The population of USA is 300 million. 70% have internet access, or 210 million.
36% have looked for information on insurance during the past 24 months. 6% have bought insurance online.
The most popular life insurance products are:
* life insurance
* disability insurance
* long term care
* critical illness
* annuity
Tuesday, August 07, 2007
Withdraw from Combined Fund
Hi Mr Tan
I have taken up the combined fund from NTUC Income. I am now investing a part of my monthly earnings.
I want to know. If I need money to pay for my car or flat, can I withdraw from the combined fund? Are they any penalty?
REPLY
You can withdraw from the combined fund based on its bid price. There is no penalty.
However, when you invest in the combined fund, you have to pay at the offer price, which is 3.5% higher. This cost is already deducted upfront.
If possible, try to avoid withdrawal and re-investment, as you have incurred unnecessary cost. It may be better for you to take a higher loan and to make a higher repayment (including a temporary cessation of your savings into the combined fund.
You can read this FAQ on Financial Planning for the Young.
I have taken up the combined fund from NTUC Income. I am now investing a part of my monthly earnings.
I want to know. If I need money to pay for my car or flat, can I withdraw from the combined fund? Are they any penalty?
REPLY
You can withdraw from the combined fund based on its bid price. There is no penalty.
However, when you invest in the combined fund, you have to pay at the offer price, which is 3.5% higher. This cost is already deducted upfront.
If possible, try to avoid withdrawal and re-investment, as you have incurred unnecessary cost. It may be better for you to take a higher loan and to make a higher repayment (including a temporary cessation of your savings into the combined fund.
You can read this FAQ on Financial Planning for the Young.
Earn 4% on your CPF retirement account
Dear Mr Tan,
I have been approached by an insurance agent to buy a life annuity from NTUC, using my CPF minimum sum. I have just passed 55 years. What do you advise?
REPLY
You can read paragraph 3 of this FAQ on Financial Planning for Seniors.
As CPF is paying interest at 4% per annum on your retirement account, it is quite attractive. You should keep your money there.
You have additional savings that can be used to buy the life annuity.
I have been approached by an insurance agent to buy a life annuity from NTUC, using my CPF minimum sum. I have just passed 55 years. What do you advise?
REPLY
You can read paragraph 3 of this FAQ on Financial Planning for Seniors.
As CPF is paying interest at 4% per annum on your retirement account, it is quite attractive. You should keep your money there.
You have additional savings that can be used to buy the life annuity.
How to get a higher return
Dear Mr Tan
I have a large sum of money to invest. Bank deposit pays only 1.7%. If I lock up in a government bond for 5 or 10 years, I only get about 2.7% per annum. This is too low for me. Is it safe to invest in the stockmarket at this time?
REPLY
I suggest that you read my FAQs. Choose one that is relevant to your situation.
If you are invested for the next 10 years or more, it is better to invest in a exchange traded fund (like the STI ETF), or in a low cost investment fund (like the combined fund from NTUC Income). There may be other suitable funds or investments. You can talk to an adviser.
If the stockmarket corrects further and reaches a lower level, it will be a good time for you to make a long term investment. You can read my FAQ about how to manage risk and get a better return.
I have a large sum of money to invest. Bank deposit pays only 1.7%. If I lock up in a government bond for 5 or 10 years, I only get about 2.7% per annum. This is too low for me. Is it safe to invest in the stockmarket at this time?
REPLY
I suggest that you read my FAQs. Choose one that is relevant to your situation.
If you are invested for the next 10 years or more, it is better to invest in a exchange traded fund (like the STI ETF), or in a low cost investment fund (like the combined fund from NTUC Income). There may be other suitable funds or investments. You can talk to an adviser.
If the stockmarket corrects further and reaches a lower level, it will be a good time for you to make a long term investment. You can read my FAQ about how to manage risk and get a better return.
Notify consumer about the high charges
Editor
Today Paper
I refer to the reply "the choice is yours, don't let us restrict you" from the assistant director of the Infocommun Development Authority of Singapore (Today, 7 August 1997).
In my earlier letter, I suggested that the telecom firms should be required to notify the customer when their monthly bill reach a certain limit. This is to ensure that the customer is aware of the charges that are being incurred.
The Authority's reply is that the service providers are required to publish their prices, terms and conditions of service, and that they are available on their websites.
I invite the Authority to carry out a survey and find out if new customers, especially the young, are aware about the high charges that they have to incur on some services, for example, IDD calls or roaming charges when they are overseas.
The Authority should also carry out a mystery shopping to find out what information is being given to a customer who subscribe to a mobilephone.
If a consumer to visit the websites of the telecom firms, he or she will be bewildered by the wide range of plans and the lack of essential, consumer friendly information.
Market liberalisation does not help the consumer, if they end up having to pay more, due to lack of awareness of the high charges for some services.
We need some minimal safeguard to protect the interest of the consumer. They have to be provided with clear and relevant information, especially on the charges. They should be notified in time about the high charges that are being accumulated on their bill, in case they were not aware about it.
Tan Kin Lian
Today Paper
I refer to the reply "the choice is yours, don't let us restrict you" from the assistant director of the Infocommun Development Authority of Singapore (Today, 7 August 1997).
In my earlier letter, I suggested that the telecom firms should be required to notify the customer when their monthly bill reach a certain limit. This is to ensure that the customer is aware of the charges that are being incurred.
The Authority's reply is that the service providers are required to publish their prices, terms and conditions of service, and that they are available on their websites.
I invite the Authority to carry out a survey and find out if new customers, especially the young, are aware about the high charges that they have to incur on some services, for example, IDD calls or roaming charges when they are overseas.
The Authority should also carry out a mystery shopping to find out what information is being given to a customer who subscribe to a mobilephone.
If a consumer to visit the websites of the telecom firms, he or she will be bewildered by the wide range of plans and the lack of essential, consumer friendly information.
Market liberalisation does not help the consumer, if they end up having to pay more, due to lack of awareness of the high charges for some services.
We need some minimal safeguard to protect the interest of the consumer. They have to be provided with clear and relevant information, especially on the charges. They should be notified in time about the high charges that are being accumulated on their bill, in case they were not aware about it.
Tan Kin Lian
Monday, August 06, 2007
Buy a fixed term annuity
Dear Mr Tan,
I wish to transfer a sum of money to each of my children (who are now adults). I wish to do it now, instead of many years later on my death. But, I do not want them to squander away the money. What is your advice?
REPLY
You can buy a fixed term annuity to make an annual payment to the beneficiary over a certain number of years, say 10, 15 or 20 years. You should be able to get a yield of about 3% to 4% on this annuity.
More importantly, it meets your goal about giving the money to your children, without the risk that they will spend it away within a short time.
I wish to transfer a sum of money to each of my children (who are now adults). I wish to do it now, instead of many years later on my death. But, I do not want them to squander away the money. What is your advice?
REPLY
You can buy a fixed term annuity to make an annual payment to the beneficiary over a certain number of years, say 10, 15 or 20 years. You should be able to get a yield of about 3% to 4% on this annuity.
More importantly, it meets your goal about giving the money to your children, without the risk that they will spend it away within a short time.
Financial Planning Tips
To find out my tips on your investments, you can visit this website.
There are tips on:
- for the young
- for seniors
- structured products
- life annuity
There are tips on:
- for the young
- for seniors
- structured products
- life annuity
Financial Planning for Seniors (revised FAQ)
I have updated my FAQ on Financial Planning for Seniors. It contains tips on investment and insurance for seniors (i.e. age 45 and older). I hope that you find it to be useful.
Working closer to home
I met a teacher who lived in Pasir Ris and worked in Bukit Panjang. He has to take a long journey each day to get to his school.
There are many schools in Pasir Ris and Tampines, that is closer to his home. Surely, it is desirable for him to work closer to his home?
It will be difficult for the teacher to ask for the transfer. He has to get the approval of principals of his current school and the new school that is closer to his home.
If this exercise is managed on a national scale, by the Ministry of Education, it will be easier for all parties and beneficial in the long run.
There are many teachers and many schools all over Singapore. It will be beneficial if many teachers could be transferred to a suitable school near his or her home?
This exercise can also be applied to other government departments and large businesses that have operations all over the island.
If 20 percent of workers can be relocated to work closer to their homes (without any long term loss of productivity), there will less congestion on the roads and public transport, and a better quality of life.
I hope that this idea can be pursued.
There are many schools in Pasir Ris and Tampines, that is closer to his home. Surely, it is desirable for him to work closer to his home?
It will be difficult for the teacher to ask for the transfer. He has to get the approval of principals of his current school and the new school that is closer to his home.
If this exercise is managed on a national scale, by the Ministry of Education, it will be easier for all parties and beneficial in the long run.
There are many teachers and many schools all over Singapore. It will be beneficial if many teachers could be transferred to a suitable school near his or her home?
This exercise can also be applied to other government departments and large businesses that have operations all over the island.
If 20 percent of workers can be relocated to work closer to their homes (without any long term loss of productivity), there will less congestion on the roads and public transport, and a better quality of life.
I hope that this idea can be pursued.
Collapse of bridge in Minneapolis, USA
There are 70,000 bridges in the USA. One bridge in Minneapolis collapsed last week, killing a few people. Some are still missing.
Is this an isolated incident? A bad accident?
Apparently, it seems that the condition of many of the bridges are unsatisfactory. There is a wider problem.
Many years ago, it was considered to be the duty of the government to provide the public works and utilities. There was no issue about the costs (although the government do manage them quite prudently). These public expenditure were considered to be necessary and beneficial.
The priority changed during the past 20 years. The governments tried to adopt business principles, using cost-benefit analysis. Some of the expenditures were reduced, as they were felt to be unnecessary. Some activities, e.g public transport and hospitals, were privatised to be runned by profit-driven entrerprises.
The outcome was a deterioration in the quality of the infrastructure and public services in many countries. There was a focus on cutting costs and increasing profits, instead of the public interest.
I hope that there will be a change in thinking, and that governments will move away from the concept of adopting business principles for public service.
Is this an isolated incident? A bad accident?
Apparently, it seems that the condition of many of the bridges are unsatisfactory. There is a wider problem.
Many years ago, it was considered to be the duty of the government to provide the public works and utilities. There was no issue about the costs (although the government do manage them quite prudently). These public expenditure were considered to be necessary and beneficial.
The priority changed during the past 20 years. The governments tried to adopt business principles, using cost-benefit analysis. Some of the expenditures were reduced, as they were felt to be unnecessary. Some activities, e.g public transport and hospitals, were privatised to be runned by profit-driven entrerprises.
The outcome was a deterioration in the quality of the infrastructure and public services in many countries. There was a focus on cutting costs and increasing profits, instead of the public interest.
I hope that there will be a change in thinking, and that governments will move away from the concept of adopting business principles for public service.
Waiting time for public buses
The Public Transport Council in Singapore has set a standard on the waiting time for public buses during peak periods.
In my view, they should focus on the following indicators:
* getting buses to keep to a schedule
* ensuring that the buses are not over-crowded
In other countries, most buses run on a time schedule. There may be only a few services in a day. The passengers know the expected arrival time and can plan their travelling according to this schedule. The buses are not full, so everyone has a seat.
In my view, they should focus on the following indicators:
* getting buses to keep to a schedule
* ensuring that the buses are not over-crowded
In other countries, most buses run on a time schedule. There may be only a few services in a day. The passengers know the expected arrival time and can plan their travelling according to this schedule. The buses are not full, so everyone has a seat.
Saturday, August 04, 2007
Common Sense and your Blue Rose
Some inspirational advice from Dr. Lee Kum Tatt to NUS Chemistry graduates and their parents at the Graduation Ceremony in 2006. Read what Dr. Lee said in his address in his blog.
Friday, August 03, 2007
Level premium for Shield plan
Dear Mr Tan,
I understand that the premium for the Shield plan varies according to the current age. It means that I have to pay a higher premium when I grow older. The increase can be quite steep. Is it possible for me to pay a level premium?
REPLY:
It is true you have to pay a higher premium when you grow older. To get an idea about the likely amount, you can refer to section 15 of this FAQ.
It is not possible for the insurance company to charge a level premium, as the premium rate has to be revised according to the claim experience. It is likely that the cost of treatment will increase in the future, due to new technology and more sophisticated method of treatment.
The premium will increase due to two factors - increase in your age (as older people need more treatment) and escalation of treatment cost.
Although you pay an increasing premium, you can use your CPF Medisave account to level out the cost. You should keep sufficient money in this account to pay for all of your future cost. It allows you to earn interest on the balance in your account.
You also have the choice to downgrade to a less costly plan, when you grow older. This option is available only if you have a plan with a yearly adjustible premium.
I understand that the premium for the Shield plan varies according to the current age. It means that I have to pay a higher premium when I grow older. The increase can be quite steep. Is it possible for me to pay a level premium?
REPLY:
It is true you have to pay a higher premium when you grow older. To get an idea about the likely amount, you can refer to section 15 of this FAQ.
It is not possible for the insurance company to charge a level premium, as the premium rate has to be revised according to the claim experience. It is likely that the cost of treatment will increase in the future, due to new technology and more sophisticated method of treatment.
The premium will increase due to two factors - increase in your age (as older people need more treatment) and escalation of treatment cost.
Although you pay an increasing premium, you can use your CPF Medisave account to level out the cost. You should keep sufficient money in this account to pay for all of your future cost. It allows you to earn interest on the balance in your account.
You also have the choice to downgrade to a less costly plan, when you grow older. This option is available only if you have a plan with a yearly adjustible premium.
Application of Laws of Chemistry to Our Everyday Life
Dr. Lee Kum Tatt has written many articles in his blog on the philosophy of science and how this together with our culture and values affect our lives. He has just written an article on how to use chemistry laws to solve everyday problems. This article is meant for our amusement the contents of which can only have been written by a fanatic chemist. Enjoy yourself.
Dr. Lee Kum Tatt and his blog
I persuaded Dr. Lee Kum Tatt to put his ideas in this blog so that others may benefit from his experience , values and philosophy. Many still asked him why he blogs and for whom? Here are his comments.
Thursday, August 02, 2007
Some tips on investing in structured products
1. What are structured products?
These investments link your returns to stocks or bonds. It reduces both the high and low-end of potential returns. You receive the middle part.
2. What type of structured products are good for consumers?
If you must buy a structured product, your best bet is probably one (i) which pays a minimum return that is more than a money market fund and (ii) doesn't lock up your money for longer than you are comfortable with. (It is hard to find one of these.)
3. What type of structured products are bad for consumers?
Structured products with high costs and uncertain returns are bad for consumers.
Costs: For many structured products, the costs are not disclosed. Some structured deposits trade as unit trusts and these report an expense ratio. The expense ratio contains most of product's costs.
Returns: The products usually state a minimum and maximum return. If the minimum return is higher than the money market rate, it is acceptable as long as it doesn't lock up your money for longer than you wish.
4. What steps should the consumer take, before investing in a structured product?
Check out the (i) costs, (ii) minimum returns and (iii) lock-in period.
These investments link your returns to stocks or bonds. It reduces both the high and low-end of potential returns. You receive the middle part.
2. What type of structured products are good for consumers?
If you must buy a structured product, your best bet is probably one (i) which pays a minimum return that is more than a money market fund and (ii) doesn't lock up your money for longer than you are comfortable with. (It is hard to find one of these.)
3. What type of structured products are bad for consumers?
Structured products with high costs and uncertain returns are bad for consumers.
Costs: For many structured products, the costs are not disclosed. Some structured deposits trade as unit trusts and these report an expense ratio. The expense ratio contains most of product's costs.
Returns: The products usually state a minimum and maximum return. If the minimum return is higher than the money market rate, it is acceptable as long as it doesn't lock up your money for longer than you wish.
4. What steps should the consumer take, before investing in a structured product?
Check out the (i) costs, (ii) minimum returns and (iii) lock-in period.
Single premium endowment has its attractions
COMMENT POSTED IN MY BLOG
Your FAQs are very informative. is the single endowment plan, Growth, by NTUC a good investment vehicle?
You have advised against any product with lock in. I notice that this Growth has lock in. To get the full return you have to keep it till maturity.
It may be considered a low risk but then its guaranteed component is very low especially in the early years and it is only 1.5% when it is held to maturity.
I think the investor is better off taking about the same risk with well diversified portfolio. Consider these two downsides, ie. long lock in period and low return, I won't recommend anyone investing in this product.
What is your view, Mr. Tan?
REPLY
Based on the current bonus rates, the Growth policy should give a return of 3% to 4% p.a. at the maturity date.
It is a good plan for a policyholder who does not wish to take investment risk, and is willing to invest for the full term. The upfront cost is low. The return on maturity has been quite fair.
For those who are prepared to take risk, it is better to invest in a well diversified fund.
Your FAQs are very informative. is the single endowment plan, Growth, by NTUC a good investment vehicle?
You have advised against any product with lock in. I notice that this Growth has lock in. To get the full return you have to keep it till maturity.
It may be considered a low risk but then its guaranteed component is very low especially in the early years and it is only 1.5% when it is held to maturity.
I think the investor is better off taking about the same risk with well diversified portfolio. Consider these two downsides, ie. long lock in period and low return, I won't recommend anyone investing in this product.
What is your view, Mr. Tan?
REPLY
Based on the current bonus rates, the Growth policy should give a return of 3% to 4% p.a. at the maturity date.
It is a good plan for a policyholder who does not wish to take investment risk, and is willing to invest for the full term. The upfront cost is low. The return on maturity has been quite fair.
For those who are prepared to take risk, it is better to invest in a well diversified fund.
Earn 4% in your CPF special account
Dear Mr Tan,
If the Growth Policy can return between 3%-4% do you think it is wise to invest your CPF Special Account in this product?
The Special Account gives a guaranteed 4% without the risk and no need to hold to maturity.
I have one NTUC agent persuading me to invest my special account in the Growth POlicy. Trying hard to convince me about the insurance, which is actually a personal insurance stripped of all other benefits. I am amazed by her argument.
REPLY
It is better to keep your money in the Special Account to earn 4% per annum, rather than invest in the Growth policy, which is likely to pay a lower return. You can get your life insurance by buying a low cost term insurance.
If the Growth Policy can return between 3%-4% do you think it is wise to invest your CPF Special Account in this product?
The Special Account gives a guaranteed 4% without the risk and no need to hold to maturity.
I have one NTUC agent persuading me to invest my special account in the Growth POlicy. Trying hard to convince me about the insurance, which is actually a personal insurance stripped of all other benefits. I am amazed by her argument.
REPLY
It is better to keep your money in the Special Account to earn 4% per annum, rather than invest in the Growth policy, which is likely to pay a lower return. You can get your life insurance by buying a low cost term insurance.
Buy term and invest in a low cost fund
COMMENT POSTED IN MY BLOG
I don't believe in cash value policies. I have only term from NTUC. They are cheap. I have no worry about keeping them. I can throw them away when the time comes without the feeling of loss.
I invest in the combined funds which are giving me good returns. I can move the investment whenever I like. I can use the profit to finance my term policies if I run into a crunch.
It is so flexible having two types of plan seperated. Don't fall for all those limited premium plans with fanciful names like LPPL living policy.
I don't believe in cash value policies. I have only term from NTUC. They are cheap. I have no worry about keeping them. I can throw them away when the time comes without the feeling of loss.
I invest in the combined funds which are giving me good returns. I can move the investment whenever I like. I can use the profit to finance my term policies if I run into a crunch.
It is so flexible having two types of plan seperated. Don't fall for all those limited premium plans with fanciful names like LPPL living policy.
Wednesday, August 01, 2007
Writing a Will
Dear Mr Tan
I like to thank you. Your Blog is always helpful.
I visited the "NTUC Income : Know Your Insurance" website and went through the "Personal Accident" and "Making a Will" sessions.
I contacted the NTUC customer service officer to find me a lawyer to help me in drawing up my Will. She recommended a lawyer who quoted $157.50 for a simple will. This is much cheaper than another law firm that I approached earlier.
I like to thank you. Your Blog is always helpful.
I visited the "NTUC Income : Know Your Insurance" website and went through the "Personal Accident" and "Making a Will" sessions.
I contacted the NTUC customer service officer to find me a lawyer to help me in drawing up my Will. She recommended a lawyer who quoted $157.50 for a simple will. This is much cheaper than another law firm that I approached earlier.
Starhub Mobile
I subscribed to Starhub Mobile recently. It had the following advantages:
* free incoming calls
* free IDD calls (018) to several countries, including Malaysia, China, Hongkong, Taiwan and USA
As I have to call these countries frequently, the free IDD call was quite useful to me.
* free incoming calls
* free IDD calls (018) to several countries, including Malaysia, China, Hongkong, Taiwan and USA
As I have to call these countries frequently, the free IDD call was quite useful to me.
Surgical operation was not helpful
I know of someone who passed away recently. He was over 70 years. He had been on kidney dialysis for many years. He spent two months in a public hospital but they did not operate on him.
Later, he went to a private hospital to carry out an operation. He passed away from some complication arising from the operation. The medical bill was $60,000.
Lesson: Avoid taking an operation at an old age, unless it is clear that the operation is useful and is not risky. Seek a second opinion before carrying out the surgery.
Later, he went to a private hospital to carry out an operation. He passed away from some complication arising from the operation. The medical bill was $60,000.
Lesson: Avoid taking an operation at an old age, unless it is clear that the operation is useful and is not risky. Seek a second opinion before carrying out the surgery.
Brief History of Science in Early Singapore
As the founder chairmen of Singapore’s Science Council, Singapore Institute of Standards and Industrial Research, Singapore Standards Council and a member of Singapore Polytechnic’s Board of Governors, Dr. Lee Kum Tatt was one of our early pioneers who was in a good position to coordinate the application of science to Singapore’s development.
Pioneers always face uncertainties and dilemmas. Dr. Lee shares with us his personal feelings of those times. Dr. Lee also shares with us what he considers as some of the important factors that made Singapore what it is today. Read about his accounts on this subject in his blog.
Pioneers always face uncertainties and dilemmas. Dr. Lee shares with us his personal feelings of those times. Dr. Lee also shares with us what he considers as some of the important factors that made Singapore what it is today. Read about his accounts on this subject in his blog.
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