Getting the most out of CPF LIFE. Full Retirement Sum or Enhanced Retirement Sum?
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- เผยแพร่เมื่อ 14 พ.ย. 2023
- Building a cornerstone in retirement funding with CPF.
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More Singaporeans do not have enough savings! CPF LIFE cannot make it! Passive income is not enough!
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I will definitely go for ERS because as we grow older our mental capacity deteriorates, it will be challenging to manage our money. If our money get wiped out by circumstances, we still have ERS as last line of defence. The only down side is policy risk as nobody knows what the future will be like.
That is a very good point! 💯
If your money gets wiped out, the extra few hundred in ERS won't matter and won't be much use as a line of defence.
Suka suka change. FRS is enough
Interesting perspective!
Thank you AK, this topic has been in my mind lately. Glad you covered it today. I’m trying to fulfill my FRS and still have a healthy sum in my personal savings. But am still considering ERS… not sure if it’s better to put a portion in FD so it’s more flexible.
I want flexibility which is why I will probably go for FRS. So, it depends on what we value more. Everyone is different.
I agree Frs is good enough now. True the interest rates are rising but there is no flexibility. A change in policy might mean you cannot touch the money longer.
My wife and me used cash to top up till ERS. After 55, we just leave whatever saving in OA and SA for future use.
Shield SA, reserve OA, form RA with the remaining 40k from SA, pump cash into RA to ERS, stay healthy and hope to live beyond 85.
There is always hope! 🤭
What does reserve OA mean?
AK.. You alluded to a key fact that might have not gotten a proper airing.
Be it FRS or ERS, the monthly payout you get actually comes out of the premium ie FRS/ERS. SO IT'S YOUR OWN MONEY until it becomes zero.
Only when the premium is depleted and if you are still alive, is when ", other than the premium funds " will be sent to you.
I recall the SRS gets depleted at around age 90..if I recall. That's too long. Think the monthly payout will go into the Healthcare industry 😂.
So can you just do the SRS., keep access funds in your bank or some safe asset... And you still can draw down bit by bit.. But have better flexibility.
SRS money must be fully withdrawn within 10 years once we start withdrawing, if I remember correctly. So, if we want it to end at age 90, we must start withdrawal at age 80.🤔
Monthly payouts go to healthcare industry? I think you are probably right! 🤣
Just what i was researching recently
Happiness!
I am definitely aiming for ERS as I have encountered numerous pensioners who never fear of running out of pay checks while they are alive
Peace of mind is priceless! 💯
It's only a few hundred more which is worth even less every year due to inflation, one should definitely still worry about running out even if one opts for ERS
I believe if you are FRS or ERS , once you start drawing down on CPF life at 65 or 70, interest payment stops. Unlike the basic sum which continues to earn interests.
Depending on which CPF Life Plan (Basic / Standard or Escalating) we choose, will determine how much of the RA sum we will use as a premium for the CPFL annuity plan.
Once CPF LIFE starts paying us, we are going to be paid for as long as we live. It is an annuity and not a savings plan. So, how much is the residual value shouldn't matter. It isn't a legacy planning tool for me. 🤭
RA like SA gives a 4% interest. My plan is at 55 if the environment gives near or higher 4% then it make sense to keep min. in RA. Assume the interest is low everywhere then I may keep FRS/ERS in RA to make 4%. If there is an opportunity to deploy money for higher returns, then can pledge property and withdraw down to BRS. That’s one flexibility I looking to do assume no change in cpf rules.
💯💯💯
Hi, actually RA and SA pay the same interest rate . Don’t need to go for ERS. This gives the flexibility to withdraw money anytime
@@ken975 my SA alr FRS n will be shielded to max before 55. My RA/ERS will solely fr OA. I am using RA to help earn 4% instead of leaving money in OA @ 2.5%
@@ken975 Yeap! singaporeanstocksinvestor.blogspot.com/2021/04/cpf-full-or-enhanced-retirement-sum-for.html💯
THANK U ADAM KOOL
😅
Will pledge the house and keep only BRS. (if that's still the option when I turn 55... 16yrs away)
Hi AK, would it be better off (or remain neutral) to return/payback the (entire) property loans, of course with accrued interest, that was being used to pay for the home, especially for those between 55 to 64? Any thoughts? Thanks
Someone else asked me a similar question in this video too. Once we are 55, that accrued interest lost is meaningless. See:
Unemployed, almost 55 and worried about CPF.
singaporeanstocksinvestor.blogspot.com/2016/07/unemployed-almost-55-and-worried-about.html
Im a self employ, Like me no cpf . I top living insurance & buy ocbc stock. Income dividend to use to buy illiness insurance. So call use dividend like is free!
Dividends can reduce or get suspended like what happened during the pandemic. That is something to think about. This is a reason why I keep an emergency fund although I have dividends.
It is quite a gamble to decide which. Who knows whether one will live long or not. Life is so uncertain, the ex-WP member can just drop dead while jogging, it was not even any marathon event, a free and easy jog! What is concrete and surest is cash in hand i think.
Can kaput anytime. Sigh. Too many things can go wrong these days.
Based on this logic, better to spend everything we earn and don’t invest!😅😂
@@jeromelim9237 Alamak. 😅
@@jeromelim9237 The best is to strike a balance, rather than maximizing all the resources to retirement. Don't sacrifice to spend on things that one is so desired cos it may never materialize if one cannot even live till retirement age. 😅
Hi AK, silent follower here. Just want to ask which one is better to top up SA yearly for tax relief or do housing refund ? I'm 50 yrs old btw.. Thanks!
SA gets income tax relief and gets paid 4% p.a.
OA gets paid 2.5% p.a. and no income tax relief.
This also means that accrued interest lost in OA for using the money to fund housing purchase is 2.5% p.a. That accrued interest lost also becomes meaningless once we are 55 years old.
See:
Unemployed, almost 55 and worried about CPF.
singaporeanstocksinvestor.blogspot.com/2016/07/unemployed-almost-55-and-worried-about.html
I cannot give advice.
You decide. 🤭
Thanks AK!😊
@@user-wx6mq2ql4k Oops 🙊
Hi AK, Would you be going for standard or escalating plan? Could you please think aloud your reasons for doing so? Thanks so much.
I am making a video on this. Akan datang! ☺
Can't wait! Thanks AK @@A.Singaporean.Stocks.Investor.
@@Smeedee-wp8wv Scheduled for 8pm. So, please wait. 😅
Hi Ak, if I have hit FRS at age 55 and still have quite a substantial amount in OA, can I transfer from OA to RA to hit the ERS ? What would you do in this case? Like to hear your views. Thank you 🙏
If I am not mistaken, if we have money in the SA after the FRS is formed in the RA, we must transfer SA to RA first if we want to hit the ERS. Best to check with CPFB. 🤭
1st qn to ask how much u need after age 65. ignore those fp, they r there to make money, so all quote high high. base on govt stat is the mean is 1.3k in 2021 and frs payout then is 1.5k. so if one is gg to spend more than this, and at that age, u need high annual return n not those 7 yrs later cos u need to spend now. 2nd qn can u get annual return in stock, etc more than 4%, no, then ers.
fyi, the way ra work is at age 65, a part of it will b used to pay for the annuity something like 20%.. your payout is from the balance and its gg to b depleted within 10 yrs. then the annuity kick in to continue the same payout until u die. however if u die before annuity kick in, the balance in ra and about 10% of what u paid for annuity (ie. 10% of the 20%) will b in your will. so if u do not want to 'lose out' make sure u dont die before age 80 and really really 'lose out', die on the day your annuity kick in.😂 so the best, keep healthy, eat healthy and live healthy so to live a long active live 😊
@@user-xb8kz2my7d LIKE "so if u do not want to 'lose out' make sure u dont die before age 80 and really really 'lose out', die on the day your annuity kick in."💯
But what about transferring the OA which only earns 2.5% to the RA up to the ERS?
If have money in SA, we have to transfer that first, if I remember correctly. 🤔
@@A.Singaporean.Stocks.Investor. Oh my!!! Then looks like really need to do SA shielding.
@@NinJa-qr1sp Oops 🙊
Choose basic plan and even if not long life can get back
It depends on whether we plan it for ourselves or our dependents.
Take care of yourself first. The kids have a longer runway to make things happen for themselves
Was commenting on AK’s view that live longer will benefit more.
@@user-xt5tx5yv9f CPF LIFE is an annuity. It is meant to fund my retirement. Long life or not, I want more money to fund my retirement. 😆 If I go kaput earlier, then, whatever is left, whether more or less, my beneficiaries will get. Not my problem liao. 😅
Yo Ak jin lo soh keep talking about cpf these days
Old people are like that one lah. 😷
Had this question on my mind too, so I did a little simulation experiment. I discovered a few things:
1. At base, topping up to ERS from FRS does not mean that the monthly payout increase one-for-one. Topping up 50% in CPF Life Balance gave me a 47.5% increase in monthly payout (which is less than the 50% expected, assuming 55 years old on FRS in 2023 going on Standard Plan). I'll leave it to you to figure out why this is the case.
For me, I decided to look deeper into how can this be justified, which leads me to:
2. Quality of income. This is still the strongest argument going for topping up CPF RA to ERS. Because of the Government's AAA credit-worthiness and approach to handling CPF monies, you can have this peace of mind that what you see is what you get. You won't get this same comfort with private insurers and financial companies, who often like to earn their keep directly from premiums or AUM rather than a separate fee, and whose terms you may not be able to inspect as well at that age.
Well, anything above 60K, we get 4% p.a.
So, it benefits people with less CPF savings.
Naturally, if we go for ERS, our effective interest rate is lower.
As for quality of income, you are right, of course. Bullet proof! 💯
First!
🥇🥇🥇