[Case Study]Pay $60k and receive $550 for life - A Good Deal?

Recently we received this case study using premium financing to pay for a retirement plan.

At age 40, with an initial outlay of $60,000, is able to receive a projected monthly income of $550 (for life). How this works:

Can this really works? We are a bit skeptical as it heavily depends on these 2 main conditions and variables:

1) Non-Guaranteed portion
Guaranteed amount is $275 and the loan amount is $311. So the non-guaranteed portion needs to generate minimally $36 to offset the loan totally.
Only if the insurer able to generate 4.75% return on their participating funds, then one can get the $239 extra.

2) Interest Rate
RHB interest is based on 1.8%. Currently we are at all time low interest rate environment. When interest rates go up, the loan amount will go up as well.

To us, though the retirement plan is good but the premium financing part is risky.

Earn 71x your Savings Account Interest Rates

On The Sunday Times, well-known Invest Editor, Lorna Tan, wrote an article on "Higher interest on enhanced savings plan".

Link here: http://www.straitstimes.com/business/invest/higher-interest-on-enhanced-savings-plan-investroundup

Similar to the article we wrote previously below (12May2017), it highlights the Maybank SaveUp savings programme:

The Sunday Times highlights a savings programme, two insurance products and a new personal finance mobile app.

The Save Up programme was enhanced on June 1. Maybank customers now have nine options to choose from, to help them achieve the maximum interest rate of 3 per cent a year.

The deposit cap for the bonus interest has also been raised, so customers can enjoy higher interest on the first $60,000 in their SaveUp Account, up from $50,000.

[Published on 12 May 2017]
[Updated with Maybank SaveUp account. Thanks reader for the updates]
Previously we shared how you can easily earned 20x your Savings Account Rates without even leaving your home... simply by just opening an online account and transfer your funds in.

If you have not read how you can easily earn 20x, click on the link below:
Easily earn 20x your Savings Account Interest Rates

To earn 71x, you need to work a bit. Don't worry, it's achievable and mostly automated :) If you don't know yet, nowadays banks are giving higher interest rates on your deposit if you use their services. These are the 3 common things you need to do:

1) Spend on their Credit Card

2) Pay Giro bills using their account

3) Deposit your salary to their bank

Checkout the interest rate (last column) below:

Take example of the last highlighted row, to enjoy 3.55% interest rate (that is 71x your Savings Account of 0.05%), you need to open an account from Bank Of China (BoC) called SmartSaver and do the following:

1) Spend $1,500 on their credit card

2) Set-up a Giro or pay your bills to 3 different account numbers with minimally $30 each bill (can be your credit card bills, utilities, mobile, tax, etc.)

3) Inform your HR to transfer your salary here with net salary (after CPF, etc.) of more than $6,000

Note: Actually there's additional bonus that is not indicated here where any incremental value compared to last month balance, you will get additional 0.6% making it a total of 4.15% (3.55% + 0.6%). And that comes to 83x your savings account rates. But the amount is based on only the incremental value and not your total savings/balance in the account. Thus we did not include in the overall calculation.

If the credit card expenses and/or the salary is hard to achieve, you can look at the lower tier one where you just need to:

1) Spend $500 on their credit card

2) Set-up 3x Giro/bills with $30 each

3) Deposit net salary of $2,000

With this you will get 2.35%; that is 47x your savings account rates.

Note: Not all company have the option to deposit your salary to BoC. If your company doesn't allow, the next best option is Maybank. If still cannot, then it'll be either UOB or OCBC account.

If you have more than $30,000 in your savings, then UOB One Account is preferred. Else can use OCBC 360 Account which gives you slightly higher interest rate.

For UOB One Acc, the interest rates are incremental from 1.5%~3.33% depending on your balance. If you have $50,000 fixed, then you will enjoy an interest rate of 2.48%. That is, monthly you will get $103! Compared to just $2 if you put into your Savings Account. And you just need to do 2 things:

1) Spend $500 on their credit card

2a) Set-up 3x Giro/bills   OR

2b) Deposit net salary of $2,000

If you are still keeping your money in your normal Bank Savings Account, don't waste your time anymore, take action now!

So instead of having a free McChicken ($2) every month, you can get yourself and your loved one a free buffet for 2 ($100) every month :)

If we would to rank them (based on salary of <$6,000 & card bills >$500):

1) 3.00% Maybank SaveUP
2) 2.48% UOB One Account
3) 2.35% BoC SmartSaver

Consolidated banks interest rates:

[Newsletter]We can only surrender our insurance policies back to the insurer. True or False?

The answer is FALSE.

Before proceeding on surrendering your policy, do take note the following:
1) Insurance purchased is meant for long term
2) If you intend to surrender/sell your insurance policy because you plan to buy new ones, it's recommended to get the new policy approved first (clear any additional underwriting) before surrendering the old one. If everything is the same (no extra condition/underwriting e.g. health is as good), then can consider to proceed surrendering your old policy.
3) Do note also that though some old insurance policy covers lesser things e.g. number of Critical Illness, but the terms used is more generic also. The more generic the term, someway it can mean more coverage. Currently the new terms used are quite specific like which specific artery burst then only can be claimed.

Recently I wanted to surrender my policy (for personal reasons), I checked the company website and the amount indicated is the exact amount in the "Projected 5.25% investment return" column in my policy 5 years ago. So far this is the only company that never gives below the higher end of the projected target. My policy:

   Company: Tokio Marine
   Plan: Towards My Legacy Plus (LP)

Yup, it's "Tokio Marine". The famous company that so far, the only company that never fails to pay at the higher end of the projected investment return column in your policy.

Luckily or coincidentally, I read an article from "The Edge" (dated 20th June 2016) about selling your life policies to 3rd party. You can even submit it online for a free quote. Since I plan on selling, I gave it a try. I emailed them my details and within 2 working days, they came back with a quote. And to my surprise, it's about 5% (~$300) more than the surrender amount that my original company provides.
According to the PIC, if the policy is endowment policy, the surrender amount is even higher.
Especially if you bought an endowment for the first year and plans to sell it the 2nd year. Normally the original company (or provider) have no surrender value for first year or two. But the 3rd party does. And I heard, it's quite substantial also.

So I agreed with him on the amount, and he ask me to go directly to Tokio Marine office to meet him. There I sign a "Absolute Assignment of Insurance Policy Proceeds" form to the company. Once signed, the cheque of the full amount is given to me immediately.

Currently the 3rd party companies which I know that accepts policy selling are:
1. Purvis Capital - Accepts both Endowment & Whole Life Policies
2. REPs Holdings - Accepts only Endowment Policies
As my policy is Whole Life, I used "Purvis Capital" and the service is quite prompt.

So if you plan to surrender your policy, check out some of the 3rd party website for "free quotation".

Thinking of trying out SQ Suite class? Now it's possible.

Envy those flying Suite Class like the link below:
What It's Like to Fly the $23,000 Singapore Airlines Suites Class

Don't need to envy too much cause you can too by just paying the amount equivalent to a business class. The trick is in miles redemption.

E.g. Flying from Singapore to Switzerland on 19Oct17 and back on 26Oct17, the cost of a Business Class (Saver) is $5,383.70 and First Class/Suite (Saver) is $13,783.70.

If you use miles for redemption, you will need 170,000 miles with additional tax of $83.70 for Business Class (Saver) and 230,000 miles with additional tax of $83.70 for First Class/Suite (Saver).
If you buy the miles directly from Singaporeair, it will cost you USD$40 per 1,000miles or about S$56 (based on U$1 = S$1.40). So the total cost:

Business Class: (170 x $56) + $83.70 = $9,603.70
Suite Class: (230 x $56) + $83.70 = $12,963.70
Comparatively business class is more expensive but Suite Class is cheaper by $820.00.

However there are other ways to use/earn miles. Most commonly is by using your Credit Card purchases for miles redemption.

Second method is more of "unorthodox" where you can buy miles from 3rd parties (e.g. from Carousell). The current rate is about S$22 per 1,000miles. Based on this rate, the total cost:
Business Class: (170 x $22) + $83.70 = $3,823.70
Suite Class: (230 x $22) + $83.70 = $5,143.70

For business class you are paying only $3,823.70 which brings a total savings of $1,560 (29%).

Notice the bold font. Yup, the Suite class cost only $5,143.70. It's even cheaper than your business class fare if you pay by cash ($5,383.70).

So, flying suite class is no longer a dream. You too can fly in style!

However not everything is perfect. There's one downside of points redemption i.e. the seat availability. So in order to secure a seat, just need to make sure you book early.

A Part of All You Earn (Fruits of Labour) Is Yours to Keep

Labour Day. In Singapore, it is celebrated on the 1st of May each year (also known as May Day) as a mark of solidarity amongst workers. May Day is a day of special significance for organised workers, as it serves to remind others what their collective strength has achieved for workers. 

The collective strength to build the financial stability of an organisation and/or the well-being of the nation's economy, would in return bring about prosperity to every individuals. Hence it is also a day, in my opinion, that we should count on our fruits of labour and assess if we have been managing them wisely/prudently. And on this note, the book "The Richest Man in Babylon" written by George Samuel Classon, just concomitantly surfaces in my mind.  

This is a book on personal finances, interestingly written with Ancient Babylonian empire as the backdrop. It was thought that the city of Babylon was the richest city in the world in that particular era. It was believed that its treasures of gold and jewels were aplenty and beautiful. The city of Babylon was set on the bank of Euphrates River, in a flat arid valley, it had no forest nor mines. All of the resources that arose from this city was man-made. Its only natural resources were fertile soil and water in the river. It was widely believed that the Babylonian engineers invented the irrigation system that we know today.

The Babylonians were skilled in arts, their works such as sculptures, jewelry, painting and weaving were found today in the most famous museums around the world. And lastly, they were also clever financiers. It was told that they were the inventors of financial instruments such as money, promissory notes and property title deeds. I won't be surprised if you have proudly related the city of Babylon to none other than, Singapore - which similarly has no natural resources and yet, after decades of labour, it has become what it is today. 

The author, Mr. Classon, advocated the prosperity of a city/nation to its people. A city would not have become prosperous if its people are not wealthy. And I guess that by transforming into a successful city in this manner, it introduces longevity to a flourishing economy through such a metamorphosis - that is, a rich city hatches and nurtures wealthy people who contribute to the well-being of its economy.

It is a world acclaimed fact that Singapore is a successful city. So how could we grow wealthy as an individual? In the book, George Samuel Classon also offers his insights on '7 cures for a lean purse' (which we like to relate some of them to our Five Pillars of Wealth): 

i. Start thy purse to fattening (Wealth Accumulation - Savings plan, Endowment & etc.)

ii. Control thy expenditures (Wealth Maintenance - Budgeting)

iii. Make the gold multiply (Wealth Enhancement - Investment)

iv. Guard thy treasure from loss (Wealth Protection - Insurance)

v. Make thy dwelling a profitable investment (Wealth Distribution - Own Assets)

vi. Insure thy future income (Wealth Protection - Disability Income Insurance)

vii. Increase thy ability to earn (Invest in yourself)

Have you adopted any/all of the 7 cures? If not, why not let us all take the opportunity on this Labour Day to reflect, review & reassess on our personal finances health status. If that is too much for you to handle on your own, look for your trusted adviser to offer his/her evaluation & possibly, solution(s)!

Easily earn 20x your Savings Account Interest Rates

Have you notice that your savings account is giving you less than $1 of interest per month? Or some even less than $10 per year.
Well, this is because your normal Savings Account interest rates is just 0.05% per year.

Yes, it's just "0.05%", not even 0.5%. It's 20x lower than 1%.
It's "per year" and not per month. It's about 0.004% per month. Yup, it's 250x lower than 1%.

Well, you can immediately earn 20x more than your pathetic interest rate of 0.05%/yr by opening a CIMB FastSaver Account online here:
http://www.cimbbank.com.sg/en/personal/products/accounts/savings-accounts/cimb-fastsaver-account.html

By just registering online, your CIMB FastSaver account number will be issued instantly. With the account number you can then transfer your Singapore Dollar funds from your existing bank to this new account number.
And voila.. from this very second onwards, your money starts to earn 1%/yr instantly. It's that simple.

To give you some perspective, if you have $20,000 in your POSB Savings Account, by the end of year, when you update your passbook, you will see an extra of $10 for interest.
But for CIMB FastSaver, every month you will see an extra $16 (yup, it's monthly and not typo). If per year, it's $200!

That is a $190 difference!

With this simple step, you can also easily beat current standard FD (Fixed Deposit) rates. E.g. as of 28April2017, DBS 12-month FD is 0.35%/yr.

CIMB FastSaver account is a normal savings account with no "lock-in" period like FD (Fixed Deposits). They don't even have "fall below fee" which some banks charge $5/mth if your balance is less than $3,000!

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You might be thinking, well, even if it's 20x it's still 1%.. You still feel it's low. Well stay tuned, next we will share how to earn 71x your normal savings account rates with up to 3.55%!