2-Room Flexi Review

Singapore’s HDB has gone a long way of providing affordable housing for Singaporeans since Singapore’s independence. It started by providing humble, relatively cheap 3-room and smaller flats; nowadays, the newer HDB flats are on the other hand larger and beautifully designed with quality furnishing. I’ve the privilege of visiting my relative’s BTO 3-room flat at Sengkang and I’m impressed, my Jurong 15-year-old flat in contrast looks “rundown”. Compared to other Asian countries/regions such as Japan, Taiwan, Hong Kong and Korean, HDB is a runaway success in the housing arena and Singapore’s home-ownership rate and housing satisfaction are probably near the top of the list if not the top.

Even though HDB housing in Singapore is relatively affordable, in absolute terms, housing is still the largest outlay for most Singaporean families. In a land scarce jurisdiction such as ours, this is understandable and unavoidable. Based on reports, articles and news, I understand that HDB is consistently looking for ways to cut costs and passing the savings to BTO buyers by adopting new technology and processes, making unit sizes smaller and even increasing subsidies and providing new schemes for the disadvantage and old-age families.

With that said, I look with great interest the 2-room flexi scheme. It’s an innovative idea. The aged family could downsize from a larger flat into the 2-room HDB with part of the balance proceeds placed in the CPF annuity scheme (LIFE) to generate lifelong income. The cost of the home is furthered reduced by tailoring to the family longevity profile and reducing the lease. The idea is to provide housing for the retired until the younger of the spouses reaches 95 year-old. I believe the 2-room flexi scheme is a good starting point for those families who want to monetize their larger HDB flats through the downgrading process. However, I believe that this scheme could be further enhanced to squeeze out the redundancy inherent in the assumptions. Let me explain.

The flexi scheme makes provision for the couple to live until 95 year old. However, most Singaporeans do not live till that age to meet one’s maker. In fact, the life table for Singapore tells us that the median lifespan of male Singaporeans is 82 while women live a few years more. That would mean that under the flexi scheme, perhaps 10 years of the lease are wasted and unconsumed. This extraneous lease, if monetized could very well enhance the living standards of the retiree home owners. In my humble opinion, I would think that HDB should provide an option for aged families to purchase “housing annuity” in a similar vein to the financial annuity that CPF LIFE provides. The housing board could be the counterparty in the provision of housing annuity where aged families are allowed to live in their flats for as long as their lifespan dictates. Thereafter, the ownership of the flats will be reverted to the board. This idea will not cost money for the government but could potentially improve the lifestyle of the retirees as the cost basis of HDBs has dropped. Adopting it will be especially beneficial to the families who do not want to leave a bequest or have no descendants. The leases sold to the flexi buyers could be reduced and the retirees get to stay in place for retirement. Like the CPF LIFE annuity, those families who kick the bucket early would subsidize those with more longevity.

Why The Average Investor’s Investment Return Is So Low

According to the latest 2014 release of Dalbar’s Quantitative Analysis of Investor Behavior (QAIB), the average investor in a blend of equities and fixed-income mutual funds has garnered only a 2.6% net annualized rate of return for the 10-year time period ending Dec. 31, 2013.

The same average investor hasn’t fared any better over longer time frames.  The 20-year annualized return comes in at 2.5%, while the 30-year annualized rate is just 1.9%. Wow!


The above is just one of the many studies that revealed the plight of Joe investor.  While institutional investors are reaping market returns; individual investors, because of agency and behavioral issues etc, suffer mediocre growth in their assets.  Similar studies in Singapore based on our CPF accounts exposed comparable dilemma.

A Simple Math Formula for Retirement Happiness

WILLIAM BERNSTEIN: The biggest mistake retirees make is not having a clear idea of exactly what useful and productive things they’re going to do with their time; “golf” is not a plan. Here’s my formula:

Retirement Happiness = [How Much You Dislike Your Job] X [How Badly You Want to Do Something Else]

So if you still enjoy your job or if you don’t have an alternative in mind, one of those terms is zero, so don’t quit. The happiest retiree I know is a burned-out physician who finally got to do the two things he wanted most: work in his wood shop and take tango lessons with his wife.

William Bernstein is a retired neurologist and co-founder of Efficient Frontier Advisors, an investment management firm.