Retirement Withdrawal Strategy

[Atrina_Boy]

Nice thread to read.

 

[JetStorm]

Payout starts at 65. Pls don't extend.

To each his own. If I have sufficient to spend based on my SRS, it should last me until 70 when cpf life starts.

 

[semiret]

Withdraw only the sum you need from SA/OA for expenses each year as OA at 2.5% and SA at 4% should keep up with inflation. If you withdraw the lump sum and keep in the bank, inflation will erode the value of your savings as bank interest definitely cannot keep up with inflation.

I hope you had some plans to deal with inflation between now to 65 - with bank interest so low, your money is losing value every day if it is just kept in the bank.

As life is short, when you are getting old your health might deteriorates in a very short period of times. After working for more than 30yrs I do want to enjoying the fruits of my hard work. I do intended to invest portion of that CPF sums into stock mkt if the conditions are right for mid term period of times( may be 3 to 5 yrs ). Thanks for your sound advice. I'll split my withdrawal into few cycles then. As for inflation that you mentioned, I've budgeted more than doubles of the current budgets for that. On top of that, I still can downgraded my fully paid up HDB or surrender 1 life insurance policy to free up some cash for any emergency if it arise.

 

[Okenba]

Retirement in SG can be considered in phases.

1) Post CPFlife payout: 65-70 and beyond.
Figure out how much you need, and how much you will get from CPFlife. If CPFlife > need, you're golden and you literally don't need any more withdrawals than that. If not, work out the difference you need and consider if you will have 25x - 33x (4%-3% withdrawal rate) that when you start taking payouts.

2) CPF Withdrawal Age until CPFlife payout age: 55-(65-70).
Minimum of 10 years and maximum of 15 years. You may also get a bump at 62 years old (retirement age) if you have money in your SRS.
Figure out how much you want to leave in your RA at 55, and whether you intend to top-up after that. If you are going to top-up, factor that into your annual expenses. With these final expenses, work out if you have enough leftover in CPF or cash to support you over this 10-15 years. SRS is a plus, but don't forget the withdrawal restrictions and taxes to be paid. If you think you won't have enough, can always opt for CPFlife payout at 65 instead of 70. (Or consider downgrading and see what ah gong can help provide too.)

3) Before CPF withdrawal age: Before 55 years.
This is all on you. Stocks, dividends, rental income, savings, whatever. But just make sure you also have enough for the 2 other phases mentioned before you FIRE. (IE. Check CPF, SRS, etc.) Also remember that when you FIRE, your CPF contributions and SRS contributions are likely to stop or at least heavily reduced. So if you calculated your numbers with those two contributions all the way to 60 or 65, you'll need to run your numbers again to be sure you're ready to FIRE.

 

[qhong61]

No, the "do nothing" default for CPF LIFE is that payouts start at age 70. If you want payouts to start earlier you have to instruct the CPF Board to do that.

It's very financially attractive to start payouts as late as allowed (age 70). If you're able to wait, you should (with rare exceptions).

Lim swee say wife passed away at 69.

 

[BBCWatcher]

Lim swee say wife passed away at 69.

Yes, and that's very sad. I'm sure we all send our condolences. Financially speaking only, if Elaine Cheong Siew Boon did not start any CPF Retirement Account-based payouts then her CPF nominee(s) inherit her full Retirement Account plus accrued 4.0% interest plus accrued bonus interest. And this financial outcome happens to be the best available financial outcome for her loved ones.

If she didn't have any heirs or charities she cared about, or if she had any material financial shortcoming from age 65 until her death, it'd be a different story. We don't know, and it's really none of our business. However, those conditions seem most unlikely.

 

[BlueRobin]

As life is short, when you are getting old your health might deteriorates in a very short period of times. After working for more than 30yrs I do want to enjoying the fruits of my hard work. I do intended to invest portion of that CPF sums into stock mkt if the conditions are right for mid term period of times( may be 3 to 5 yrs ). Thanks for your sound advice. I'll split my withdrawal into few cycles then. As for inflation that you mentioned, I've budgeted more than doubles of the current budgets for that. On top of that, I still can downgraded my fully paid up HDB or surrender 1 life insurance policy to free up some cash for any emergency if it arise.

Congratulations! Looks like you had prepared well for your retirement.

On CPF withdrawals, my understanding is that you could withdraw as often as you like from 55 onwards and it would be as easy as receiving the withdrawal directly into your bank account. So to use the money, you could just withdraw it monthly while keeping the rest continue to earn interests.

The sequence of withdrawal, from my last check with CPF (was over a year ago), is interests from SA, then OA, after that any deposits into SA, then OA and finally principal from SA, then OA.

 

[henrylbh]

Hi All,

I would like to seek your view about your strategy of the withdrawal when you start your retirement journey, says from age 65 onwards.

in addition to the monthly CPF life payout, how much do you intend to withdraw (of course, if also depends on how much you want per month)? Do you withdraw 4% of your total savings yearly? If it is 4%, your savings can last you 25 years (65 + 25 years = 90 yo).

Any comments?

Also depends on whether you intend to leave anything for your offsprings.

I amortised all my financial assets on a straight line to age 95, leaving only my 5rm hdb flat to my kid. The only biggest issue is medical expenses. I don't bother with inflation as my initial drawdowns are nearly double my retirement needs and without spending all, it should be enough to take care of inflation.

 

[kickass22]

Also depends on whether you intend to leave anything for your offsprings.

I amortised all my financial assets on a straight line to age 95, leaving only my 5rm hdb flat to my kid. The only biggest issue is medical expenses. I don't bother with inflation as my initial drawdowns are nearly double my retirement needs and without spending all, it should be enough to take care of inflation.

Wonder how many people under , what you meant by "amortized" all my financial assets on a straight line. ;P

 

[zoneguard]

Wonder how many people under , what you meant by "amortized" all my financial assets on a straight line.

I interpret as this.

EDIT: It's simpler, A = P/n.

 

[karakorum1999]

I interpret as this.

EDIT: It's simpler, A = P/n.

Thanks for this interesting formula.
If n is infinite (desiring lifetime withdrawals), then A=P*r, i.e. can only withdraw the annual interest/returns. Makes sense but so sad .. but ok if planning bequest.
This reminds me of the interest from some/many of us here in accumulating a big fat SA account (through top-ups and shielding).
Suppose my SA account is $500k (say at age 65, or even 70 if need more time to build up).

(1) If I only withdraw the annual interest, this will provide a monthly payout of about $1,667 (using the above yearly formula and not a monthly version). I can do this forever and the principal goes to my estate at some point.

(2) Suppose I don’t want to leave a bequest, then I can use the above formula:
(a) to last 20 years, n=20, and r=0.04, then I can get monthly payout of about $3,066!
(b) to last 30 years, n=30, r=0.04, then monthly payout is about $2,409.. not bad too! Especially if you have CPL life payouts for life..

(3) We can also see the effects of $500k SA account (assuming 4% forever) versus $500k in banks (assuming about 0% forever):
(a) Get monthly of $2,083/month for 20 years
(b) Get monthly of $1,389/month for 30 years.
Extreme scenarios for illustrating purposes.

I think there is also a formula for varying/escalating withdrawals.. ? Let me go play with it…!

Helpful for my scenario planning!

 

[kickass22]

I interpret as this.

EDIT: It's simpler, A = P/n.

I failed my Algebra and math. Die man!

 

[Froggyman]

Congratulations! Looks like you had prepared well for your retirement.

On CPF withdrawals, my understanding is that you could withdraw as often as you like from 55 onwards and it would be as easy as receiving the withdrawal directly into your bank account. So to use the money, you could just withdraw it monthly while keeping the rest continue to earn interests.

The sequence of withdrawal, from my last check with CPF (was over a year ago), is interests from SA, then OA, after that any deposits into SA, then OA and finally principal from SA, then OA.

Wish to check about the sequence of withdrawal ... interest from SA , then OA.
Is the interest for that particular year only or all interest from the previous year?
Example at at age 60 in Jun of 2022, request for withdrawal of a large sum.... so withdrawal will be from interest from jan to Jun 2022 ,then deposits(if any) OR it will be interest earn from age 55 to age 60 ?
Thanks.

 

[zoneguard]

Example at at age 60 in Jun of 2022, request for withdrawal of a large sum.... so withdrawal will be from interest from jan to Jun 2022 ,then deposits(if any) O

Withdrawal in Jun 2022, Interest from Jan to May of 2022, deposits in Jun 2022.
(Sidenote: Interest from Jan to Nov of 2021 already added to principal in Dec 2021.)

 

[zoneguard]

and math

Maths is fun!

 

[kickass22]

Maths is fun!

Math is fun!...... for some.

For others, like me, who are NOT mathematically inclined, its a struggle and I have constantly check my sums and use technology aids to help overcome some of the impediments.

But no matter want...... Math is important.

 

[zoneguard]

But no matter want...... Math is important.

The most important Math for personal finance is Compounding.

 

[reddevil0728]

The most important Math for personal finance is Compounding.

8th wonder of the world

 

[dork32]

It's very financially attractive to start payouts as late as allowed (age 70). If you're able to wait, you should (with rare exceptions).

i do not care much about the payout. i should have more than enuf cash to last my whole life. To me it is the overall value. the advantage of drawing at 70 is that the principal continue to roll at 4%++ for 5 more years.

 

[dork32]

I failed my Algebra and math. Die man!

i learnt this formula when i was in sec 3. it is the sum to nterms formula for geometric progression