Our Insurance and Investment Plan for Baby Ong

TLDR

1. Must buy hospitalization insurance/integrated shield plan

2. BTIR (Buy Term, Invest the Rest)

3. Personally, I believe that CI/ECI riders are unnecessary

4. Forget about Endowment/ILP, use one of the robo-advisors or simply invest yourself

We wanted to get hospitalization insurance/integrated shield plan for Baby Ong as we deemed that to be the most important insurance one should get given the high cost of healthcare in Singapore.

The agent came with a bunch of other recommendations such as whole life, endowment and ILP. His rationale of getting a whole life is because it is the "cheapest" rate/premium one can get at age 0/1, pay 25 years get lifetime coverage, and cash value upon maturity. Endowment and ILP are to save up/invest for the baby education/university fees. I didn't buy it (both his recommendations and the policy). lol.

Let's just run through some numbers using the Aviva PI/product summary as a reference. The whole life insurance costs $1,408.50 and the early CI rider takes up the majority of the remaining premium at $732 per year. In my opinion, there's no need to get $300k ECI for the baby. CI is to cover the possible loss of income so that money will be the least of one's concern when one is recovering from it. Money is definitely not a problem for the baby. We would rather self-insure by saving the premium and investing them to grow our portfolio such that it will be big enough for us not to worry about money too.

These are the breakdown of the surrender/cash value for the whole life policy at different years before year 25 where the premium is no longer required.

Let's just assume using the best-case scenario of 4.75% investment return for the surrender/cash value of the policy. Compare the above with a BTIR (Buy Term, Invest the Rest) approach with a much higher coverage - $1 million.

The above is the premium breakdown for Tokio Marine $1 million term insurance with the various riders. Anyway, the one we got for Baby Ong is with TPD and a $100k CI rider because the system insisted that there must be a CI rider tied to it costs $385 per year.

A simple spreadsheet forecast will show the difference in the total premium paid (~$10k). If we were to invest the difference in premium (the remaining premium after 25 years for the term insurance will be paid out from the portfolio), our portfolio will grow to a sum larger than the surrender/cash value of the whole life policy with an assumption of 4.75%.

Take a look at the difference if we assume our investment will grow at 7% instead. Not forgetting if one were to surrender the whole life insurance to get the cash value, the coverage will cease while we can cash out anytime from the portfolio. It doesn't make sense to buy whole life insurance for the cash value. Play around with the spreadsheet and forecast them yourself - Whole Life vs Term + Invest (For Baby)

Had we simply purchase what was recommended by the agent, the difference in terms of total premium paid (100% more) and portfolio would have been much greater! Having said that, it is not an apple to apple comparison given that the whole life has CI and ECI coverage and that's why I only compared using the whole life premium. Anyway, do take a look at this long article written by Kyith from Investment Moat too - The True Reason to Choose Term Life Insurance Over Whole Life.

I will not recommend Endowment and ILP as a form of savings/investment for your baby's education fund. An endowment plan is simply too conservative for the baby with a long investment horizon (20+ years). ILP has extremely high fees. The worst part is both of them require you to commit for a long period of time. On the other hand, if you were to invest yourself or if you have no knowledge on how to invest, simply use any of the robo-advisors, you will have the flexibility to stop investing or cash out at any point in time without any penalty. I would say endowment was a popular choice for our parents' era where investing was much harder/challenging but it shouldn't be the case nowadays. There are much better alternatives.

Based on the above, we will be getting Baby Ong the $1 million term insurance and will be investing the difference of $100 per month into StashAway 36% risk index portfolio. Although it is the riskiest portfolio, we find it to be relatively safe across 20 years. It simply means there is a 1% chance at any given year that the portfolio might lose >=36% of the portfolio. You can read more about the risk index here.

There's a 50% chance the portfolio might grow to $101k in 20 years time, 75% chance it will be $70k or 95% chance it will be just $41k considering the capital is just $24k. Unfortunately, we will only know the actual performance 20 years later.

Our StashAway 22% Risk Index Cash Portfolio

My StashAway 36% Risk Index SRS Portfolio

Why StashAway? I really like their portfolio. It is performing pretty well (notice the XIRR for both portfolios are double-digits as compared to the conservative 7% I used in the forecast above) and relatively safe (lower volatility and the max dropdown are within the respective risk index). Having said that, I had my reservation previously when I first found out about the 40% estate tax issue if one is to invest in the US market - Estate Tax - The Issue Not Addressed By Some Robo Advisors. 

However, given that they have openly indicated that a joint account is in the pipeline, I feel more confident that our investment will not be taxed if anything happens to me once I can set up the joint account with CZM. With that, we are now more comfortable with investing more money through StashAway.

Our Insurance and Investment Plan for Baby Ong:

1. Great Eastern GREAT SupremeHealth P PLUS + GREAT TotalCare Elite-P

2. Tokio Marine $1 million Term Insurance with TPD and $100 CI

3. $100 per month investment to StashAway 36% Risk Index Portfolio

In my opinion, if you are spending too much money on various insurance be it for yourself or your children, you will not be able to invest for your retirement. Instead, you will be helping the agent to retire. lol.

Anyway, if you are interested in signing up for StashAway, do use our referral link - KPO and CZM Referral Link. You will get $10,000 free management fees for 6 months and we will get $16!

You might be interested in previous months update too:

- StashAway Withholding Tax Reimbursement FY 2019

- StashAway - December 2020 - $56,721.26

- StashAway - January 2021 - $59,991.38

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

Our Salary 2020 + Passing Up Promotion

CZM and I were given our annual compensation/new salary and bonus recently. It was mostly sad news given that 2020 was a crazy year where the whole world went into lockdown. Anyway, CZM had a 2.5% increment and a 1 month bonus. As for myself, I had NO increment and a 0.85 month bonus. However, considering that I changed company in June last year and had already gotten a 16.97% increment, I should look on the bright side and be contented with what I have as I am pretty sure I will not be getting such an increment had I chose to stay with my previous company.

CZM is on track to getting her next promotion next year so there's something to look forward to. Hopefully, she will get a double-digit increment? Otherwise, she's not going to be motivated enough to continue to work as we are close to retiring her already (within the next 5 years)! Hahaha. Shall elaborate more later.

Surprisingly, my manager also brought up the possibility of trying to get me a promotion next year too but the thing is I am no longer interested in climbing the ladder. I enjoy what I am currently doing and the workload is manageable. However, attempting to get promoted would mean an increase in responsibilities and workload in order to get the additional visibility which means more effort/time from my end and more room for mistakes. I can already feel the increase in workload and meetings I was sent to attend/lead in order to get those visibility. It's so ironic because previously, I would be asking my ex-managers if I can get promoted the next year and what do I have to do to get it. This year, I did not plan on asking and it was presented to me. 

I remember when I first joined the bank (6 years ago) and one of my colleagues who was just an associate (my current title) was awarded a 20 years long service award. At the back of my mind, I was pretty judgemental and was wondering how can one work for so long but not get promoted? Now I can totally relate and understand that it was actually by choice. The idea of passing up promotion is generally perceived to be negative and I need to communicate it tactfully that I will still do my best at work (at the end of the day, I still need to ensure that my performance remains as one of the better ones in order to get a decent increment and bonus) but I have no interest in moving upwards with more responsibilities (attending more meetings, working overtime, etc.). I discussed this with CZM and she agrees with me too (considering that she's probably biased and just wants me to spend more time with her and baby. lol).

With CZM understanding and support, I communicated to my manager that I would like to pass up on the promotion a week later because I would like to prioritize my family given that we just had a baby and I feel that it is not a good time to put in the additional effort/hours to get the promotion. In addition, I feel that I am not ready to be promoted to the next level so I wanted to let him know early in order not to waste his effort in grooming/providing me with the opportunity/visibility and that he can give it to the others in the team that wants the promotion. However, my manager said I should not be selling myself short and we can change it to a 2-year promotion plan while we continue to build up my visibility with no expectation in additional hours/OT. I can tell that he is genuinely concern/cares about my personal development/career growth when he provided me more advice that I'm at a crucial point of my career where I need to decide if I want to go technical in-depth or more broad/managerial role and to do that, I can't just be doing BAU/daily routine kinds of stuff. I need to start thinking and plan my career path. The thing is I actually enjoy doing BAU because things are more "predictable" in nature and a typical career length for the majority is about 30-40 years which definitely requires careful planning while ours are just 10-15 years. We are happy as long as we do not need to OT/have night calls. Anyway, I think it sort of backfired and CZM is laughing at me now cause I still need to do all the additional work for more visibility but no chance of promotion now. lol.

Our initial plan/forecast was to have a $1 million portfolio generating a 5% yield by age 40 to retire early but the forecast has been accelerated by the increase of our salary as well as the use of leverage to invest - Leverage Performance 2020. I have just updated the spreadsheet in Our Goals and the latest forecast shows that we will have our first $1 million portfolio by the age of 33. However, with a baby now, our expenses have increased beyond what we had forecasted and we are not comfortable retiring with just $1 million. Hence, the plan is we will/can retire CZM first once we hit that goal and I will continue to work till at least 40 or until we are extremely comfortable/confident things will work out. After all, it is almost impossible for our passive income to exceed/replace our active income and the decision to give up our active income will not be an easy one to make.

With that, both our salaries have increased by >100% since we first started to work a few years ago. 164% increment for myself since 2015 and 170% increment for CZM since 2013. These increments are achieved from either changing company or getting a promotion. The percentages are meaningless without an actual number but the whole point is your salary increment isn't going to be linear and you should work hard to increase it especially at the start of your career when you still have the energy and time. The Woke Salaryman published this article which I found it to be pretty meaningful - The Single Mistake Everyone Makes In Their 20s Trying To Build Wealth. Focus on the big win, increasing your salary if you are young. Seedly has this pretty comprehensive salary guide - The Ultimate Salary Guide For Singaporeans. For those that are below median income, do take some action to get yourself above it. Once you are above median income, work towards getting $6k in order to beat/maximize the CPF "game".

Salary Spreadsheet
I have a spreadsheet to project our salary increment and track the actual increment. Based on our starting salary and an assumption yearly increment of 5% (I thought this is conservative but CZM thinks otherwise), it would have taken me 20 years and CZM 20 years to reach our current salary.

Ministry of Manpower (MOM) published a summary table on Singapore Median Gross Monthly Income From Work (Including Employer CPF Contributions) of Full-Time Employed Residents. For the year 2020, it is at $4,534 including the employer CPF or $3,778.33 without employer CPF. If you compared it against the previous year, it actually dropped. I'm guessing that is because there are people that actually took a pay cut due to the impact of COVID-19 on businesses.

I will be using the 2016 median income ($4,056) as an example in the spreadsheet (because it was created then and I am lazy to change the numbers), excluding the employer CPF portion ($3,467) because who does that! Imagine people negotiating with HR for a higher salary with an X% increment based on their current salary including the previous employer's CPF contribution. lol.

The cells highlighted in yellow are for you to input manually, everything else is formula linked. The spreadsheet projects your yearly salary based on an assumption of 5% increment. The "Salary Projection" projects based on your first drawn annual salary while the "Revised Projection" projects based on the latest "Actual Salary" specified by you. As you can see, it would have taken this imaginary person 6 years (31-25) to reach his current salary (27-25).

You can get the google spreadsheet here - $$$ Salary Projection $$$

All the best to our readers! Hope you get a nice increment and bonus!

You might be interested in these blog posts too:

- >100% "Return" on Salary (2019)

- KPO's Salary 2018

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

Portfolio - February 2021

Time flies. Baby Ong will be 3 months old soon and we will be sending her to an infant care end of the month :'( as CZM's maternity leave will be ending in early April. Our initial plan was to send her to My First Skool which is very near our house but it seems that they are already full. In the end, we decided to send her to Josiah Montessori which is near our workplace. After going for a few infant care tours, it seems that their curriculum is one of the better ones (e.g. they teach basic sign language so that the baby can communicate with the parents even before learning how to speak) and the Teacher-Child Ratio is 1:3 as compared to ECDA guideline of 1:5. The only con is $$$.

The registration fees are crazy - $535 (non-refundable) + $990 deposit. Fortunately, they have reduced the deposit required and gave a 15% discount on the monthly fees (probably due to COVID-19). Even so, after the ECDA subsidy for working mothers, it is still going to cost us ~$1,474 per month going forward.

Compare that to My First Skool's fees - Registration is just $85.60 and the monthly fees are just ~$764 per month after subsidy. Now we can only hope that Baby Ong learns more and gets better care in Josiah Montessori while we take a step back in investing for our retirement with increasing expenses.

Our portfolio reaches another new high! It increased by 4.13% to $742,364 - $27,278.67 of capital injection (we utilized more leverage!) and $2,186.46 of capital gain. This includes $96,049 of leverage/debt (gearing ~14.86%).

If you prefer to look at numbers, this is the raw data used to generate the above bar graph. These numbers are as of the last day of the month.

"Cash Flow" is the amount of money being injected/withdrawn from the portfolio (buying stocks = +ve cash flow while selling stocks and collecting dividends = -ve cash flow)

SOLD
- None

BOUGHT
- STI ETF (1,500 units) @ $2.873

- iShares Hang Seng Tech ETF (300 and 300 units) @ HK$19.58 and HK$18.77

- Mitsubishi UFJ Financial (3,000 units) @ ¥509

We bought STI ETF and iShares Hang Seng Tech ETF because there was some weakness/minor correction in the market. We are still holding some cash hoping that the market will correct more but it didn't really happen. Out of the $26k of capital injection, only ~$6k came from our cash/pocket.

We bought MUFJ using leverage after coming across this excellent analysis from InvestQuest -
The Bank That Owns 21% of Morgan Stanley. Why We’re Buying MUFG. It was the kind of stock that we like, undervalued with a relatively high and sustainable dividend yield. Our entry price could have been much lower ¥470+ if not for my RM that screwed up the account opening =.=" Regardless, we are still sitting on a good unrealized profit which is the target price specified in the article. Very impressive analysis by Peter from InvestQuest!

Anyway, the idea of using leverage is simple, borrow the money, buy a good/excellent REIT/stock, use the dividends to pay the interests, and keep the difference while ensuring that we will never get a margin call/trigger. Once again, leverage has its risk and is definitely not for everyone. We see it as our way of buying a second property without incurring any of those taxes (ABSD, rental income tax, etc.). You can take a look at this - Leverage Performance 2020. Unfortunately, we did not buy IWDA because it is at an all-time high. Yes, I am timing the market but I just couldn't help it. Unfortunately, it just keeps going higher @_@"

Given that it is a brand new year, I have adjusted my SRS contribution to $1,276 per month with the intention of maxing it by year-end. We made some changes to our monthly DCA such as closing Syfe Equity100 and the $500 has been moved/deployed to StashAway. We have also decided to open another StashAway portfolio for Baby Ong. Shall blog more about this separately.

Our Monthly DCA for January - $4,126
$1,500 Cash for ourselves - StashAway Risk Index 22%

$100 Cash for Baby Ong - StashAway Risk Index 36%

$638  KPO's SRS - StashAway Risk Index 36%

$250 CZM's SRS - StashAway Risk Index 14%

$638 KPO's SRS - Endowus Loss Tolerance -60%
$1,000 Cash - Syfe REIT+ (100% REIT)

Dividends
The total dividends collected this month is $2,562.37. The breakdown is as follows:

Company                               PayDate     Shares     Total

CDL Hospitality Trusts               26-Feb-21     1,893     $65.13

Ascott Residence Trust               26-Feb-21     23,141     $459.57

ARA LOGOS Logistics Trust       26-Feb-21     144.4     $1.18

Suntec REIT                               26-Feb-21     11,372     $257.12

Parkway Life REIT               26-Feb-21     5,031     $179.60

Soilbuild Business Space REIT    26-Feb-21     30,000     $358.20

SPH REIT                               26-Feb-21     118.58     $1.42

Ascendas India Trust               25-Feb-21     61.718     $2.58

Thai Beverage Public Co., Ltd.    25-Feb-21     20,000     $257.57

SPDR STI ETF Units               24-Feb-21     24,500     $980.00

Total dividends collected for 2021: $2,766.37
Average dividends per month for 2021: $1,383.19

StashAway

KPO

CZM

Capital: $51,526.00
Current: $‭‭‭‭63,266.19

If you are interested in StashAway, do use our referral link. You get $10,000 free management fees for 6 months and we will get $16!

If you want to extract those transactions information from StashAway, do take a look at this article - StashAway Transactions Parser.

Endowus

Capital: $12,426.00
Current: $14,461.50

Endowus has decided to extend their attractive CNY promotion to the end of March -  lowering of the minimum investment amount to just $888! Huat ah! 

To kickoff the Chinese New Year and to help people invest better from the start of the year, we will be running the following initiatives:
1. For the entire February March, we are lowering our minimum investment amount from $10,000 to $888
2. From 1 - 14 February, we have a sign-up bonus for new clients from $20 to $28

To be eligible for the $20 sign-up bonus, the prospective clients have to:
1. Be a new Endowus client
2. Create an account before the end of March (leave an email and password on our website) using a referral or affiliate link
3. Fund their account with $888 before the end of March

If you are interested in Endowus, do use our referral link for our readers! You will get S$10,000 managed free for 6 months ($20 equivalent) and we will get $20 too! This access fee has no expiry date.

Syfe

Capital: $13,700.00
Current: $‭‭‭15,507.93

New Syfe customers will have their first $30,000 managed free for 6 months when they use our new referral code (KPOCZM). We will be receiving a $10 cash incentive for our portfolio if you invest $500 or more.

If you want to extract those transactions information from Syfe, do take a look at this article - Syfe Transactions Parser.

You might be interested in these blog posts too:
- 2020 Net Worth

- Leverage Performance 2020

- Portfolio - December 2020 - $669,630

- Portfolio - January 2021 - $712,898

- Portfolio - February 2021 - $742,364

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)