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Retirement drawdown strategy? Passive income and CPF?

Saturday, March 12, 2022

This started out as a reply to a reader's comment and it got so long that I decided to publish it as a blog.

My reply:

I think I am a bit like that too. 

I am comforted by a high level of savings. 

Mentally scarred. (TmT) 

However, I have been less tight fisted in recent years with money. 

There are more important things in life than money, after all. 

Bad AK! Bad AK! 

As for your question on retirement drawdown cases, this is something other readers have asked me before. 

There is no shortage of advice on the internet on this topic. 

However, this is a difficult topic for me to blog about because all of us have different circumstances, varying needs and wants. 

We are also wired differently and will find comfort in different approaches. 

I can only talk to myself about what works for me. 

In my retirement, I do not want to worry about outliving my savings. 

My focus is on passive income generation so that I would not have to draw down from savings. 

I do feel that this is a valid and even important idea to consider but like I said, we are all wired differently. 

If I keep my needs simple and wants few, I might never have to draw down from savings and I might even be able to grow my savings in my retirement. 

Of course, regular readers know it all started with a spark. 

So, the focus for many years leading to my early retirement a few months before I turned 45 was to invest in bona fide income producing assets. 

Of course, we must always hold some cash and this, of course, includes our emergency fund and war chest or opportunity fund. 

It is good that you mentioned CPF because my CPF savings, apart from yearly voluntary contributions and top ups, is really on autopilot. 

Conventional wisdom tells us that investment grade bonds should be a significant proportion of our portfolio in retirement and the CPF works for me.

If I ever need to, I will be able to make withdrawals from my OA and SA in a few years from now when I turn 55 years of age. 

I do not see that happening unless my passive income is severely curtailed or if I suddenly need more spending money. 

Money in the RA will automatically be drawn upon once I turn 70 and, of course, that is CPF LIFE which is a lifelong annuity. 

I know this is a tangential answer to your question. 

However, like I said, we are all different and there are just too many possible draw down cases. 

Know what we need and want in retirement. 

Look at what we have now.

Think of what we are able to do from now till our desired retirement age.

Devise a realistic plan which we are comfortable with. 

Be disciplined and march towards our goal. 

Of course, a good dose of luck helps. 

Once our goal is met, in our retirement, be cautious and stay mostly conservative when it comes to money and we should be fine.

The best retirement drawdown strategy is the one that gives us peace of mind.

Related post:


Unknown said...

Thank you for the nuggets of wisdom and personal experience!

AK71 said...

Hi Unknown,

Yes, definitely very personal.

We should all have our own plan. :)

TC said...

Hi AK,

Which CPF Life scheme will you choose upon reaching 55 years old? FRS or ERS?


AK71 said...

Hi TC,

I blogged about this before.

Which CPF LIFE plan for me?

You might also be interested in this blog:
CPF Full or Enhanced Retirement Sum for me?

Gambatte! :)

Sandra said...

Hi AK,I started the CPF SA top-up planning at age 44, based on your talking-to-yourself conversation😆 Although a bit late, I still made it😊 Just turned 55 this month, and I have retired with a comfortable passive income from CPF interest without start of CPF life yet. I far from being rich upon retirement, but definitely very self-sufficient and happy, with priceless freedom gained! Appreciate your valuable and inspiring self talk for common folks like me☺️ Thank you💐

AK71 said...

Hi Sandra,

Congratulations! :D

11 years. Time really does fly.

Not having to fear outliving our savings is probably one of the biggest blessings we can have in retirement.

I am glad that talking to myself has been useful in more ways than one. :)

1. Don't do silly things and we can retire smart too.
2. Building a cornerstone in retirement funding.
3. CPF interest is passive income and real money.

Sandra said...

Note to add: For those who do not believe CPF is real money, wait till you reach 55, any amount in excess of FRS amount is at your fingertip disposal, with just a click of PAYNOW to your bank account😉

AK71 said...

Hi Sandra,

Thanks for sharing your experience.

Now, I don't have to worry about the government stealing my CPF savings. ;p

Huat ah! :D

The CPF is a PONZI scheme!

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