Options with CPF Life and SRS in retirement.

Reader:
Just wondering if you have given any thoughts on when you will start your CPF LIFE payout? Do you mind blogging about it?

I have been building up my SRS savings. By the time I hit the Official Retirement age of 62 (for now), if I start withdrawing my SRS at 62 to 72, the annual sum will be equivalent to CPF LIFE.




Now the question is, should I start my CPF LIFE payout at 65 or delay till 70 to gain more interest and thus a slightly higher monthly payout?

According to the picture you posted on 17th July 2017, at FRS: age 65 = $1,380 mthly. At age 70 = $1,840.

What will you do? A bird in hand is better than a slightly bigger bird in the bush?



AK:
With CPF Life, it depends on whether I need the money. At 65, if I need the money, then, I will start drawing from the annuity. 

If I don't need the money, I will leave it to grow, earning a risk free and, hopefully, meaningful interest rate by then.

With SRS money, once I start the withdrawal process, I would have to empty the account within 10 years unless I use the money to buy an annuity. I have some investments in my SRS account and I would probably have to liquidate these. 

So, I would probably consider withdrawing money from my SRS account in a bull market sometime after I turn 62.

So, depending on the situation when the time comes, I could tap either the SRS or CPF Life first or not at all.
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Liu Jiayi says:
From Jul 2015, SRS members will be able to apply to their SRS operators to withdraw an SRS investment by transferring the investment out of their SRS accounts (e.g. into their personal Central Depository (CDP) account), without having to liquidate their SRS investments.

(Please see comments section below for the full comment.)

Related posts:
1. CPF Life Payout Estimator.
2. CPF Mobile Service Centre.
3. Lifelong income with SRS.

QAF's 2Q17 profit after tax fell 72%.

Part of QAF's large decline in earnings should not come as a surprise since, one year ago, in 2Q 2016, QAF recorded an exceptional gain of $9.7 million from reducing its stake in Gardenia Malaysia (GBKL) to 50%. 

If we were to exclude that exceptional gain, however, profit after tax still reduced by 58%, year on year. Not as bad as 72% but still rather attention grabbing.

Singapore and Malaysia

QAF's share of profits in Malaysia is reduced because of its smaller stake in GBKL. However, the reduction is bigger this quarter compared to the last quarter.

It was revealed that QAF experienced issues in its Johor production plant. This affected sales volume not only in Malaysia but also in Singapore. 

Otherwise, QAF would probably have done better in both countries. There were also some one off cost items due to problems at the said plant.

Philippines

The bakery business in the Philippines is doing well but incurred higher marketing and distribution costs. It was revealed that although costs are heightened, the bakery business achieved higher sales and increased market penetration in the country. 

Looking at the Income Statement, Other Operating Expenses saw the biggest increase of 23% and it was revealed that most of this big increase is due to higher marketing costs in the Philippines. This is also a market in which QAF is planning to expand its footprint.

China

The bakery business in China is still losing money but losing less money. Narrowing losses is good news but if it continues to bleed, it might be a good idea to shut it down. QAF will decide by end of the year if it should continue its business in China.

Australia

QAF's pork business in Australia saw a 20% reduction in selling price due to an over supply situation which led to downward pricing pressure. 

The demand for pork is still healthy but the over supply will take time to resolve. It is hard to say how long the situation might persist but I doubt that it is enduring. 

The situation is probably more cyclical than structural.

One quarter does not make a year. It is reasonable to wait and see if QAF is able to recover earnings in the coming quarters as it pursues growth.

To be realistic, however, any recovery could take some time to materialize as new production plants are built. Also, it is my guess that many of the increases in costs and expenses are going to be sticky.

Having said this, note that QAF is meeting the challenges from a position of strength as its balance sheet remains strong. 

Cash and cash equivalents also increased year on year from $97 million to almost $126 million. 

QAF has a good track record and I like to think that the managerial competence is more enduring than the challenges being faced.

Even with reduced earnings in 2Q 2017, QAF is capable of maintaining a 5c DPS but it is harder to say if a reduction will happen or not. With this in mind, while waiting for improvement in performance, I look forward to being paid.

If Mr. Market were to send QAF's share price tumbling, it would be an opportunity for me to accumulate a larger position in a competently run and financially sound company which is likely to do better again in future.





If there should be a decline in share price, I hope it is a big one of, say, 10% or 20% and not just another dip.

See announcement: HERE.

Related post:
Wondering about QAF Limited.