CPF for retirement planning

[jackieatbtu]

Hi, I am not that mathematically inclined so would like to ask those who are smarter. I have been reading up on retirement planning and trying to make sense that is best for my situation.

I seem to be heading towards the foreveralone category and will be buying a HDB under the singles scheme. I am trying to figure how best to use my CPF and cash for the house and my retirement.

Online blogs have mentioned that using CPF for housing mean that I am borrowing against my future retirement. On the other hand, others tell me to use up CPF cause no chance to get the money out.

I do like the idea of CPF Life which is annuity for life. The only issue is that we do not have control on how much goes into it (Retirement Sum) and how much left over at 55. So, I think we need to make sure we do have cash investments plus CPF LIFE for retirement.

My idea is based on a selfish idea where I am not leaving much for my beneficiaries, which would be siblings and nieces/nephews, when I finally die of old age. Priority would be for myself and making sure I got enough to live on while I am old. Please check if my following thinking is correct?

1) Since CPF Life allows us to pledge up to 50% of the retirement sum with the HDB, that would mean we need less CPF balance inside RA at 55. I think this pledge includes CPF principal plus any accrued interests paid into the HDB.

2) Since I am planning to live at my HDB until the day I die, I could let the accrued interest increase since it will not affect me at all. By increasing this amount, I get to use it for pledging the CPF life.

3) Then, no matter how much retirement sum increase over the next 30 years, my CPF accrued interest would also be accumulating.

4) In the mean time, I would be accumulating more cash over the years as I am using more funds from CPF for the mortgage. I will also able to withdraw more cash out at 55 from my SA as I am making CPF top ups yearly (tax relief).

Would the above thinking be correct for somebody who is not planning to leave much behind? This way, I get to partially monetise my HDB and make sure not as much money is locked up in my house.

 

[elnewbie]

As long as you pledge your flat, the CPF min sum gets reduced by a flat 50%. In today's context, that's $80,500.

Now your monthly CPF Life payout will be based on the $80,500. The monthly payout has nothing to do with how much accrued interest is vested in your HDB. You get what you had put into the RA. You can't be having your cake and eating it too.

Hope this answers most of your questions.

In terms of retirement planning, this depends on various factors such as your current earning potential, your age, your risk appetite when it comes to investments. It's quite hard to make a generic statement, one size fits all solution.

 

[SBC]

The current eligible withdrawal age is 67.

You tell me how to plan?

 

[jackieatbtu]

Yes, I meant that using a HDB for pledging would effectively reduce the amount by half. As for the accrued interest, that is more to cover the 50% pledge due to the min sum increasing every year also. So that would mean more people hitting their min sum at 55?

I do have another question that is unsure. I am 40 this year. Based on the pledging rule, the flat has to be at least 30 years lease remaining. Does that mean I must make sure my flat has at least 45 years lease remaining? Calculation: 15 years to CPF life pledging at 55 years old. 30 years of hdb remaining lease. 15+30 = 45.

 

[jackieatbtu]

The current eligible withdrawal age is 67.

You tell me how to plan?

My current plan is using investments and working till 65. Thus, from 55 to 65, still using salary for income. From 65, half from CPF Life (since already pledged half the FRS) and half from investment money. Plus, the extra money in the RA account that are freed up via pledging will still be earning interest.

 

[SBC]

Are you married with kids?

Need other saving, investment to tong from 50 till 67.
Job security rises with age. This is not always given.

Can include SRS & insurance in your planning.

 

[Squaredot]

Are you married with kids?

Need other saving, investment to tong from 50 till 67.
Job security rises with age. This is not always given.

Can include SRS & insurance in your planning.

job security rises with age??

 

[SBC]

I mean degrade.

 

[jackieatbtu]

Are you married with kids?

Need other saving, investment to tong from 50 till 67.
Job security rises with age. This is not always given.

Can include SRS & insurance in your planning.

Foreveralone means not married no kids. Will outlive my parents hopefully. So, left siblings as close family members only. I suppose if I really meet somebody in the next ten years the plan may change.

I am also in the middle of planning to get some disability income and term insurance until 65. SRS just started, will be withdrawing that slowly from 62 to 72 to pay lesser tax. If retrenched before 65, then would be finding a lower pay job and hopefully able to live on it without drawing on savings.

What else am I missing? Retirement insurance products? I am unsure if that would be similar like CPF life and would cost even more. I am currently invested in STI ETF.

 

[SBC]

Quite easy to achieve for single guys.

STI ETF is a good option

 

[jackieatbtu]

So, I suppose using up the CPF and conserving as much cash as possible is the best route for me? Currently paying 20% salary into CPF, 15% into SCB for ETF, 10% into yearly SA top up and SRS.

Those arguing against using CPF monies for mortgage is the worry that we are spending away the extra money that would have gone into mortgage payment. So, as long as I keep investing that amount, I should be doing the right thing?

I know I am not even considering the argument for the using cash on low mortgage interest rate vs keeping OA 2.5% but I honestly dont believe this low interest will last longer than my mortgage. Still remembered how high the interest went during 1997 financial crisis. Planning to get the HDB fixed loan, which should be better than bank loan over the next 20 years.

 

[FP_IFA]

Foreveralone means not married no kids. Will outlive my parents hopefully. So, left siblings as close family members only. I suppose if I really meet somebody in the next ten years the plan may change.

I am also in the middle of planning to get some disability income and term insurance until 65. SRS just started, will be withdrawing that slowly from 62 to 72 to pay lesser tax. If retrenched before 65, then would be finding a lower pay job and hopefully able to live on it without drawing on savings.

What else am I missing? Retirement insurance products? I am unsure if that would be similar like CPF life and would cost even more. I am currently invested in STI ETF.

Top up your long term disability cover if you are 40 and above. You can use medisave to pay for it.

 

[jackieatbtu]

Top up your long term disability cover if you are 40 and above. You can use medisave to pay for it.

You mean Eldershield?

 

[highsulphur]

The current eligible withdrawal age is 67.

You tell me how to plan?

Where is the source? You can withdraw your excess monies from cpf at 55.

 

[wts2013]

Foreveralone means not married no kids. Will outlive my parents hopefully. So, left siblings as close family members only. I suppose if I really meet somebody in the next ten years the plan may change.

I am also in the middle of planning to get some disability income and term insurance until 65. SRS just started, will be withdrawing that slowly from 62 to 72 to pay lesser tax. If retrenched before 65, then would be finding a lower pay job and hopefully able to live on it without drawing on savings.

What else am I missing? Retirement insurance products? I am unsure if that would be similar like CPF life and would cost even more. I am currently invested in STI ETF.

At present, what sort of insurance policies do you own? H&S is mandatory, assume u have with 100% cover?

 

[jackieatbtu]

Yes full integrated shield plan with rider.

 

[wts2013]

Yes full integrated shield plan with rider.

No other insurance policies?

Since foreveralone, your CPF Life will be your disability insurance as well

 

[FP_IFA]

You mean Eldershield?

Yup your eldershield. The basic one only gives you $400 payout per month. You can get extra cover from NTUC, Aviva or GE using medisave.

 

[kehyi4]

The current eligible withdrawal age is 67.

Current Payout eligibility age is 65 lah, not 67

 

[henrylbh]

TS can augment his retirement income with reverse mortgage since there is no beneficiary.