Andrew Hallam introduced 2 portfolios – the Couch Potato Portfolio and the Permanent Portfolio. Both are suitable for lazy folks like me. I decided on the Couch Potato Portfolio as I did not relish the idea of holding gold.
In short, the Couch Potato Portfolio’s fund distribution is:
50% stocks, 50% bonds
So the way I customise my Couch Potato Portfolio to fit the Singapore context is as follows:
Stocks
Local: I invest about 10% of my annual fund allocation via a retirement vehicle into a Singapore stock index fund. There is a tax benefit in doing so – you can lower your tax bracket. The flipside is that you cannot withdraw from this account penalty-free until after the statutory retirement age (62 currently).
Currently, the Singapore stock index fund returns around 7% annually
Global: I invest 40% of my annual fund allocation into global/US index funds. The historic returns of the funds are around 11%
Bonds
In Singapore, we have a compulsory retirement savings scheme called the CPF (Central Provident Fund). Every working person must contribute 20% of their salary into this fund, with the employer matching up to 17%. So I have a healthy balance in the CPF at the moment. However, I cannot withdraw from the fund until I am 55 years old. It pays 2.4% to 6% interest at the moment.
Many Singaporeans use their CPF to buy homes, which to me jeopardises their retirement. This strategy may work in a booming market where one can hope to sell their properties at a profit but who can guarantee that? In fact, I feel that using CPF for housing makes one tend to overextend. I used the CPF when I first bought my flat but quickly paid off the sum within 6 months.
Currently my portfolio stands at 40% stocks, 60% bonds / CPF.
I hold one year of emergency funds that can be stretched if I am really, really thrifty.
Currently I have zero debt other than a monthly balance on my credit card which I pay off in full.
A great read, thanks for sharing. Had no idea the Singapore pension had a compulsory 20% contribution, with generous employer match. In the UK, workers get auto-enrolled onto the company pension, but it’s not compulsory (they can opt out) and standard contribution minimum is just 5%, with employer contributing 3%, better than nothing but paltry really.
Anyway, good luck with your journey!
I was also most impressed with those CPF contributions, especially that the employees have to contribute and therefore have skin in the game. In Australia, no one cares about superannuation until they are 50 and then tries to shovel as much as they can into it. Our employers contribute 9.5% and the current government is resisting legislating an increase to 12% over a number of years. Employees don’t need to contribute at all unless they choose to salary sacrifice. And here I thought that we Aussies are really behind but seems we are not bad compared to the Brits!
Sounds like you are on the right track, Auntie! I don’t think it’s a mistake to pay off your mortgage. The sense of security that comes from knowing you own your home and that your emergency fund will tide you over the rough spots is very valuable.
I agree! The psychological benefit of having a secure roof over your head is priceless
Thank you for sharing this wonderful FIRE journey. I’m impressed with Singapore’s CPF for creating a path towards retirement– awesome company match!
I enjoy reading how everyone’s journey can be different and yet successful. You’re doing great, Auntie. Like you, I paid off my mortgage and have no regrets. Good luck with your plans.
I too love reading how diverse everyone’s FIRE journey is from all over the world and yet, there are so many similarities