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Everyone has a goal of retiring comfortably after working more than half their lives out for money.We all hope to get a lump sum retirement fund when we reach our retirement age.
But, in Singapore, our money is instead secured away and we are given a monthly income from that pool of money.
Although we still think the CPF is a pretty solid retirement scheme, not everyone agrees to this.
So if you think you are better off with the full sum of CPF money in your pocket, we will be sharing how you can get that pool of money out of your CPF!
There are 2 ways to do this:
1) Buy a Life Annuity Plan
We talked about what an annuity plan is and how it can help you withdraw your retirement sum from the CPF.
You can find the post here: How to Escape Retirement Sum?
2) Own a Pension
By owning we do not mean you go out and buy a pension.
A pension is usually a retirement payout paid by the company you worked for.
It is usually a fixed amount of money paid from the day you retire to the day you pass away.
It is rarely (if not no longer) seen in Singapore (except if you are from the really old days of Singapore).
If you are paid or going to be paid by a pension, you can apply to be exempted the setting aside the full retirement sum!
Recommended Post: Can I use my CPF to pay for my housing after age 55?
You will be exempted (fully or partially) based on the monthly income you draw from either/both sources.
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Just two things to note and consider before you plot and plan how to "escape" the CPF Life:
ReplyDelete1. You rightly pointed out that pensions are almost unheard of, nowadays. Most workers, civil servants and even the uniformed services do not have pensions nowadays. The CPF Life scheme is thus there to fill this gap to ensure retirees will get some form of allowance throughout their retirement.
2. As of now, there is no private annuity plan that could match the payout of the CPF Life plans. CPF Life has the advantage of mass pooling and thus offers lower costs for its members. And in turn, it is able to give out higher payout as opposed to privately run annuities.
Given the above two points, one should consider thoroughly the pros and cons before opting out of the CPF Life schemes. The last thing you want to do is to opt of the CPF Life only to invest it into a lower performing private annuity plan.
What I would recommend are the following steps in order of sequence:
1. Top up your RA to the max allowed. This would be ERS of $264,000 (2019) to have a $2,000 a month payout from age 65 for life.
2. Then purchase private annuity for second source of annuity
3. If able to stomach risk, then invest in equities for higher returns.
You are right, pensions are almost non-existant in Singapore. CPF LIFE is the best annuity plan out there compared against any private annuity plan.
DeleteIt is a dumb idea from a 'investment returns' point of view.
Nonetheless, there will always be naysayers who claim CPF to be a scam and will want to withdraw their money out to put into lower grade or lower return investment.
While we try to let people know CPF has its merits, we also let them know that if they are unhappy, they can "get out" of it. :)
The CPF full retirement sum of $176K in 2019 (and increasing at roughly 3% each year) is actually a really small sum for much of anything, let alone retirement. For almost everybody, if given to us for self-management, the money wouldn't be able to cover 10 years of retirement. It's better to just leave this amount to CPF Life annuity.
ReplyDeleteIn real life, for 80% or more of the general population:-
The best way to have a large sum of money when you're "retired" (either forced or voluntary) is to keep your employable skills up-to-date as long as possible, continually cultivate strong network of connections, and save diligently over many decades.
Simple, diversified, low-cost investing can be an optional add-on. Not everybody is mentally suited for investing. Most people can only accept at most 0%-20% of their savings in risky assets like stocks.
Couldn't agree with you more!
DeleteBut the general public just don't see things this way. To them, "if I can manage my monthly salary, why can't I manage my entire retirement sum?" - although there are plenty of research done to prove otherwise.
Not many people can live beyound 80 years of age.
ReplyDeletePlse rfund our money asap n 4get all proposals dats confusing complicated n not applicble to me.apprcte
ReplyDeleteRevert back to old system.at 55 to b paid full in cpf rfund.
ReplyDeleteCitizens should b entitled to our own decisions of our cpf hard earned money.to b given rights of our own money too
ReplyDeleteOur money and our care. Do u want or like or allow others to tell or plan for u what to do with your life in the future? IF U DO, then allow it but those who dont, got any choice to choose now? Dont think so. Fair decision? to be a democratic society based on justice and equality so as to achieve happiness, prosperity and progress for our nation.
ReplyDeleteI guess that's why people say "I rather die by my own hands than by the hands of others".
DeleteIt is funny how life works.
In medicine, we want our doctors trained and certified before they operate on us.
In transport, we want our operators to have license to fly, ship, or drive.
But in politics, we don't want politicians.
In finance, we don't want true independent financial advisers, and if you ask most independent financial advisers (the fee-based ones), they will generally agree CPF is a pretty good scheme although it does have some flaws.
CPF told me i cannot opt out or change to shorter term to receive higher monthly payout.
ReplyDeleteMistake I made was listened to CPF to opt for lower payout to enjoy payout until death.
Dont make this mistake when you reached 65. Go for max payout n not until death payout.
Hi Seth,
DeleteAre you on the non-CPF LIFE scheme (the minimum sum scheme) or have less than $60,000 in your CPF Retirement Account(RA)? If you are on the minimum sum scheme, the payout would last until your RA is depleted - which might be why a lower payout would extend the life of the payments.
current can survive on daily basis still need to wait for 55. CPF are sending those people to graveyard if we cannot pay the bill then ask government to wait 55 then we pay the bill if we still can survive not helping at all is killing us don different like a murduerer
ReplyDelete