Given this, that post is likely very political driven and serves to shock more people about how deficient the CPF for your retirement. However, it misleads fellow Singaporeans more than helped them in my opinion. If we read the comments section, you realize that Singaporeans are pretty informed to think that there is something wrong with this picture.

I would think that the CPF personnel would not make such mistakes.  There is much that have not been said, and that is why the numbers given is much lower. 

The self examination is that if you look at such an article(s) and believe that it leans more towards the truth than you think this is false, then you probably do not know enough of the retirement system in the first place.

More worrying, if you expect that despite how much you contribute to the system and you get a sum of $1000 to $3000/mth in annuity income for life, then you need to get financially educated, re-calibrate how much realistic returns financial assets will get us. Then you will realize some mathematics that goes on in your head is a bit ridiculous. 

Lastly, having nothing in your CPF is OK. Not satisfying even the basic retirement sum (half the full retirement sum of $171,000 currently) is OK. You just have to have enough wealth out of CPF. 

In the worst case that you cannot find something good for your retirement, you could always top up your retirement account and enrolled in CPF Life to get the above high yielding yield.

If you have very little in CPF and very little outside of CPF, then that is a precarious position to be in. 

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

The government, the union and the employers are unanimous. They agreed that changes needed to be done on Singapore’s retirement age and re-employment age.

Manpower Minister Josephine Teo asked the Tripartite Workgroup on Older Workers to look into whether we need to change the retirement age of 62 and re-employment age of 67 and if they should be made when should they be made.

Singaporeans living longer. Josephine Teo’s data shows that on in two Singaporeans aged 65 today is expected to live beyond 85, and one in three will live beyond 90.

Longevity and demand for greater quality of retirement would mean that workers need to save longer.

The time for proposal till final implementation will take some years.

Josephine Teo explained that in many other countries it is rather difficult to move on such issues due to “Deep distrust and division prevent people from focusing on the future.” She said that we must try to avoid that and do better.

She also responded to MPs Foo Mee Har (West Coast GRC), Png Eng Huat (Hougang) and Sylvia Lim (Aljunied GRC) who asked about retirement adequacy, Mrs Teo said that retirement adequacy is improving, with more than six in 10 active CPF members turning 55 last year being able to meet the Basic Retirement Sum of $85,500.

How does Kyith feel about this? 

The age where you can withdraw money from your SRS penalty free, is linked to the statutory retirement age when YOU first enrolled in the SRS. Since the statutory retirement age now is 62 years old, if you open your SRS account with a small sum of money, that would fixed the penalty free SRS withdrawal age.

So whether you need it or not, you can do it now. You can read my previous article on opening my DBS SRS with $1. 

I think they might have an easier time to reach a consensus over the age, then the amount of CPF contribution for those that are older. 

In my past article, I have stated that it is better to extend the retirement age. 

This is provided the retirement age, and the re-employment age works as it should. 

Employers are not suppose to dismiss the employee due to age if the employee is below 62 years old. Employers must offer re-employment to eligible employees who turn 62, up to the age of 67. This provides older workers with more opportunities to work longer, if they wish to do so, while at the same time having the choice to retire when they have reached 62.

How many of us believe this to be the case? 

There are some organization that just do not fire people, even if you wish they should. I was told to my face they just do not fire people. And there are people that should really be fired. 

On the other end of the spectrum, you do not need to fire someone. For someone that is older, it is easy to set a a high benchmark and show them that they cannot hit it. Less to no performance bonus, no increment. Report to people you know they don’t like. 

Given this, you can understand why Non-Constituency MP Daniel Goh debated that we should just remove the retirement age. Josephine Teo said that it will be bad news for employees as the employers would have no obligation to keep employees up to  a particular age.

Now I wonder how antiquated is that kind of thinking.

If a worker is in depend, is good, brings in the business, keeps the morale of the colleagues high, even if the person is 67 and can still contribute, the employer will draft a contract for him or her. 

In contrast, if the business is no good, and the person is worth less than what the employer is paying for him/her, they will just activate the strategies to get rid of the person.

The retirement age seem to be a rule to preserve those mediocre or poor workers. So if we need such a rule, then what does that say about us as a nation?

Don’t let others dictate your Retirement Number

Or for the matter whether you retire or not. 

The discussion on retirement, to me, feels very borne out of our fear that we do not have enough for retirement. 

Better yet, it is borne out of our fear that when we are in our 60s, our capacity is so poor that without retirement, it is horrendous.

If this is your fear, and this fear consumes you so much, then my solution to you is:

1. figure out how to have adequate wealth for financial independence
2. figure out how to have the same level of cognitive and physical capacity when you are in your 60s

We get angry because we are afraid that we cannot reach this high level of retirement adequacy and rules the government set.

Those that read this blog, and embark on the journey in some ways are likely not worried. 

This is because they have a good idea how to derive the sum of wealth they need and how to go about get it. More importantly, even if they have not reach it, they have enough tactics to make what they have last longer. 

I think many would be aiming for having wealth other than CPF Basic Retirement Sum. If we are complaining that CPF is not adequate, then we jolly well need to make sure we have liquid investable assets that is not in CPF.

Which makes the idea of checking retirement adequacy by measuring it against CPF BRS (like what Josephine Teo described) to be a little ridiculous. 

The second part is to find out how you could make yourself strong so that you could work beyond the retirement age. 

I think work gives us a lot of focus. It distracts us from loneliness. It allows us to find an evolving tribe. The bane of work is poor health. 

And poor health is a fear of many. 

Do I have the solution? No. You might have your opinion here. I just sprain my back these few days and felt that this competency is harder to achieve than the money aspects.

One point that I am trying to make is that you might struggle with wealth accumulation, but you could have the health aspect figure out rather well. We all have our own struggle and its up to us to make the best of our situation. 

If you find it a struggle to accumulate enough now, you have enough run way to ensure that you could work longer. 

Dictate how long you wish to work, whether you get paid or not, what kind of work that you wish to do. Financial independence is about the money, but it is also not about only the money. 

Work gets good if you do not have to depend on it. 

This Country is Conducive to Retiring Early

We live in a country that, by all standards, favors those that make good life and economic decisions. 

Those that are able to, will find that they can pick and choose the grade of goods and services that they subscribed to. The taxation is conducive to let you accumulate wealth, and de-accumulate wealth without too much leakage. The lack of estate duty, capital gains tax on many financial assets, dividend and interest income tax on distributions is a big advantage.

When there are a lot of taxes, like in other countries, you are being forced to put your money into private or public retirement accounts, that locked you in till near retirement age, to give you incentive to save money and reward you by paying less effective taxes. 

Whether you use our private retirement contribution account, the SRS, is less important. For most people they could accumulate well without the SRS. 

That means that you can build up your wealth, and choose to semi-retire, Barista FI, or be financially independent much early. 

However, it absolutely penalizes you if you make a lot of bad life, working, wellness and financial decisions. 

It also penalizes you if the odds are not stacked in your favor. 

So here is one of the reasons why I right these outlandish financial independence stuff:

If you do not reach there, at least you will have more than a CPF Basic Retirement Sum so that you can top it up next time and get an annuity income. You can attempt to try and reach financial independence and not reach there. However, what you learn along the journey will make you financially agile that you would be able to make more good decisions than bad, and not get penalized for it. 

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

If you are getting ready for your retirement, you have to tackle the problem of securing a long term, low volatile cash flow, while keeping your assets intact. 

This is a problem posted to me many of times.

My solutions is that if you invest in a portfolio of equities and bonds, you have to live with the volatility. However, if you build up your competency, you could safely withdraw 3 to 3.5% of your wealth, and adjust your spending systematically. (do read this further in my retirement planning / financial independence preparedness section)

If this is too much for you, a retirement plan, or an anticipated whole life plan might be helpful. 

Yesterday, one of my readers was asking me about this whole life plan Infinite Harvest by China Taiping Insurance Singapore. This product, I feel targets the affluent, but probably is something that the emerging affluent would take note as well.

So I got one of my friends to help draft a benefits illustration for the policy.

The Infinite Harvest is an Anticipated Whole Life Insurance plan. In a past article, I introduce readers to insurance plans that provide dividend cash flow consistently. 

Little did I know there is a name for such policies. Had I know, I would not have butchered some names for it.

However, the important thing is to understand what these kind of policy does.

An anticipated whole life insurance provides you with a long duration of consistent cash flow:

• you pay a premium which is invested into a participating fund managed by the insurer
• after certain years, the whole life policy provides you with a cash flow annually
• the cash flow are usually part guaranteed and non guaranteed
• aside from the cash flow, the policy also accumulates in value
• if the assured passes away, the death benefit are usually higher than the premiums paid

The Infinite Harvest is an anticipated whole life that is geared for retirement purpose, but as you see, there are other use of it as well. You can see it as an asset to provide an income stream other than your job.

So here are some of the main features:

1. The plan is a single premium whole life insurance policy. This means that instead of paying monthly or annual premiums, you pay a lump sum premium at the start
2. After 5 years, the policy will pay out a monthly cashback/cash flow. This cashback is made up of a guaranteed and non guaranteed component. The frequency is only monthly. You cannot change the frequency
3. If you do not wish to take a cashback, you can accumulate the cashback. The accumulated cashback earns a return at a non-guaranteed rate of return
4. If you have selected cashback, you could switch to accumulation mid way and vice versa
5. You can set the assured to another beneficiary. You can also change the owner of the policy. This means that you can set the assure to your son, and later on passed the policy to the son
6. If the assured passed away, 2 things would be paid out. The first is a death benefit less the debts owed, which is the higher of (101% of the single premium you paid originally or the guaranteed surrender value). The second thing is a non-guaranteed terminal dividend
7. If you choose to surrender the policy anytime. If you surrender in day 1, you will get back 80% of the single premium. (If premium is $500k, you will get back $400k). The surrender value will increase over time. You will also get a non guaranteed terminal dividend
8. By the 10th year, if you surrender, you will get back 100% of the premiums paid
9. You can choose to do a partial surrender of the policy, but the minimum monthly cash back has to be at least $400/mth
10. There is no medical underwriting required. This is more of a retirement product
11. Available to Singaporeans, PR, and passers by in an approved list of country
12. The total distribution cost, which includes commissions, benefits paid to the distribution channel is about 7.5%. So for a $500,000 single premium policy the cost you pay is $37,450

I find anticipated whole life policy very similar to investing in a investment property. In my article previously, I tried to highlight the similarities:

comparing a whole life insurance policy that distributes cash flow versus a buy to rent property

I do find the total return (rental/dividend income yield + capital appreciation) to be rather different. 

From what I understand, you cannot leverage with Infinite Harvest, like some of the other anticipated whole life we talked about (such as the OCBC Premier Life Generation mentioned in the second section)

Click to see bigger illustration

In the illustration above, we see a mother Susan spending $224,824 to purchase Infinite Harvest. The life assured is on her son. She owns the policy. For the first 18 years, Susan owns the policy and from the 6th year, she received a monthly income of $800 (guaranteed + non guaranteed). When her son reaches 18 years old, the policy is transferred to the son, and the son continues to received the payout. 

In this hypothetical scenario, the policy provides a cash flow for 79 years. When the son passes away, Susan’s grand children will received a death benefit made up of the value of the initial premium and also a terminal dividend. 

I think this is what a lot of people are looking for. Capital preservation and growing income stream.

The Illustrated Yield or the Projected Internal Rate of Return of Infinite Harvest

The first thing you need to sort out, is to find out how is the projected rate of return of the policy. 

Why do we need to do this?

So that we can establish a good basis, to compare against other prospective retirement financial assets.

My friend Wilfred Ling, a fee based financial adviser, help me come up with an illustration which fits my profile, which is a 40 year old, looking to pay a premium of $500,000.

Now, your monthly cash back has a guaranteed and non-guaranteed component. The amount of non-guaranteed component depends on the investment rate of returned achieved by the participating fund (your premiums are put into an investment fund, where the insurer will invest to provide the returns).

There are 2 investment returns illustrated: 4.75% and 3.25%. This is not the returns you get. Look upon the returns you get as the returns when the participating fund achieves an average return of 4.75% or 3.25%.

The following table shows the annualized cash back that the assured can get depending on the investment return:

So for example, on year 6, the guaranteed monthly cashback is $8850/yr.

This guaranteed yield is 1.77% of the $500k single premium. If the investment return is 3.25%, the non guaranteed cash back is $5150/yr. The yield is 2% for this non guaranteed portion. If the investment return is 4.75%, the non guaranteed cash back is $12,903/yr. The yield is 3.5% for this non guaranteed portion. So it totally depends on the participating funds return and is by no means guaranteed.

I was provided with a cash flow schedule from 40 years old to 120 years old. So that is a 80 year cash flow schedule.

In the first year I will have a cash outflow of $500,000. From the 6th year onward, every year there will be guaranteed and non guaranteed cash inflow.

At the end of 80 years, I surrender the policy or passed away, I or the beneficiary will have a large cash inflow.

We are interested to find out the internal rate of return or IRR for the stream of cash flow. In the BI, this is called the “Illustrated Yield”. Think of IRR as the interest per year you earned from this stream of cash outflow, inflow over 80 years. What is the interest per year you earned.

With the IRR, you can then compare to:

1. your 0.65%/yr fixed deposit
2. your 2%/yr Singapore Savings Bond
3. 5-7% ETF portfolio
4. and the 5-7%/yr total return for REITs.

The benefits illustration provided 2 projections based on a 4.75% investment return and 3.25% investment return.

The illustration above shows 2 different set of yield upon surrender when the assured surrenders at age 100. Since I start off at 40 years old, the duration of this policy is about 60 years.

Long time readers of mine would know I would compute my own internal rate of return. However, I realize based on how the benefits illustration is list out, I have no way of doing it.

The top one shows the result if you take distributions and the one at the bottom shows the result if you do not take distributions but reinvest at a non-guaranteed rate.

So for the first one the cash flow would look something like this:

1. Year 1: -$500,000
2. Year 6: +$21,743
3. Year 7: +$22,514
4. Year 8: +$23,302
5. Year 60: +$1,075,678 (surrender or passed away and received death benefit)

Notice that the annual cash back is going up.

The second one the cash flow would look something like this:

1. Year 1: -$500,000
2. Year 60: +$4,576,704 (surrender or passed away and received death benefit)

Wow! the surrender value at year 60 is big. 

Both assumes the illustrated investment rate of return of 4.75%. 

You will notice that the yield upon surrender, which is equivalent to the IRR is around 1.69% for the guaranteed, and 3.98% for the guaranteed + non-guaranteed. While the end value of the accumulated way is bigger, the IRR is actually smaller.This is for 60 years.

The benefits illustration also listed the total illustrated yield / yield upon surrender / IRR till 80 years old (about 40 years duration) as 2.71% for investment return 3.25%/yr and 4.05% for investment returns 4.75%. The 4.05% is close to the 3.98% given in the other section but with a shorter duration.

The 2.71% IRR for investment return of 3.25%/yr is something you should take note of, for your conservative planning.

How good is this?

We can compare against other investment assets and see how this stacks up.

I have gone through some retirement plans in the past and you can compare this against their result (comparing against their projected 4.75%/yr investment return):

1. The OCBC PremierLife Generation – (anticipated whole life) IRR of 3.81% for 40 years
2. Aviva MyRetirement Choice – (endowment) IRR of 3.64% for 20 years

PremierLife generation might be comparable, but MyRetirement Choice is more of an endowment than an whole life insurance. 

The guaranteed amount alone is not appealing. If we were to buy such a product, we would think our return would be between 1.69% and 3.5%. Remember the above IRR was generated with an investment return of 4.75%. The future might be rather different.

Taiping Insurance’s Lack of Past Participating Fund Returns

Since we stress so much that that a large part of the returns is dictated by how well the participating fund do, it might make sense to review the insurer’s past track record in managing these stuff.

Unfortunately, Taiping Insurance Singapore is so new to Singapore that they do not have a past participating fund.

China Taiping Insurance Singapore (CTPIS) is not so well known in Singapore. They originate from the Tai Ping Insurance Singapore branch, which was established as far back as 1938. Its parent is China Taiping Insurance group,, which is a Chinese State-owned and administered financial and insurance group.

In August 2018, CTPIS got their license as a composite insurer from MAS to carry on life business in Singapore.

Investing in a new insurer such as this always brings about some uncertainty.

However, suppose you estimate that their return would be close to the mean, if not it may make sense to see how low insurer returns could be.

You can see that on an average the investment returns could reach 4%, but often it is around 3.5%. 

Thus, if you are interested in a whole life insurance policy like this, it might make sense to look at the projection of 3.25% investment returns instead of the 4.75% one.

We can see the current asset allocation of the participating fund for the policy:

You can compare the fund to something like a 30% equity and 70% bond portfolio. The volatility is going to be much lower, and largely driven by bond future returns. The returns are not going to be out of this world since we are in a very low interest rate environment.

There is a strong correlation between current bond yield and future bond returns. So if current bond yield is low, future bond returns is low.

Another thing to note is that you can view the participating fund as a prudent manager controlling how much you could spend. 

The manager of the participating fund will have to smooth out the returns. This means that if this year is good and the portfolio earns 10%, they have to systematically keep some of the returns for the years where the portfolio earns -3% for the year. 

It is the same as how you should manage your stocks and cash or stocks and bonds portfolio in retirement. Many might not be sophisticated enough to employ a systematic way of controlling how much they can spend each year, so that they can smoothed out their retirement cash flow.

So you can see the appeal of such products.

Does Infinite Harvest’s Cash Flow provide Adequate Income to you?

While evaluating the IRR is important, that is more of a performance measurement. 

Ultimately, the reason why we purchase plans like this is that the cash flow it gives out goes towards paying part of the annual living expenses. 

Based on the 3.25% investment return, the first year cash flow is $14,000. This gives us a cash flow to premium yield of 2.8%.

This looks on the low side and I guess this might be the downside of a whole life. If its an endowment, where the endowment is paying out capital, the cash flow might have a higher yield. 

Of this, about 1.77% of the single premium yield is guaranteed. 

How you can look at this is to plan your expenses in 2 sections:

1. Your survival expenses. The bare necessities that your family needs in retirement, or to offset a certain goal at the bare minimum
2. Your rich life expenses. The discretionary part of life

Your survival expenses should be covered by the 1.77% to 2.10% of close to guaranteed cash flow. So if your survival expenses is made up of $12,000 a year, you probably need something close to $12,000/0.021 = $571,000 in premiums.

I do not know your situation but for different folks you might switch it around:

1. Your survival expenses is satisfied by your CPF Life and rental property
2. Your rich life expenses is made more concrete by a whole life plan like Infinite Harvest

Ultimately, plans like Infinite Harvest is just a financial product. What matters more is the overall plan what you are trying to execute.

Is the plan sound? Are you diversified enough such that if Infinite Harvest fail to deliver you are alright?

Summing Up

I think a policy like Infinite Harvest is not meant just for retirement. And I do not think it is a high return product as well. And we should be planning with a 3.25% investment return idea instead of the 4.75% investment return.

I think of it like you are in United States, and you could purchase those $50,000 to $100,000 properties and rent them out.  Your wealth is not concentrated and can be more diversify. 

The alternative is that you could purchase a $1 mil private property and spend the next 20 years to service the loan. If the family income is affected, the the whole family have to find the cash flow to service the loan. 

If you collect an equity portfolio, or a equity exchange traded fund portfolio, together with bonds and whole life plans such as these, if your income is hit, you just stop buying new financial assets. You do not run into that vexing problem of finding money to service that mortgage.

Should you need it, you can tap upon the cash flow that comes from one of these properties, if not it will just accumulate.

If you wish to find out more about the Infinite Harvest from China Taiping Insurance Singapore, you can contact my friend Wilfred Ling, who writes at IFA.sg. Wilfred is a fee based financial adviser, very experienced. You can read the content he has written about financial planning on his site. 

You could find out whether Infinite Harvest is suitable for your overall wealth plan, and if its not suitable that is OK. Wilfred happens to have access to Dimensional Fund Advisors (DFA) evidenced based funds as well.

The above link is an affiliate link. You get 20% off his financial planning package. 

You can take a look at some of my past insurance reviews:

1. OCBC’s PremierLife Generation Case Study
2. PRUflexicash Case Study
3. Aviva MyRetirement Choice Review
4. Crowdsourced Insurance Savings Plans Return Table

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free