Saturday, September 29, 2007

Look after your Medisave account

Many people think that Medisave is somebody's else money. They are delighted when they have the chance to take out from Medisave.

Actually, Medisave is your own money. If you keep in Medisave, you earn an interest rate of 4% plus 1% on the first $20,000. This is an attractive rate of return.

Here is my tip:

1. If you have money, pay by cash. Keep your Medisave intact, until it reaches the cap.

2. Your savings in Medisave earn an attractive interest rate. It is better than the interest paid by your bank.

3. You will need your Medisave when you grow old. When you are young, do not use it carelessly.

4. Do not spend too much money to buy expensive Shield plans using your Medisave. Choose a more economical plan.

12 comments:

Anonymous said...

Hi Mr Tan,
Money in the medisave a/c is meant for medical bills, which are always rising. Why the government imposed a cap on it?

regards,
starlight.

Anonymous said...

Mr. Tan, you are advising keeping the CPF medisave account properly and let it earn 5% risk
free.Although it is not reachable by insurance agents yet you advise caution.
You know what, i have been approached by an insurance agent from NTUC INCOME, who advised me to invest my CPF SPECIAL ACCOUNT in the Growth policy . The reason he gave was that I would not be able to invest my CPFSA next year because of the changes.
I was shocked for words when i heard this.This is an understatement.I would say I lost my respect for Income agents immediately.In my mind I was thinking how could this agent asked me to do such a thing and invest in a losing product.Growth policy could give me 4% at best or less. It is projected and not guaranteed but CPF is going to give me 5% without risk and no lock in too.
How could we have this type of agents who have no compunction at all.Lucky, I have been following the CPF issue lately. If i am like those in the coffee shops I would have been conned of my hard earned money.And I am not surprised many will be victims of insurance agents
especially with the confusion
and changes not finalised.
The agents will exploit the situation and go for the kill.
Now I am convinced what they say about insurance agents is true.

Anonymous said...

There are already talks among the insurance about how to wipe off customers' CPF ordinary and special account balance before they have no chance to sell investment to them.
Be careful, when they come to you.
They will try to distort and confuse you about the CPF changes.

Anonymous said...

I have heard of some people who want CPF to release the medisave money to them claiming it as their hard earned money. Then i learned that these same people squandered their money they drew out at 55 and are now penniless.
They now grumble and sometimes are seen at CPF office trying their luck.
This shows that many people do not know how to manage thier money. It is timely that CPF introduces this compulsory scheme to help them. At least it is a relief to know that even most lowly income earners will have the minimum sum in the future.
But this just addresses minimum living. To help CPF members to have a better life we need also to put in place a scheme that will enhance their excess saving. Instead of leaving the excess of the protected $60K to themselves to enhance the value some kind of protection is also needed.If the members want to invest they must invest DIRECTLY into the funds managed by CPF or approved by CPF. This will save the
unnecessary charges that go to insurance salesmen or advisers and also to avoid the poor and improper advice by this group of predators.
I am sure CPF members will have a bright future, especially the low income earners who are often the victims of insurance salespeople.
CPF must not be afraid to implement unpopular plans knowing that it is good for citizens in the long run.

Anonymous said...

Not only look after your medisave but also your other accounts, OA & SA. For many they might be the only source of their retirement. Invest prudently.
Before investing get your adviser to give you a financial check up and determine what kind of vehicles you should take. Without check up you might be investing in wrong financial instruments. You might take too little risk or over taking risk and results in loss and not attaining your goals.Have a plan.
Remember CPF is YOUR HARD EARNED MONEY.Make them work harder.
Don't let insurance salesman make them as their source of their retirement.

Thomas Phua's Blog said...

An accident operation can cost $21,000 and a long term stay for bone marrow transplant can cost $30,000.

Can Medisave account shoulder such unforseen circumstance?

Whether one has Medshield or any of the PMI, it is safer to have one of these medical insurance as a lifetime backup.

Whether to cover the Deductible or Co-insurance is then personal decision.

Most of us have lived long enough, not to have been hospitalised before, but it is the only one that is coming that may cost us all we have in the medisave and our savings to deplete.

Medishield or PMI are basic necessity to have.

I paid more $801 alone for Plan Basic for my mother and she has not been hospitalised to claim it, but it is with peace of mind, that should anything major happen, I do not have to worry about big bills.

I paid for Shield Plan for all my 3 children, myself and spouse as well.

Insuring Shield plan is more than shouldering big bills, it can some time maintain family harmony when come to who pays the bill because bill can be cushioned off by the Medishield or PMI.

- Thomas Phua

Anonymous said...

Having a H&S plan is enough.If you have no rider it is still alright even when you are old. The basic should take care of the large part of the bill. The rest is self insurance.
It is the large bill that is a concern.
Don't have the kaisu syndrome . This illness will prove to be more costly.

Anonymous said...

Before the january 2008 CPF changes
do be careful of raiders who come in different disguises who will "talk' you into investing in their products.
In the next 3 months there will be an all out effort by insurance agents to get CPF members' money.It is do or die for them.They will stop at nothing. By 2008, it will be tough for them, especailly those agents who have no skills in investment. So don't be gullible and get sweet talked into buying those single premium endowment with long lock in and low return.

Remember there is NOTHING in the industry that is better than the CPF's return, WITHOUT RISK & LOCK IN.

WARNING:If you ever invest in risky
assets, they must return at least
2 times what CPF gives. For Ordinary account it must return 6-8% and Special Account above 8%.
There will be insurance agents who will show you products with return
of 0.5 to 1% above CPF and con you with free insurance coverage.You will be better off with CPF WITHOUT LOCK IN and RISK.
Remember CPF money is for retirement and not for buying insurance.Distinguish investment from protection.Any product MUST make your money work harder but not marginally.
Make sure the risk must not be excessive. Get the adviser to calculate and show you the risk that is compatible with your risk appetite and financial circumstances.
Mr. Tan, i hope you can sound this warning to your readers.This is a crucial period otherwise many will not have the minimum $60K in their CPF accounts in January 2008.

Anonymous said...

If everyone thought they were so smart and knew how each instrument worked, how come they did not get rich yet? Please get the correct knowledge of the instruments and not give others false info. Someone spoke of unnessary charges to insurance salespeople, if not for them, who would enlighten the uninformed of the changes? Actually im sure advisors would'nt mind waiting for people to walk into their lives and ask what funds the companies they represent can do for their money, but it doesn't hence, advisors have to convince in a condensed manner. misunderstanding happens with preconcieved ideas. another point to note is that CPF board approved the funds offered by respective insurance companies as they felt it to be benificial to its members. Otherwise all our money would be locked in and invested only by CPF board, only to be returned to us after we hit the minimum sum at our withdrawal age! Low risk low returns, high risk high returns right?

-Daniel Mok

Anonymous said...

Daniel, thye used to say that insurance is sold not purchased. This
is when policemen wearing shorts. Now, with your knowledge you can get info anywhre, from internet, from insurance agents; which ever way is your choice. Do you wait for an insurance agent to come into your life to help you make some decision for your financial future? Do you pay
huge commission for info? Do you know why 85% of CPF members lost money? As you have said h funds are approved why should they lose money? Not only that 15% make above 2.5%, how muach more. With this info don't you think many will be better off staying with CPF?
Le me tell you, the difference a good agents and a bad agents is one sells you funds, the other advises you on funds. There are many in this sales category and that is why many lost their CPF money. Iyt is important that you get a good adviser to help you and stay with you with your investment.

Thomas Phua's Blog said...

Daniel Mok has a point.

Mr Tan would tell you most who invested in Combined Fund Growth Fund with $10,000 in 2003 would be smiling as the value is now $18000+

Those who buy direct are smiling, those who buy from insurance agent also smiling.

Those who keep discriminate the insurance agent, well, I have nothing to say.Don't buy anything from them then, is your own money and your own decision.

I invested $350,000 of my CPFOA in Income's fund, some in UOB Fund and some in DBS. Tell you best is still in Income FUnd and UOB. Worst is DBS.

Total value of the funds have appreciated to above $500,000.

I don't care who I buy the investment from as long as it gives me the potential.

UOB sales charge is 5% and I just top up last month and it broke even this month. Happy to pay the bank sales person. The bank sales person did not even need to advise me as I already know this fund and I went there to sign it up to top up straight.

It doesn't matter as long as the fund performs. And by walking in, do I tell them I want to buy the fund and I do not want to pay the sales charge?

If any one can tell me how to avoid this sales charge when I am ready to buy, please advise me the loophole if any.

DANIEL MOK IS CORRECT TO MENTION "If everyone thought they were so smart and knew how each instrument worked, how come they did not get rich yet?"

Anonymous said...

You happen to be a smart and savvy investor, but not many people are like you. Can you explain why 85% of CPF members lost their money? Didn't they buy from insurance agents? My point is get your advice from qualified insurance agents.This is to reduce the chance of loss. No one is expert and just like you said we can be rich if we know about investemnt.But knowledge helps to steer clear from agents who sell, churn and advise buy and sell.
As for you,you might have a diversified portfolio, eg, asset allocation funds from NTUC. You might have bought during this bullish period after 2002. Whatyever you bought from that year, even Ahkow fund,you will make some money.Even your cats could pick a winning fund.
My point is , to you and Daniel, is
why pay insurance agents when they give you nothing but info which you can get from prospectus.What advice can they give you ? low risk low return , high risk high return? Are you are sure the risk you are bearing is not too low or too high? Is 25% high or 15%?.Is the return justifiable for the risk you take. Your investment might have appreciated higher with some other funds instead of combined funds. I am not saying combined fund is not good. The fact is it has low expense ratio, this beats a lot of the others; it has a head start. Compared to its peers, how is the performance?

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