Worried you won't live to enjoy all your CPF savings?

Added (20 Jan 17):
Reader says:
I was talking to my colleagues today about CPF life.

They are very concerned about the payout starting at 65 and they not being able to live long enough to fully draw out their CPF money.

I tried to explain that they might outlive the $166k and receive free income for life, but they are skeptical that they will live beyond 80+...






AK says:
I rather have the assurance that I won't be old and destitute than worry about whether I would be able to enjoy all my savings before I die... chances of us living past 85 are quite good.



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A reader's questions after reading a recent blog post of mine:

My reply:
Hi iwimsasl,
If we do not believe that having an annuity is a good idea to help fund our retirement, then, this is probably a bother. 

However, if we believe that an annuity is a good idea, then, there isn't a better annuity offer than the CPF Life out there.





CPF Life is meant to start paying out at age 65 but we can choose to defer the starting age till 70. 

The benefit is that the payout will be bigger monthly because the CPF-RA funds will have another 5 years to accumulate. 

Allowing earlier withdrawal would translate to a less meaningful monthly payout which is why it is not a good idea.




Will the minimum age be raised from 65 to 67? 

I don't know but I don't think it is a bad thing if it should happen.

It would probably mean that Singaporeans are living longer and we would receive larger monthly payouts because the accumulation period is longer.

See: 
Upsize $100K to $225K?

Insurance is about transferring risk and also the sharing of risk. 

Annuity is an insurance. 





For having the certainty of a basic level of lifelong retirement funding in my old age, I think bearing some cost is reasonable. 

What if we happen to be blessed with longevity? 

It could happen and insurance is about guarding against what we cannot foresee.




Very often, the preoccupation with trying to get back some money from buying insurance after X number of years leads many to overpay for insurance. 

This is probably why so many are under insured or pay too much to be adequately insured.

Know which insurance products are essential and get the best value for our money. 




I believe that an annuity is essential and as an annuity, CPF Life gives me the best value for my money.

FB (31/12/16)

...





Related posts:
1. Mom stunned by what happened to her CPF-RA!
2. Retirement funding for our parents.
3. Funding XX% of our retirement with CPF.

Mom stunned at what happened to her CPF-RA money!

Alamak, another blog post on the CPF?

Quick, those who are tired of the topic, close the window!





Still reading?

OK lor.

My mother is going to be 70 years old next year.

When she turned 55, $65,000 was moved into her then newly created CPF-RA. 

That was the minimum sum for her cohort, apparently.

My mother is still actively employed but is thinking of retiring soon.






Mom:
"Ah boy ah. Can help me go into my CPF account online or not? I want to see how much I have now."

AK:
"You want to see how much money government gave you, is it?"

Mom:
"Aiyoh, cannot be a lot lah. Maybe now my CPF-RA will have $80K or $90K lor."

AK:
"You will be pleasantly surprised."


After 14 years, what has happened to the money in her CPF-RA?





This happened:

Click to enlarge.

$118,709.04

Mom:
"I so stunned like vegetable! Haha."

Stunned already can still laugh?

OK, no need to call ambulance.





If there is a need for it, this will provide her with a monthly income.

What? 

People say don't be stupid to top up your CPF-SA?

OK lor.

Related posts:
1. Get 6% from CPF?
2. Financial strategy for elderly?
3. Retirement funding adequacy.

How younger members can get 6% per year from the CPF?

I have regularly blogged about how CPF members should grow our CPF savings and make it a cornerstone of our retirement funding strategy. 

I have shared my own approach and also my results here in my blog which I have been told have inspired many readers to adopt similar strategies.

Over time, some readers have written to me to share as well and I am happy to share one email here today from a regular reader:








AK,

My mother is 77 years old. Her CPF Retirement Account has about $300. I would like to top up her RA account to $60,000 to take advantage of the interest rate of first $30,000 is 6% and second $30,000 is 5%. 

I am planning like in 10 years time the growth will be sizable and relatively risk free. I will get her to nominate me as the beneficiary of her CPF savings. 

What do you think?

Respectfully,
SM

A screen shot of one of  my many blog posts on the CPF.

Hi SM,

I like the idea and you will also get income tax relief for up to $7K Top Up to her CPF-RA each year. Gambatte! ;)

Best wishes,
AK


AK likes this. 





See also:
3 reasons to top up parents' CPF

Find out more about the role of the CPF and enhancements to the CPF here: www.cpf.gov.sg/bigRchat.


Related posts:
1. A cornerstone in retirement funding.
2. Retirement funding for our parents.
3. Parents say don't be stupid to top up SA!
4. 2016 changes to the CPF and SRS.


"If you are 55 years old or older, you will also receive an additional 1% interest on your first $30,000 in CPF savings which means you get 6% interest per annum, risk free!


"It would be a good idea for younger readers to communicate this change to their parents. If at all possible, consider topping up your parents' CPF SA or MA if they do not have that first $30,000 in their accounts." AK 

"Compared to anger and fear, shame is 1,000 times worse."

UPDATE (30 Dec 16):
If we are prepared, we need not fear the big bad letter "R".

"About 120 employees from Toyota agent Borneo Motors and Suzuki agent Champion Motors will be retrenched in the coming weeks, in one of the largest downsizing exercises to hit the local motor industry. 

Their parent company, vehicle distribution giant Inchcape, is restructuring its operations here. The cohort represents 12 per cent to 14 per cent of Inchcape's headcount in Singapore. 

The latest retrenchments come amid a gloomy economic outlook."
Source: The Straits Times.





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This is a very touching letter from a new reader. I edited the letter before publishing it. 

However, I tried to keep the original tone and definitely the content:

Dear AK,

I am a father of 3. They are 16, 14 and 10 years old. I was retrenched last year and felt very bitter towards the company. Being retrenched at 48 and with a family to feed is no joke.

That bitterness became fear with passing time. How was I going to support my family? My wife tried to find work too in those months but having been out of the workforce for so many years, she was unable to find suitable employment.

Bills still had to be paid. Our savings were used up quickly and I had to borrow money from our families to meet expenses. It was shameful.

Compared to anger and fear, shame is a thousand times worse.







I was going crazy. I was about to break down. I thought of killing myself.

My children are the reason why I was able to continue living and I finally found employment two months ago. It pays one third less than my previous job but I am grateful that the months of not knowing how to provide for my family are over for now. 

When I visited my younger brother last month to return some of the money I borrowed from him, we had a long talk.

I told him I was angry and fearful. 

He asked if I was still angry. 

He asked if I was still fearful. 





I told him that I no energy to be angry anymore but I will always be fearful.

He gave me a few suggestions and he referred me to your blog. He has been following your blog.
AK, you opened up my eyes! 

I read all the blog posts I could find on personal finance in your blog. I did not waste time on the blog posts on investment because I am not ready for that.

I did save some money but I did not plan. Now, I know I have to save for:

1. An emergency fund - 24 mths of expenses.
2. Topping up my CPF - for my retirement.

My salary is lower now and I have to return money borrowed from families. 

I know I don't really have a choice and I am prepared to work till I am 65 when I have a monthly allowance from my CPF like you said in your blog. 

All my children should be independent then.





My retrenchment is probably a good lesson for my children. 

They saw how it got me badly. I hope they remember. 

My eldest is reading your blog too because he got interested when I explained to him.


By sharing my story, I hope that others will avoid the bad feelings I had when I was retrenched.

见贤思齐焉

LHY







If we had an umbrella handy, we wouldn't have to fear the rain and we wouldn't be angry because we got drenched.

(If someone could help me decipher the Chinese phrase accurately, please do, because Google Translate isn't very helpful.)




Related posts:
1. Don't depend on wage increases...
2. Best insurance to have in life...
3. Emergency fund...
4. Too late to plan at age 57?
5. Retirement adequacy (CPF Life).