Tuesday, March 10, 2015

Tan Chuan Jin: Younger workers can save enough to retire

To put it bluntly, the minister is talking nonsense. A comment at the top put it well.

Vivus Loh Just like how we should stay healthy to avoid going/staying at hospitals right? Brilliant.

I shouldn't be blogging right now. I ought to be look at interest rates options this very moment for my work. But this has to go out.

I can take apart his story as reported in the ST in many ways but I would just choose what I consider the most important which will take down his house of cards.

TCJ case makes no sense. This is completely surreal. The subject is highly complex and uncertain and he reduces it to bite size but lost all of its essence. In short, his example is too far removed from real life to be useful. Not even good enough for a computer simulation game!

For simplicity the minister assumes the poly grad pay remain static. For the case to work everyone's pay must also remain static. In fact, all things mustn't change too much which we know is impossible. Life is full of surprises. The first part which the poly grad pay held static looks "reasonable" and helpfully conservative to build a robust case, but what about everyone's pay also do not move in order to make it realistic as we must have a relatively stable environment? What sort of world is that? What will happen to consumer prices? Every year this hypothetical poly grad will see his standard of living fall. Who will accept that? Over a lifetime interest rates always look volatile. The assumptions for compounding makes no sense except taken at extremely low rates. Yes, the math he says is simple but it is the wrong numbers. All the time he conveniently forgets that Singapore is the ultimate price taker. That is short hand for we don't what tomorrow is like because we don't even know what prices we have to pay. Yes, we also need to pay for healthcare as Vivus Loh pointed out.

As the country must remain relevant and useful to others ALL THE TIME to survive, so must its people. Aim to retire but be prepared that it may not be possible. We are better off rejecting the minister's bad advice. If we take him up on that, one day this will be an impossible nightmare task a future minister cannot deliver on. Talk about thinking log term eh. He is trying to make his job doable by kicking the can down the road for his successor to deal with.

Twenty years ago, a minister offering such advice would be welcome. But a new generation of more thoughtful people have grown up but our leaders have not kept pace with the new savvy out there.

Try harder minister. Don't insult us with kindergarten stories.

Update: 2:55 pm

I was at the car distributor waiting for the blown headlamp to be replaced when I came across this. So the PM also weighed in. Fortunately it isn't Tharman, whom I think is a really good guy.

Just because Buffett and Einstein made some wise statements about the magic of compounding people must do their homework to know how to use this concept properly.

In real life compounding is not magic but sheer hard work and often with some luck. To you it is magic because you get rewarded for giving your money to be invested. Meanwhile someone is working his butts off with your money to make it happen. Perhaps take some horrible risks as well. In recent years, pay him less but yourself more in order to fulfill your high returns promise....many ways. How precisely, there isn't enough transparency to tell. Were it a business, 5% compounded into the future indefinitely and guaranteed is a herculean task to achieve.

China's GDP has been compounding above 7%, often more for many years. That is a good example of the magic of compounding without taking away the very hard work to make that happen.

So what is the PM trying to say? It is easier to say this indirectly and rhetorically. Remember there is no free lunch. Remember you must always know who the sucker is. If you don't then perhaps check if it might be you! MPs clueless about how the budget is constructed should also ask if they are suckers.

Governing is hard and we must not make the job harder for our leaders. On the other hand we cannot allow them to make it easier for themselves at our huge expense. Remember until 2011 they used to play heads they win, tails we lose.  That is why they are always scolding us. To me they have lost the right to scold. Elsewhere if a politician scold he should prepare himself to look for another job. Scolding is their egregious way to transfer blame to us when we all share responsibilities and outcomes.

Trust but verify. Whatever you are ignorant of, the government would not hesitate to take advantage of that. They can forget about the old bond of trust. That is over. Don't tell me stories about compound interest. I am in the game, I know what this creature is. More important I am not alone and our numbers can only grow.

Update: 9:55 pm

Add another minister, this time Shamugam to the pile. This one cannot judge numbers. He cannot tell that the MA charges in TCs for residential units must be different and lower than commercial units.

These calculations are fantasy numbers done in the same way by financial planners to sell their fat margin plans. A senior counsel ought to know and do better! I suppose TCJ just got them done by his underlings at CPF in the same style for him to use with us. Purportedly easier for us to understand. And like Shan didn't check like the numbers he got from the MND for the MAs. This sloppy minister just pass it on and even talk like he knows.

These ministers are basically good people but sometimes I can't understand why they act so badly or pretending to be stupid. Or are they actually out of depth? Need Tharman to come rescue them? But the PM was himself a FinMin before and presently the chairman of GIC.


  1. There is some empirical truth about why many CPF accounts are depleted because the holders irresponsibly got fleeced by house agents and moneylenders to withdraw their cash to punt on various get-rich-quick schemes over the last decade. When the continuing global recession set in and many lose their jobs, and true to form many of those schemes go belly up things get terribly squeezed. Some times the old fashion keep your money in the tin can (or some safe institution that allows for the magic of the traditional interest compounding) works best.

  2. So kee chiu and this talk cock joker are the best of the lot and the country's PM in waiting? You guys might as well commit hari kiri now.

    1. I do not think they will do that and let Tharman take over.