Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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P.S. If you are unable to make it, please don't feel like you are going to miss anything important because this is just an informal chit chat session with AK.
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.
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