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Retirement money made to last longer without risk.

Tuesday, January 23, 2018

Reader says...

My mom is now 71 and she has $200k retirement money.

She is not on the CPF life scheme but on the past retirement sum scheme.

I am trying hard to help her get some passive income.

She has parked this money in short term duration funds but the returns has been really peanuts.

I am trying to see how to help her.

Do you have any suggestions?

AK says...

I would say that at her age, it is more about capital preservation and she should not take any risk with her savings.

The CPF is a good risk free tool in helping to fund her retirement and topping up her CPF-RA will ensure that her retirement money earns 4% to 6% per annum.

I would say that for any investor, 4% to 6% returns per year is difficult to achieve without taking any risk at all.

So, she should take full advantage of her CPF membership and max out her CPF-RA.

Doing so would most probably help to make her retirement money last quite a bit longer.

If her MA is maxed out, she could also consider doing voluntary contribution to her CPF to max out the CPF Annual Limit.

To her, then, the CPF is like a savings account that earns 2.5% interest per annum in her OA.

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AK71 said...

Jimmy Ng says...
curious. If the mom can park the funds in RA, does it mean immediate membership with CPFLife and a payout base on age and the lump sum parked in there ?

Ronnie Wan says...
All above 65 can still opt in to CPF LIFE even if U are on RSS. The annuity will be immediate & not deferred. Can chk with CPF.

AK says...
As long as they have BHS, can ask to join CPF Life but the lifetime monthly payout could be lower compared to the RSS monthly payout.

Simp said...

If she is 71 year and under minimum sum scheme, she should put all her retirement money in CPF RA.. It will generate > 9k interest pa based on the 200K and she can withdraw the interest every month.

Genke Konmmo said...

Hi AK,

Can you please elaborate more on parking funds in RA? Does it mean the person is able to withdraw her funds anytime they need it, essentially making it a high yield savings account?

Genke Konmmo said...

Hi AK,

Can you elaborate more on parking funds in RA for someone who is retired? Can the person withdraw funds any time, essentially making the RA a high yield savings account?

AK71 said...

Hi Simp,

I am not sure it works that way with the CPF-RA.

Once in the RA, the money stays there and we can only be paid a monthly income determined by the CPFB, drawing down the money in the account over time.

AK71 said...

Hi GK,

The RA is not a high yield savings account.

The function of the RA is to lock up some of our CPF money in order to pay us a monthly income latest from the age of 70.

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