Retirement Income Scenarios Blog

For some years I have been focusing most of my research on issues associated with the provision of income to individuals during their retirement years. I now have expanded this work to include the provision of programs that anyone can use, requiring only a browser that supports Adobe Flash software. To keep everything associated with this research in one place I have created a new blog at:

                  www.RetirementIncomeScenarios.blogspot.com

Please take a look. If you find it interesting, I'd be delighted if you would sign up for notifications by email when I add new posts, which I hope to do quite frequently.

 


  

5 Unusual Tricks to Help you Save Up

Saving money is not always as easy as it first seems, and all those good intentions and budgets can fly out of the window without you even noticing – so why not try some more unusual money saving tips? Here are five of our best tips to help you save up!

1. Never pay with coins
   That’s right, take out all those coins weighing down your purse or wallet and put them in a piggy bank or jar instead. That 10 Sen coin isn't worth much on its own, but once you start saving up all your coins, it can add up to a considerable sum. Avoid the temptation of dipping into your coin fund by storing in it a tin with just a coin slot at the top. If you have to get out a can opener to access those coins, you’re more likely to wait until it’s full before you open it!
   
   
2.  Never say NO to a freebie
   Whether it’s free shampoo and soap from a hotel or free condiments from a restaurant, stock up! These free products are just as good, but with the added bonus that they cost you nothing. It also means that you get better value on your hotel room and meal out, so it’s a win-win situation.
   
   
3. Sleep on it
   Make a deal with yourself: Don’t buy something the first time you see it. Shopping can be a dangerous experience for those wanting to save up, and sometimes all that temptation can get too much. So avoid all that hassle and post-shopping regret by not buying anything the first time you see it or try it on. Go home, sleep on it, look at your finances and your budget and decide whether you really need it, or whether you can survive without it.
   
   
4. Find a partner who’s good with money
   If your partner is always overspending, borrowing money from you and forgetting to pay their bills, chances are you’re not going to be that good with money either. We’re not saying you should break up with your partner if they’re not good with money, but you should definitely sit down together and discuss your expectations when it comes to finances – money is the number one cause of arguments in relationships, so don’t let it ruin yours too.
   
   If you’re still single, on the other hand, why not add “good with money” to your list of criteria? A smart spender will encourage you to save, and will help you to get back on track if you fall off the saving bandwagon.
   
   
5. Save the environment and your money at the same time
   You've heard it a thousand times before: switch off the lights when you’re not in the room, reuse paper, bottles and everything possible… It’s all great for the environment, but there’s another key reason to save energy and reduce, reuse and recycle: it saves you money!

Exclusively for Finance Malaysia Blog, this money saving tips is brought to you by comparehero.my, Malaysia's leading comparison portal.

Fed holds off tapering, cuts growth outlook

            

            The US Federal Reserve has decided in its latest monetary policy to maintain its economic stimulus program (the Quantitative Easing) despite speculation that it would start the tapering process. It had been widely speculated that the central bank would cut back the stimulus package, currently $85bn a month. The Reserve also reduced its growth forecasts for the US economy, cutting the 2013 outlook by 0.3 percentage points to a range of 2.0-2.3 per cent, and lowering the prediction for next year to 2.9-3.1 per cent.

            To give a backdrop to the entire situation, the US embarked on an easy money policy post the 2008 financial crisis. This was called the Quantitative Easing program wherein the Federal Reserve would buy bonds and other assets in order to push more money into the economy, thereby stimulating growth and reducing unemployment.  The most recent strategy, called QE3, had the Fed buying $85 billion of bonds every month.

            With the US economy stabling, and the unemployment estimates reducing to 6% for the year 2015, the US Fed Reserve Chief Ben Bernanke had previously indicated in June that the tapering of the QE program may begin by the end of this year. This had sparked a panicky flow of money out of the emerging markets and back to the US which had adversely affected the emerging economies, including India.

            In his statement today Bernanke said, ‘‘Conditions in the job market today are still far from what all of us would like to see. The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.’’ Another important point is that Mr. Bernanke said a decision on tapering asset purchases depends on economic data, and there is no set timetable. Previously he had indicated that the tapering will begin by the end of this year.

            Now that the QE tapering has been held off, the markets on the whole will be looking towards a revival of sorts. The US Dow Jones rose 1.11% to 15,701.82 and the NASDAQ by1.1% to 3,786.906. The BSE Sensex has already gained 500 points and is at 20,464 points (as of 11:20 AM IST). The Rupee has has come down to 61.95 to the Dollar, down by 1.44 (as of 11:20 AM IST).

All eyes are on the RBI monetary policy expected tomorrow (20^th September) where it is expected that Mr. Raghuram Rajan will signal a reversal to a few of the tightening measures the RBI had taken previously.

- Sufiyan Sarguroh

  SIMSREE Finance Forum

Recent Bills Part-2

Pension Fund Regulatory and Development Authority (PFRDA) Bill

Background:  Pension Fund Regulatory and Development Authority (PFRDA) Bill was established by the Government of India on 23^rd August 2003 to promote old age income security by establishing, developing and regulating pension funds. Pension bill was introduced into the parliament in 2005 for the first time. After nearly a decade, both houses of parliament i.e. Loksabha (4^th September) and Rajyasabha (6^th September) have finally passed the pension bill which aims to create a regulator for pension sector and extend the coverage of pension benefit to more people.

Why it’s important: At present only 12% of total active workforce are having formal pension and social security plans, while remaining 88% of workforce is having no old age security. This bill will help increase number of people investing in pension plans. It will also open door for 26% of FDI in pension funds.

Key Features:

1.    With the passage of the bill, more citizens of the country will be able to get pension cover. National Pension Scheme (NPS) has a corpus of around Rs. 35,000 crore with around 53 lakh subscribers, including those of 26 state governments.

2.    Subscriber will be able to open an account which will be portable across job changes. Subscriber will also decide the fund manager and schemes in which he is interested to invest his pension wealth. They can also switch schemes and fund managers.

3.    Government of India has also launched Swavalamban plan for people working in unorganized sector.  This scheme will encourage such people to save for their retirement.

4.    This bill will give PFRDA statutory powers. With statutory powers authority can pull up errant pension sector participants and ensure better subscriber protection.

What will be affected?

The bill provides subscribers a wide range of choices to invest their funds, for assured returns by opting for Government Bonds as well as in other funds depending on their capacity to take risk. The new law could help bring in new pension products in the market, thereby giving a choice to customers. Competition could also improve quality of service and returns. If these measures are successful, these could help mobilize substantial long-term funds, which can be used to build infrastructure. 

By, Abhijit Vasagade

SIMSREE Finance Forum

Why Gold and Silver? Why Online Store?

Are you first time gold and silver buyers? Why don't you invest in these popular metals? If you did so, you have had a wonderful investing experience after 2008 global financial crisis. But, do you really understand these metals? Were they really precious (especially now)?

Traditionally, gold and silver were one form of exchange. Because of the invention of fiat money, they were being turned into some short of "back-up" currency, in case our fiat money system go burst. It's natural when things go wrong, gold and silver tends to appreciate in value. In other words, people hold precious metals to preserve the value of their assets.

3 Reasons Why Gold and Silver...

1. Still hot in demand, especially by emerging affluent Chinese. Traditionally, Chinese loves gold. They bought it for events such as new born baby, new year, wedding and even funeral ceremony.
2. Strengthening USD ??? Yes. It's a correct reason also. Why? Because of news that US going to stop QE3, USD is strengthening so much. But, we must not forget that Europe is still printing money. Then, how about Japan who jump into the bandwagon of money printing?
3. Simply for portfolio diversifying purpose. As a rule of thumb, 10% of our investment portfolio should allocate to precious metals like gold and silver. When everything goes haywire, precious metals tends to react reversely positive.

Alternative Distributing Channel...

Other than the commonly seen channel like banks and goldsmiths, have you ever think about online purchase? Why?

1. Normally, it's cheaper because it does not need to open a shop and employ security guard.
2. Convenient. You can view and select with the pleasure of your time, comfortably at home.
3. Safe delivery. It's depend. But, I will feel safer if it delivers to my doorstep, instead of going to purchase at goldsmith. Do you know someone might be following you?

Of course, some of you may skeptical about the reliability of the online store. You may try it with small purchase first (test the water before diving in). On this matter, one of the most popular online store in town was SilverMalaysia.com which already features in major dailies with wide media coverage. You may open an account, then explore further.

* Finance Malaysia Blog DO NOT holds any form of liabilities regarding the recommendations. Investors are advised to read and understand the terms and condition thoroughly.

3 Tighter Rules for Property Sector? (Sept 2013)

Prior to Budget 2014 (to be tabled next month), speculation has rift up on a few proposal to tighten the rules, especially on property sector. Following the outcry from public stating the alarming high property prices, measure should be taken to tackle the issue before bubble was formed.

The Bubbling Biz...

Among the measures being proposed were:

1. Non-other than Real Property Gain Tax (RPGT)
   
   
   
   
2. Higher Stamp Duty:
   ~ 5% of purchase price for 3rd property
   ~ 7.5% for 4th property
   ~ 10% for 5th property onward
   
   
3. Loan-to-Value ratio reduce to 60% for 3rd property onward
   
   

While the above info need to be ascertained further, some banks already implemented their in-house ruling. What's that? It was to limit the maximum term for refinancing of property to 10 years. Yes. Sooner or later, all of the banks will follow.

* Please note that the above 3 rules need to be ascertained further. Stay tune!

Recent Bills- Part 1

Companies Bill 2012

The Companies Bill was laid before the Parliament in the month of December 2011 and was referred to the Parliamentary Standing Committee on Finance, headed by Mr. Yeshwant Sinha. The standing Committee submitted its report in June, 2012. Based on Standing Committee recommendations, the Companies Bill was amended and was introduced as Companies Bill 2012. The Bill was passed in Lok Sabha on 18 December 2012 and by Rajya Sabha on 8 August 2013.

The Bill has 470 clauses are against 658 Sections in the existing Companies Act, 1956. The entire bill has been divided into 29 chapters.

Key Features:

• Companies are required to spend at least two per cent of their net profit on Corporate Social Responsibility
• The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20, from which public companies should not be more than 10
•  Financial Year of any company can end only on March 31 and only exception is for companies, which are holding/subsidiary of a foreign entity requiring consolidation outside India, can have a different financial year with the approval of Tribunal
• Maximum number of members in a private company increased from 50 to 200
• For infrastructural projects, preference shares can be issued for a period exceeding 20 years
• Shares cannot be issued at a discount except sweat equity shares
• Time gap between 2 buy-backs shall be minimum 1 year
• One of the directors of a company shall be a person who has stayed in India for 182 days or more
• A Chairperson can be an MD or CEO at the same time, if the Articles of the company permits or if the company does not have multiple businesses or where the company has multiple businesses and has appointed 1 or more CEO for each such business
• CFO and WTD(Whole Time Director) included in Key Managerial Personnel
• Appointment of at least one woman director on the board of prescribed classes of companies has been made mandatory

Source: Ministry of Corporate Affairs, Government of India. http://www.mca.gov.in/Ministry/pdf/The_Companies_Bill_2012.pdf

The National Food Security Bill 2013

In its 2009 national election manifesto, the Congress had promised to enact a Right to Food law with the aim of guaranteeing access to sufficient food for all people. On March 19 2013India’s Cabinet approves an amended draft of the food security before introducing it in Parliament for a general debate. On May 2, 2013India’s government introduces an amended food security bill in Lok Sabha. On August 26 2013 the bill was passed in the Lok Sabha with a simple majority. The Bill was passed by Rajya Sabha on 2 September 2013, bringing it one step closure to being an Act.

Key Features:

• 75% of rural and 50%  of the urban population entitled to five kg food grains per month at Rs.3, Rs.2, Re.1 per kg for rice, wheat and coarse grains, respectively
• The bill giveslegal entitlement to 67 per cent population (including 75 per cent rural and 50 per cent urban) for subsidized grains under the Targeted Public Distribution System
• The work of identification of eligible households has been left to the states
• Pregnant women and lactating mothers entitled to nutritious meals and maternity benefit of at least Rs.6000 for six months
• The central government will provide funds to states in case of short supply of food grain
• The current food grain allocation of the states will be protected by the central government
• The state governments will provide food security allowance to the beneficiaries in case of non-supply of food grain
• The eldest woman in the household, 18 years or above will be the head of the household for the issue of the ration
• There will be state and district level redress mechanisms
• The programme , when implemented, will be the biggest in the world with the government spending estimated at Rs 125,000 crore annually on supply of about 62 million tonns of rice, wheat and coarse cereals to 67 per cent of the population

Source: The hindu.

http://www.thehindu.com/multimedia/archive/01404/National_Food_Secu_1404268a.pdf

By, Varad Shastri

SIMSREE Finance Forum

Raghuram Rajan - The new RBI Governor

Outgoing Governor D.Subbarao welcomes successor
Raghuram Rajan 

Raghuram Rajan, 50, took charge as the Reserve Bank of India (RBI) Governor from Duvvuri Subbarao on 4^th September 2013. He is the 23^rd Governor of the RBI and has been appointed for a period of three years.

Mr. Raghuram Rajan earned his bachelor’s degree in electrical engineering from IIT-Delhi, before pursuing his MBA in 1987 from the Indian Institute of Management, Ahmedabad, followed by a PhD in 1991 from Massachusetts Institute of Technology. He was a gold medalist at both IIT and IIM. Mr. Rajan’s claim to fame is his prediction of the 2008 global financial crisis in his paper titled ‘Has Financial Development Made the World Riskier?’ He had previously served as a Chief Economist to the IMF from 2003 to 2007, and more recently as the Chief Economic Advisor to the Finance Ministry of India for the past one year.

A few critics were concerned with his appointment as the RBI Governor, since he has never held a decision making post. His previous posts at the Government of India and the IMF were purely advisory roles. However, these concerns have been put to rest as Mr. Rajan brilliantly began his innings at the RBI spelling out plans to reform the country’s banking industry and reshape its financial infrastructure.

A few key decisions that he took are as follows:

·         Limits for exporters to re-book cancelled forward exchange contracts doubled to 50% of valued contracts; for importers it has been increased to 25% from 0%

·         Special concessional window for swapping foreign currency non-resident (FCNR) deposits and dollar funds

·         Overseas borrowing limit for banks hiked from 50% to 100%

·         A committee led by former RBI Governor Bimal Jalan has been formed for looking in to the new banking license applications

·         A committee led by Nachiket Mor formed to study every aspect of financial inclusion

·         Inflation indexed savings certificates linked to CPI to be launched by November end

The markets have responded spectacularly. The BSE Sensex has gained almost 675 points in the last two days to settle at 19270 (as on 6^th September 2013) since Mr. Rajan has taken charge. The rupee too has gained almost 1.5 rupees settling at 65.24/dollar (as on 6^th September 2013).

All eyes are now on the monetary policy that will be announced on 20^thSeptember 2013. It was earlier scheduled for 18^th September. Although no specific reason was mentioned, it is understood that the RBI will take into consideration the decisions taken by the US Federal Reserve in their monetary policy to be announced on 18^th September.

Mr . Rajan, as he has himself admitted, has no magic wand. However, with his maiden speech, he has instilled a lot of confidence in the market. His bold entry to the job, announcing a raft of financial deregulatory measures has received rave reviews from economists and the local media. To conclude, I quote the outgoing Governor, D. Subbarao, on Mr. Raghuram Rajan - “The country could not have asked for more capable person to lead RBI in most difficult times”.

- Sufiyan Sarguroh
SIMSREE FINANCE FORUM

End the Fed!

That’s the title of a book I would recommend people to read. The author of the book is the great politician Ron Paul. For those who are not familiar with Ron Paul it is worth mentioning that he is a former US presidential candidate, long-time congressman and, in a previous life, a medical doctor (obstetrician). But most of all he is an outspoken proponent of a sound gold-backed currency. It is against this backdrop that his 2009-book “End the Fed” should be read.

I am probably biased by my hard-wired views on fiat money in general but still, I think this is a good book. It is very one-sided though and it should be read as a plea made by a party. As such, Ron is certainly not mincing his words when it comes to the evils of the Fed. The following quote from the book is representative for its style and it summarizes Ron’s arguments for why the Fed should be abolished immediately: “The Federal Reserve should be abolished because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty. Its destructive nature makes it a tool of tyrannical government.” [Ord och inga visor!]

I am happy that Ron raises this issue though. I am no expert on monetary economics and central banking but I do find the complete absence of critical voices against the central banks of today very curious. Neither politicians, journalists nor (main-stream) investors seem to care much about the problems of having a state-run entity with a license to print as much money as it sees fit. Of course, for the libertarians out there this is nothing new, though. Not surprisingly, great minds such as F.A. Hayek were highly critical about central banks: “I doubt whether it has ever done any good except to the rulers and their favorites” and “money is certainly too dangerous an instrument to leave to the fortuitous expediency of politicians.”

Anyway, for anyone who worries about the merits of fractional reserves banking and inflation in general this book is probably best avoided. Reading it would simply take your worries to a new and much more uncomfortable level.....