Understand CPF LIFE and make it work for us. (Size of CPF LIFE payouts depends on a few things.)

I shared in a recent blog on the possibility of withdrawing my CPF savings from age 55.

I also shared that my plan is really to let my CPF savings grow and to enjoy a monthly income from CPF LIFE from age 65.

See:
Withdrawing CPF savings: How much and how?
(Maximising CPF-SA savings and returns?)

CPF LIFE is an annuity.

What is an annuity?

"An annuity is a series of payments made at equal intervals."
Source: Wikipedia.

"Annuity holders cannot outlive their income stream, which hedges longevity risk."
Source: Investopedia.






So, the money we put in our Retirement Account (RA) which will be created for us at age 55 is used to join CPF LIFE.

CPF LIFE the annuity will pay us a monthly income from age 65 at the earliest for as long as we live.

1. How much we will receive monthly from CPF LIFE will partially depend on how much money we put in our RA at age 55.

Obviously, if we put in more money, we will be able to enjoy a larger monthly income compared to someone who puts in less money.

Think Full Retirement Sum (FRS) instead of Basic Retirement Sum (BRS), for example.








2. How much we will receive monthly from CPF LIFE will also partially depend on when we want to start receiving this stream of lifelong monthly income.

The earliest we can start receiving a monthly income from CPF LIFE is at age 65.

However, we can choose to start the payouts later in life, giving more time for the annuity to accumulate funds.

We can also choose to do nothing and in such an instance, CPF LIFE will start paying us a monthly income when we turn 70.

It follows that CPF LIFE, having five more years to accumulate funds, would be able to pay a higher monthly income to us then from age 70.






3. How much we will receive monthly from CPF LIFE will also depend on the CPF LIFE plan we choose to go with.

We will only have to choose which CPF LIFE plan we want a few months before we start receiving the monthly payout.

Although I already know which CPF LIFE plan I want, things could change later on in life, of course.

I have blogged about the different CPF LIFE plans before and if you are interested in finding out more, go to the related posts at the end of this blog.





For most regular Singaporeans, an annuity is probably the best way to help ensure retirement funding adequacy. 

We should understand what CPF LIFE can do for us and we should make it work for us.

It is really that simple.

If AK can do it, so can you!

Believe it!






Related posts:
1. CPF LIFE Escalating Plan.
2. Which CPF LIFE plan is for me?
3. CPF LIFE payout estimator.

Withdrawing CPF savings: How much and how? (Maximising CPF-SA savings and returns?)

Although I hope I wouldn't have to do it, if things should go terribly wrong, I might have to withdraw some savings from my CPF account in future.

So, I will have a newly created Retirement Account (RA) at age 55.

Funds will be taken from from my Special Account (SA) to make up the Full Retirement Sum (FRS).

For those who do not have sufficient funds in their SA, funds will be taken from the Ordinary Account (OA) to make up the shortfall.





Of course, we can also intentionally make it so that we have insufficient funds in our SA so that funds from the OA will make up the bulk of the funds to be transferred to our RA.

This might or might not change in future but, as of now, this hack is still possible. 

If you are interested in finding out more, you could read the following blog and newspaper article.

See the blog conversation here:
Exploit CPF-RA. (Hacking CPF-SA.)

Read the article in The Straits Times on:
Maximising Special Account Savings.





As I am planning on having the FRS in the RA, I will be able to withdraw up to 100% of my remaining CPF savings with the exception of the funds in the Medisave Account (MA).

In the event that I choose to make such a withdrawal, savings in the SA has to be withdrawn first before savings in the OA.

Alternatively, I could choose to have the Basic Retirement Sum (BRS) in the RA by pledging my home which I own.

This would allow me to withdraw more of my CPF savings.

However, that is not what I am planning to do.

So, what is the plan again?





If nothing terrible happens, the plan is really to leave the savings in my CPF untouched to earn 4% to 6% interest yearly till I am age 65.

Age 65 is the earliest I can have CPF LIFE start paying me a monthly income for life.

Of course, I can also wait till age 70 before having CPF LIFE pay me.

Waiting for another five years before receiving payouts would mean a bigger monthly income for the rest of my life.

Not going to lose sleep over this, I will cross that bridge when I come to it.

OK, I might have to talk to myself about CPF LIFE in the near future as a reminder to myself.







Related post:
CPF can be our best friend in our golden years.

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