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In recent times, I have found it much easier to talk to myself on YouTube.
It is faster than blogging.
This explains the greater number of videos produced compared to the number of blogs I have published.
Although it is expeditious, YouTube is only good for sharing what would require less mental processing on my part
It is good for sharing content which I have at my finger tips which means I could simply ramble while still making sense.
For anything that requires me to think more deeply and to organize my ideas, I find writing to be more effective.
This blog is going to be about something which has required more thinking on my part.
This is really inspired by 2 comments in my most recent YouTube video.
If you have not seen the video yet, here it is:
One reader told me that I am growing older and I should spend more of my money before my health deteriorates.
I know the reader means well but I have very little interest in spending more money than I do now.
In case you are new to my blog and think that I live like a pauper, I don't.
I own a condominium apartment and I have a car, for examples.
Very big ticket items in Singapore.
Still, I must accept that I am growing old, not just older.
Another reader provided the numbers by saying I would be 55 years old in 2 years from now.
Then, he asked what would I do with my CPF money and if I would choose the FRS or the ERS?
Both these readers' comments got me thinking.
That's a problem I have always had.
I think a lot and some would say I think too much.
You know what people say about young people.
They think that they are invincible and have plenty of time.
Well, I am not a young person anymore.
Although I am still relatively sharp mentally, I can tell that my memory is declining.
According to the doctors, this is normal but I am more worried about dementia now.
So, although I have said before that if we are savvy investors, we would choose the FRS and invest the rest of our CPF money ourselves, I could change my mind.
This is really consistent with having a crisis mentality.
Always asks what could go wrong?
Although it is still true that if we are savvy investors, we could possibly do better investing our CPF savings in excess of the FRS, there is this question of age related issues.
What if we become mentally infirm in our old age or, worse, middle age?
For most of us, the answer to this would be to have a bigger stream of passive income which does not fluctuate with market conditions.
CPF LIFE would fill this role admirably and by choosing ERS, we would allow it to do better.
ERS is not just for those who are not savvy investors but for anyone who wants to have a greater level of certainty in retirement funding.
I am aware that the interest accumulated in the FRS or ERS in order for CPF LIFE to provide us with an income for the rest of our lives goes into a pool and would not go to our beneficiaries in case we should bid farewell to this world earlier than desired.
However, CPF LIFE is an annuity and it is an insurance product.
It is an insurance against longevity risk.
As with all insurance products, it is about pooling resources from many to protect against shared risks.
We might not like the idea of having interest accumulated on our savings going into a pool instead of our beneficiaries but if we should be blessed with a long life, we would be dipping into other people's money in the pool as our own would have been exhausted.
We must remember that CPF LIFE is a retirement funding tool and not a legacy planning tool.
Take the good with the bad.
With this in mind, I checked my latest CPF OA and SA balances.
CPF OA
$768,628
CPF SA
$350,678
I also checked what the FRS would be like in 2026 which is when I turn 55.
55th birthday in the year of 2026?
The FRS would be $220,400.
ERS would be twice that sum or $440,800.
My CPF SA should grow to about $380,000 by 2026 just from interest earned, assuming no further contribution on my part.
If I were to go for the ERS, it would mean having the entire sum migrate to the newly created CPF RA plus $60,000 from my CPF OA.
This would give me a monthly income of about $3,400 from CPF LIFE Standard Plan from age 65.
This is quite possibly going to be more than enough to cover the basics in my life.
Of course, I am hazarding a guess here since who knows what the world would look like 10 years from now?
As I grow older, I find myself less inclined to tinker with things.
I value simplicity more and more.
In the last podcast I did with The Fifth Person, I said that I had little or no inclination to look at new stuff when it comes to investments.
I am just looking at what I already have and waiting to add to what I think are strong businesses which would pay me through good and bad times.
Having said this, true to the spirit of this blog post, there could come a time when I might not be mentally well enough to make such decisions.
Making full use of CPF LIFE would help to mitigate this risk.
Of course, all of us are different and what gives me peace of mind might be a source of discomfort for others.
If AK can talk to himself, so can you.
Relevant link: CPF LIFE.
Bloggy Award
20 comments:
Well......that milestone in life - reaching Age 55. The New ERS - being 4X BRS will help to build that monthly income for life. Recalled reading somewhere that we can top up to each year's new ERS and jiak maximum interest with a view of an even higher CPFLife payout. Hopefully, the OA to RA transfer is allowed for this. We need to be healthy to collect this payout for as long as possible. Huat ah.
Hi AK,
I too had decided that I wanted a steady stream of income for my wife and I in our old age for life. Being 10 years older than you, when we turned 55 in 2016, the FRS amount was very modest and the projected payout at 65 was about $1,300 pm each. We felt that it was gravely inadequate and we immediately topped up our RA to the prevailing ERS in 2016. since then every Jan each year , we have been topping up our RA to the prevailing ERS of the year. And next year when the ERS is raised to $426,000 we will top up our RA again to that amount. Including the interests earned over the years, our RA will cross $500,000 each next year. Even then, we can only expect to receive $3,000 pm each at 65, on Standard Plan. At least the payout will be for life.
And indeed, as we get older, we want to simplify things. Thats one reason why we have been channelling funds back to our CPF. Our combined OA will be able to generate about $73,000 of interest annually from next year.
The CPF alone can thus provide us a passive income of about $145,000 each year combined from both our CPF Life payout and our interest from OA.
By the way, I would like to say thanks to you for your selfless sharing. I have learnt and implemented some of the things you shared into my own financial planning. I have actually written a blog post on what I have learnt from your sharing in my telegram channel: https://t.me/CPF_Tree/3458
Thanks again and do keep talking to yourself.
Hey AK, been a while. Quick update, I had also retired at 49 and not missing corporate life a bit :) Thanks to the gov, CPF managed to past 1.2M this year and am also looking at ERS to keep things simple. Upon reaching 55, I am thinking of using CPF as a bank, with OA giving a min 2.5% interest - not terrific but risk free (have other investments). Wondering if we can top up to ERS using cash instead of using our OA? If Yes, will u do that?
Hi SnOOpy,
I think the FRS is determined by cohort. By extention, so is the ERS. I don't known if things have changed. 🤔
The Minmum Sum which was what the FRS was called has not changed for my mom in years, apparently. 😷
As for having a long life, there is a downside since the fixed sum of monthly payout will shrink in value over time. Won't be worth much by the time we are 90. 😅
Hi MSI,
I should have read your comment before reading SnOOpy's. 😅
Good to know that we can top up to the new ERS yearly. 💯
That would help to deal with inflation but it would only work for people who have spare cash.🤔
For elders who depend solely on the monthly payout for a living, it would be difficult to set aside part of the money to do more top ups 😷
Thanks for sharing your thoughts and experience 👌
Hi Staerfeldt,
When we turn 55, money in the CPF OA is cash. So, what do you think? 😋
A savings account that pays 2.5% p.a. without us having to jump through hoops is terrific to me. 🎉Nothing like this from the banks. ðŸ¤
We are so fortunate to be CPF members. 💯
Congratulations on your early retirement 🥳
I am 59. I have topped up to the prevailing ERS limit since 55. My RA is at $350,741.18. SA is$125,364.69 and OA is $903,956.92. I will top up to the prevailing ERS (4xERS) in 2025 and thereafter until 64. Using ChatGPT. I manage to calculate, my CPFLife will hit close to $4,000. I plan top up my wife RA, when she turns 55 in 2026, same age as you. She is 6 years my junior, she would probably outlive me. I want her to be well taken care of. I use the interest gained from CPF OA, dividends, bonds to top up our RAs. After all, these are 'free money' to me i.e. no need to work these top ups. These 2 entry gates are important financial milestone. With this safety net in place, I can put the rest of the money to riskier assets like SG Bank stocks and Reit having another stream of income with better returns. Hope this make sense
For those who are concerned about leaving some legacy from CPF Life, can select the Basic Plan --- 80-90% of your RA remains in RA where the 4% interest is still accrued to you (& your nominees). Only the interest on the 10-20% paid as CPF Life premium doesn't accrue to your account.
And yes, members can still top up their RA/CPF Life to the prevailing year's ERS --- the accumulated interests don't count; CPF only counts the total principal you have put in. For Basic Plan the apportionment of the top-ups follow your initial: 80-90% remains in RA, while 10-20% goes into CPF Life premiums.
Having said that, CPF Life is still hands down the best annuity payout in Singapore. No other commercial lifetime annuity comes close.
Hi Siew Mun,
Makes perfect sense to me to take advantage of risk free returns first.
Always go for the low hanging fruits first is what I say all the time. ;p
This is especially when they offer relatively good returns.
Thanks for sharing! :D
Hi Unknown,
Yes, there is a trade off.
I think that we should take full advantage of the best annuity available to us which is CPF LIFE in helping to fund our retirement.
There are better ways of leaving a legacy, if that is important to us.
Unless they are disadvantaged in some ways, I believe that the younger ones don't need our money and they should be able to make their own fortunes. :)
Hi Ak, good to hear you more frequently these days over at YT, means that you have more or less settled to life's unexpected events. Like yourself, however I am a retiree by force as I found out that I have advanced stage cancer a few years back. Due to advancement in medical field, I have been able to prolong my life with medication. So I think it is still important, to stay positive and continue investing. I may life longer than what statistics tell me.
Just wondering, why you don't have a OCBC Div+ account but instead CIMB and UOB one account ( which have hoops to jump thro but can withdrawal without sacrificing interest). Even tho OCBC D+ pays monthly interest, can see but cannot withdraw, else have to forgo interest for the month. Think this good for saving for big ticket item and just do a one time withdrawal when the time comes? Curious me.... ;)
Hi HappiSnoey,
Good to hear from you!
For sure, although it can be hard at times, we want to stay positive or else, life is not worth living. Truth.
As for OCBC, I had a bad experience with them just like I did with DBS.
I have a long memory for this kind of stuff. ;p
UOB was the only bank which was nice to me when I was going through hard times many years ago. That's why I have stayed with them.
Also, the criteria for getting 4% p.a. interest rate for the UOB ONE Account are not hard for me. So, no issues.
As for CIMB, I like that they are quite generous when it comes to Fixed Deposit Interest Rates. Haven't done anything to drive me away.
To be honest, there is also inertia. ;p
I don't have salary crediting for UOB One account, only $2000 card spent and 3 Giro. EIR is only around 3%. In quarters that I spend only $500 each month, EIR is around 2.5%. I cannot get the 4% you mentioned. Maybe that's why I find the OCBC 3.3% more attractive. Have a good weekend! Happy Gaming :)
Hi HappiSnoey,
Thanks for letting me know.
3.3% p.a. is not bad for a savings account, to be honest.
Have a good week ahead! :D
The Limits of Mortality. As we grow older, we face new challenges that come with aging. It’s a journey that everyone must navigate. This realization reminds us to try to live life more fully. Whatever childhood dreams or aspirations we have, we should try to pursue them while we still can. Life is too short to be burdened by regrets. That’s why the FIRE is so important—it empowers us to take control of our lives and make the most of our time!
Hi AK, will u talk to yourself about wilmar's latest earnings report?
Hi zhenling,
Wilmar's business is cyclical in nature.
There will be some bad quarters.
Wilmar is very undervalued if we look at its sum of parts.
They can easily unlock value for shareholders by monetizing some of their parts.
Usually, when the share price falls to $3 or lower, insiders start buying more.
I will probably be doing the same. ;p
Hi TDT,
All of us should work towards financial freedom but whether we want to retire early or not is something more subjective.
Like I always say, it is good to have options in life.
We most certainly do not want to work because we don't have any choice but to work. ;p
Hi AK, help pls!
I have a conundrum that I hope you'd be able to talk to yourself about potential solutions while I try to listen from a corner.
Your blog posts have been a steady ever-present guide for me since seven years ago when I started working towards financial freedom and early retirement. Unfortunately, in the past year I have reached a bottleneck.
Current assets: HDB flat (fully paid for) and 700,000 in cash
CPF: OA 298,000; SA 252,000; MA 71,500
The reason for accumulating so much cash is that I have been thinking about buying a two-bedroom condo (1.6-2.2mil) in the CCR/RCR as an investment so I do not wish to relinquish my HDB flat.
However, that will incur a 25% ABSD, which I am aware would be illogical (and emotional) of me to pay... The monthly instalments could be hefty and potentially delay my retirement target. There's also no guarantee the investment will result in a sufficient capital gain for me and the number of years I'd have to wait.
This has made me consider whether I'd be better off utilising the cash in a mix of fixed deposits, blue-chip stocks and other investments for a steady annual return.
If you were in such a scenario, what would be the best way forward and the steps to take?
Look forward to your reply...
Hi Anon,
I have decided many years ago that investing in private property in Singapore is not very rewarding if we are thinking about rental income. The rental yield is too low to be attractive.
Singapore private properties have become trophies and stores of wealth for the rich not just in Singapore but in the region and even the world. This is why the prices are sky high.
If we are speculating and not investing, we could participate in the hope that we could sell at higher prices in future but, like I said, that is speculation.
This is something many people are ignorant of and those who have vested interests would not share. Euphoria is good for their business.
I can say with certainty that investing in a portfolio of good income generating Singapore equities has been more rewarding for me as an investor for income.
Of course, all of us are different in so many ways.
We have to do what we feel is right for ourselves. 100%.
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