Category Archive: Ask a Question

Jul
28
2008

Property Sale and CPF Minimum Sum

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by Martin Lee

July 28, 2008

Question for Lion Investor

Hi,

I like your blog. There is always a write up of the latest events happening in Singapore. As a Singaporean, it is very useful to be updated on all current issues. It provides a one-stop info centre.

Just wanted to check with you: about the current min. CPF sum requirement :
1) assuming I have less than the required min. cpf amt. at age 55
2) I sell my house at age 56 yrs.
3) Will the cpf auto deduct the min. cpf amt. from the sale proceeds?

Assuming:
1) I reach 55 yrs in 5 yrs time.
2) I used $250,000 CPF money to pay for my house, besides the cash portion. The house has been fully paid up.
3) I can sell the house at 1 million dollars.
4) I have $50,000 in OA, $40,000 in Special, $34,000 in medisave.

Appreciate your help on this so that I can plan when to sell my house.

Many thanks!

Elly

My Comments:

Hi Elly, assuming you continue to earn interest from the CPF board (at 2.5/4) and there are no further additions or withdrawals to your CPF accounts, you will have about a total of 144k in OA, SA and Medisave in 5 years time.

About 34k will be set aside in your Medisave as the Medisave Minimum Sum, with the balance 110k in your retirement account (RA).

The CPF minimum sum then will be about 120k, and you can pledge your property for half of this amount. This means you will withdraw 50k cash, keeping 60k cash in your RA. Your pledged property will make up for the other 60k of the CPF minimum sum.

If you sell your house at 56, 60k will need to be returned to the RA to make up for the property pledge. The amount to be refunded will increase due to the accumulated monthly interest on the pledged amount.

If you sell your house before you turn 55, you will need to refund 250k plus accrued interest to CPF. Then when you turn 55, 120k from your OA and SA will need to be set aside for your CPF minimum sum.

Since you will quite easily meet the CPF minimum sum requirement either way, getting a good price on your property might be a more important consideration for you in deciding when is the best time to sell it.

Hope this makes it clear for you.

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Apr
13
2008

Ask Your Questions on Rickmers Maritime

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by Martin Lee

April 13, 2008

I will be attending the AGM of Rickmers Maritime tomorrow morning. Rickmers is currently one of the three shipping trusts listed in Singapore.

If you have any questions on Rickmers Maritime that you like to ask the management, drop me a note or post a comment below and I will try to ask on your behalf.

I will be providing a summary writeup about the AGM proceedings in tomorrow’s post.

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Apr
10
2008

Stock Investment Beginner

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by Martin Lee

April 10, 2008

Question for Lion Investor

Dear Sir,

I would appreciate some advice for a complete idiot in stock investment who wants to take the first step in stock investing. What are the “must have” knowledge that one must pick up before taking the plunge?

Thank you.

Frank

My Comments

Before you even start to invest, you need to make sure your financial position is fundamentally strong. This means having a few things:

  1. A postive cash flow every month.
  2. Putting aside some cash that will tide you through in case of any emergency. Typically, this is 3-6 months of your salary or expenses.
  3. Money you don’t need in the short to medium term that can be used for investing. We shall call this your investment fund.

Once you have your investment fund, you have to decide on an optimal asset allocation for it based on your needs. This will detemine what percentage of your investment fund goes to stocks, bonds, alternative investments, etc. You might want to do some reading on the topic “Asset allocation”.

Let us look more at stock investing since you asked about it here. There are two main schools of thought when it comes to stock investment.

The first group of people are the traders. To them, the stock market is like a casino.

Traders focus more on price movement more than anything else. If you intend to become a trader, you need to read up on technical analysis and trading methods.

The second (and smaller) group of people are the investors. They treat buying a stock as buying a business. If you think about it, that’s what a stock market essentially is. It provides a secondary market for the buying and selling of shares of companies.

At any one point in time, the quoted prices might be worth more, less or equal to the intrinsic value of the business.

The returns you receive will thus depend on both the performance of the company you bought, as well as how it’s price changed relative to its business value.

If you are going to focus on being an investor, a good place to start is to read Warren Buffett’s annual letters to his shareholders. They contain a chuck of his investing insights and ideas.

You will also need to be familiar with accounts so that you can analyse the financial reports of the companies you are researching.

For both groups of people, some economics macro background will also be useful.

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