There are many financial decisions in life that we have to make. Sometimes, there are important decisions that we should think through carefully, rather than to go with the default choice that everyone else around us has made.
#1 Getting A Private Integrated Plan With Complete Rider
All Singaporeans and PRs are automatically covered under MediShield Life, Singapore’s basic health insurance plan. Coverage is provided regardless of age or pre-existing conditions.
According to the Life Insurance Association (LIA), two in three Singapore residents have a private Integrated Plan (IP). In addition to that, one in three have an IP rider. A rider allows deductibles and the co-payment portion of the bill to be covered by insurance companies.
While we think a private integrated shield plan is something everyone should consider, it’s also important for you to first understand the extent of the coverage that you want, and to get the plan that best fits your requirement.
Think about long-term affordability as well. When you buy an IP, you will be paying the premiums for many years. So check out how much future premiums will be before committing to it.
#2 Getting A BTO Flat
Many people advocate getting a BTO flat as your first home. It costs less and is newer, compared to other similar flats in the vicinity. We have also written extensively about why we think you should get a BTO flat.
But a BTO flat isn’t always your only choice, or even the best choice. A home is after all…your home and your personal preferences matter.
For example, some couples may want to stay near their parents and may opt for a resale flat. Others may want to stay nearer to the CBD for a more convenient daily commute.
Read Also: Should I Get A BTO Or Resale Flat?
#3 HDB Vs Bank Loan
As a default option, most HDB homeowners will opt for a HDB loan because interest rates are stable. In contrast, bank loans can vary over the years depending on the interest rates of the market.
In recent years, low interest rates offered by banks has led to more interest even among flat owners who qualify to take a bank loan.
If you wish to find out more about whether a HBD or bank loan is more suitable for you, you can read this article we wrote about HDB vs Bank loan.
#4 Using CPF Instead Of Cash For Home Loan Repayment
Many Singaporeans pay their home mortgage using money from their CPF Ordinary Account (CPFOA). In fact, more than 80% of HDB homeowners do not pay any cash for their monthly home loan repayment.
However, funds in your OA can earn you a risk-free return of up to 3.5% per annum, while cash on hand, unless invested, do not generate any returns. Interest earned will become a large sum of money when compounded over a long time period.
When Singaporeans use their CPFOA for their home loan repayment, they should think through carefully on how tapping on these funds today will impact their own future retirement.
#5 Choosing Your CPF LIFE Plan
Singaporeans age 65 have a choice of choosing their preferred CPF LIFE plan. They can choose from the Standard Plan (default choice) or the Basic Plan.
In a previous article written, we analyse that based on life expectancy, the Basic Plan appears to be the “superior” plan. This is of course subjective and largely based on how long you actually live to.
While we are not saying that everyone should choose the Basic Plan, we think more Singaporeans need to do the comparison for themselves, before deciding on what makes the most sense for them.
Thinking through a decision does not mean that the default choice available is not a good choice. For the most part, a default choice is usually the more logical choice for most people, hence the choice being “default” in the first place.
However, as with many other financial decisions in life, what is suitable for others may not always be the best choice for you. Big decisions should never be taken lightly. So think through these decisions in advance before you make any of them.