How am I doing? - Help yourself and everyone else series.

[confused_newbie]

Hi everyone,

1) , I want to say thank you to everyone for replying.

2) I want to highlight that I am not specifically looking for a professional licensed financial planner opinion. If you are one and wish to give as one great! ,But I would specifically like your own personal opinion based on your own planning and views as a laymen etc... I want to get the diverse view of the community and then take as an additional input.

So, please feel free to give your personal views and your are definitely not accountable for the decisions I make on my planning.

3) Let me answer the questions that D.O.G. , M.W. and others asked. Please feel free to ask me if I have missed out anything.

1. Nature of job held by self and spouse - Me - Creative / Design field - Creative Director . Spouse - IT support.
2. Salary (ballpark) of self and spouse - Me - 6500 (Nett) , Spouse - 3000 (Nett)
3. Monthly household savings - 6000
4. Current net worth and breakdown (bank, stocks, bonds, property etc)
- Singapore Stocks : S$311375 : US Stocks - S$ 18155
- Cash reserved for investments = 13712
- NZ FCFD = 41000
- Emergency Fund = 50000
- Savings = 43000
- No Bonds & No property ( Living rent free )

- Number of children and their ages - 1 child. Hoping to have another. Age - 2 yrs old.
- University type ( The type is left to the child to decide, I would give then a fixed 200,000 if we decide or cannot have more than 1 child. If we are given the gift of having a 2nd child then , it would 100,000 each. )
- The money is 200K in future dollars.

- do you wish to leave anything to the children? - I do not intend to leave anything, but help them if I can along the way, only if I can. If there is remainder, I will leave to them. If not, nope. Probably the house I live in.


Again, I just want highlight I want to get the views of the community, I am not specifically looking for a license person to answer me. It's not that I am going to just follow everything that everyone says, its just an additional input to my views.

Thank you you all for your input and views.

[brattzz]

oh ur in the high-middle income group lah,

no problem for u lah, unless u want to stay landed properties..

[d.o.g.]

So, please feel free to give your personal views and your are definitely not accountable for the decisions I make on my planning.

Here goes.

Assuming you have only 1 child, you will need the money when the child turns 18 (if a girl). So in 16 years' time you will need $200k for her.

You want to retire in 20 years' time at 60, to support retirement spending of $3,500 per month ($42k/yr) in today's dollars. Assuming inflation of 3%, this means annual spending of $76k in future dollars. Assuming you die at 90, the money has to last 30 years. If you earn zero real return from retirement onwards, then you will need $1.49m at age 60. Each year, the money increases by 3% (you match inflation) and you spend $76k adjusted for inflation. At age 90, you run out of money. Hopefully you are dead before then.

You save $6k per month or $72k per year. In 20 years you can save $1.44m before inflation. If you can invest this at 3% per year you will be able to get $1.44m in future dollars. That's pretty close to the retirement target. You already have about $350k of investments. If that matches inflation at 3% per year, in 20 years it will be $630k. Your total assets would be over $2m in future dollars, enough for the house, retirement and the kid(s).

So as long as you can maintain the savings rate, and invest at 3% a year or better, you are very likely to reach your goal.

Strictly speaking we should subtract $1k per month for the house, leaving you $5k/mth or $60k per year. That gives you $1.2m pre-inflation in 20 years. If you can invest at 3% per year you will get $1.2m in future dollars. Let your investments grow for 16 years, from $350k to $562k, take out $200k for the kid(s), leaving you $362k to grow for 4 years to $407k. At age 60 you will have $1.6m total in future dollars, enough for retirement, as long as you can still match inflation, and you die before age 90.

Note: if longevity (age 85+) runs in either spouse's family, it would be prudent to project to age 95 or even 100 for retirement. It's OK to die with some extra money. Not OK to run out of money while still alive.

Insurance
==
Ensure that both parents are already adequately insured for death, disability, hospital/surgical coverage etc. All the savings plans will be for nought if one dies early and the income cannot be replaced. Term life insurance is cheap.

For the child's needs, buy a 16-year term plan (since you will already have the money anyway after 16 years). $200k coverage is enough since you only need to pay for the child's education. Buy policies on both parents (NOT the child!).

Also, consider retirement needs if one parent is dead/incapacitated. The survivor may not be able to save enough for retirement, in which case it may be a good idea to buy additional 20-year term policies to replace the income the other spouse would have contributed - $1m for the main breadwinner, $500k for the spouse.

Hospital/surgical insurance (like MediShield) is a must. Buy the most expensive available (pay from Medisave).

Will
==
Ensure that a will is drawn up so that if both parents are dead/incapacitated, a trusted person can bring up the child. Safeguards must be put in place so that the caregiver cannot spend all the money for himself/herself e.g. create a trust that is drawn down each month to pay school fees, living expenses etc.

Consider setting up the trust even if only one parent is dead/incapacitated. The survivor could develop bad habits and gamble the insurance proceeds away, or fall victim to a con man and lose the money.

As usual, YMMV.

[miantuan]

could anybody share where to keep savings/emergency cash, and earn more interest compared to fixed deposit?

thanks!

[d.o.g.]

could anybody share where to keep savings/emergency cash, and earn more interest compared to fixed deposit?

Get your priorities straight. Emergency cash cannot be put at risk. This means that the return on such money is totally irrelevant. The only thing that matters is the return OF the money, when you need it.

If you want to get a return, invest it, but understand that there are risks in investing that you cannot afford to take with emergency funds, hence emergency money CANNOT be invested. The same goes for money put aside for an upcoming wedding, a housing downpayment and so on. That's money you can't afford to lose.

[miantuan]

thanks, d.o.g.

wish to clarify that i'm lookg for a place to keep savings where it is as safe/liquid as keeping it in a bank, but will earn more compared to the interest offered at a bank. minimally the principal shd be guaranteed.

thanks!

[d.o.g.]

wish to clarify that i'm lookg for a place to keep savings where it is as safe/liquid as keeping it in a bank, but will earn more compared to the interest offered at a bank. minimally the principal shd be guaranteed.

There is no such thing today, sorry.

Lots of people found this out to their detriment when they bought structured deposits from banks. Like you, most of them wanted something that was "as safe/liquid as keeping it in a bank, but will earn more compared to the interest offered at a bank." We all know what happened.

If you want a guarantee of ZERO risk you have to also accept a guarantee of ZERO return. That is the way the economy works - nothing comes free. Someone has to pay for lunch.

[miantuan]

I guess I will leave it in the bank and earn interest then (and be subjected to the risk that the bank will collapse )

[brattzz]

I guess I will leave it in the bank and earn interest then (and be subjected to the risk that the bank will collapse )

spread out 20K at each the 3 major local bank lah, got deposit gurantees one.

tat will at least keep ur 60K safe and sound.

[Musicwhiz]

I guess I will leave it in the bank and earn interest then (and be subjected to the risk that the bank will collapse )

Hi Miantuan,

You could try Maybank's iSavvy account (which I am currently using). It pays 0.4% per annum on balances >S$50,000; otherwise I think it's 0.125%. Good thing is there is also 6% interest on interest credited every 6 months; so the effective interest rate would be much higher than the stated one.

On the other hand, you can also explore Stan Chart's e-Saver account. Not sure about the rates and promos right now, but it's also an "Internet-Only" account which means less costs to maintain; hence they can pay slightly higher interest.

Currently, all my emergency fund (of 1 year living expenses) and opportunity funds are parked in May Bank's iSavvy.