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2016 full year passive income from S-REITs.

In this final blog on S-REITs in 2016, I want to record a heart felt good bye to Saizen REIT as we knew it. The REIT was one of my largest...

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What an unemployed 53 year old can do with $20K?

Tuesday, January 17, 2017

Dear AK,
I am 53 and I have been jobless for more than a year. I have given up on job search. Fortunately, I am a saver and have almost 200k in savings.
Jobless 10 years too soon, I need to make my savings last longer. 
My sister told me about a 5 years endowment plan from _____Life.
Minimum required is $20,000.
2.25% p.a. is more than fixed deposits. (Email truncated.)

Hi JK,

5 years is a long time and if we believe that interest rates are rising and could continue to rise in the next few years, then, this endowment plan is not attractive to me. In another year or so, could FDs offer 2% interest per annum? I wouldn't be surprised.

Unlike a FD, a premature termination of the endowment plan would mean losing quite a bit of money. With a FD, if you break it, you just lose all or some of the interest you would have otherwise earned. Your principal sum is safe.

Here is an idea. If you are quite sure you do not need the $20,000 for the next 5 years, if you have enough in your CPF to meet the Full Retirement Sum (formerly the Minimum Sum) and if your Medisave has already hit the BHS* level, you could consider a voluntary contribution to your CPF account.

*(Basic Healthcare Sum (BHS) which was known as the Medisave Contribution Ceiling (MCC) in the past has been raised from $49,800 to $52,000 in 2017.)

Being 53 years old, the "lock in period" is only 2 years. At 55, you would be able to withdraw from your CPF account all money (including this $20,000 and the interest earned) in excess of the Full Retirement Sum.  

In effect, you are getting 2.5% to 4% interest per annum for a 2 years "fixed deposit".

In fact, you might want to max out the CPF Annual Limit ($37,740) this year and next. I am unemployed like you and that is what I plan on doing.

I hope you like a shorter lock in period and higher interest rates. I know I would if I were in you.

(Watch the video at the top of this blog post and you will learn that AK is economically inactive and JK is a discouraged worker. We are not considered unemployed by the Ministry of Manpower.)

Related post:
AK is buying a 12 year bond.

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