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Why retirement is not an option for some people?

Wednesday, August 30, 2017

Ever since I went on a low carbohydrate diet, I have been consuming more protein and fats. One of the things I do eat from time to time is fish and I enjoy Batang fish quite a bit.

This evening, I paid almost $5 for my fish dinner:




150 grams of Batang fish. Just nice for a grown man or at least for me.

A dusting of turmeric powder, a sprinkling of garlic salt and some butter. 
1 minute in the microwave oven at 800 watts, followed by a drizzle of extra virgin olive oil and it is good to eat.
Yummy.
Anyway, as I was walking home from the supermarket, I tossed some numbers in my head.




$5 doesn't seem like a lot of money but to someone who makes $100 a day, that is 5% of his daily pay. 

(Once upon a time, that was my daily pay too.)

Considering the fact that $20 goes to his CPF, $5 is actually 6.25% of his take home pay. This is quite a big percentage.

Let us say this person depends solely on his CPF savings to fund his retirement and let us say he hit the FRS 10 years ago and CPF Life pays him $1,380 a month from today for life, he would get $46 in pocket money a day. 

In such a case, $5 is going to be almost 11% if his daily allowance!

The price of Batang fish would probably increase over time too.

Of course, he probably won't be eating Batang fish everyday but it is just an example to show how our CPF savings are probably not going to be enough to retire on.

If we depend solely on our CPF savings for retirement funding, it is quite possible that we would have to continue working beyond age 65.




This is for CPF members who have the FRS at age 55 too as this fishy example shows. 

For CPF members who do not have the FRS or even the BRS at age 55 and if their CPF is the only source of retirement funding, the chance of them ever being able to stop working is almost non-existent.

To people who are still unhappy with having money locked up in their CPF accounts and who want their CPF money returned to them because they have no savings to retire on, you have to wake up. 

You cannot retire. 

You have to continue working.

Related post:
CPF Life payout estimator.

5 comments:

MSAPersonalFinance said...

Hi AK71,

Have you ever wonder why when BRS requires $83K and the payout is from $700 but FRS requires $166K and the payout is from $1280 not $1400? It seems like the return is reduced if you opt for FRS or ERS.

AK71 said...

Hi MSA,

The reason is because the first $30K receives 6% interest, the next $30K receives 5% interest and anything above the first $60K receives 4% interest.

Ben said...

Hi AK,

You are right. We can't depend solely on CPF for retirement. There is an need to rely on other savings for worry-free retirement.

Ben

AK71 said...

Hi Ben,

Savings can be depleted. Unless we have plenty, it might not be a good solution.

For those who are willing to take on some risk, investing in some income generating assets is probably a good idea.

For those who are more risk averse, getting a private annuity plan to supplement CPF Life once we have the ability to hit ERS is probably a good solution.

AK71 said...

Reader:

I read your blog as much as possible everyday trying to grasp the concepts that I have neglected or didn't even came to my mind...

You recent blog that say "cannot retire" strikes me hard. I have been thinking to top up CPF for high interest, with the option to withdraw it at age 55...

It's good that I started reading your blog and aware of importance of managing finances. But I also get tensed up and stressed having to start from zero at the age of 43...

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