Retirement Withdrawal Strategy

[kickass22]

one example, of losing my fun is this. eg Toto this week 10 million. some guy in your company/ family will suggest this: lets pool our money to buy toto. lets buy system 12. it increases your chances of striking. even if you do not strike group 1, the payout of system for 3+1 is also higher.

the following is total crab if you do your maths
1. It is good to pool your money
2. System 12 is good coz it increases the chances of striking
3. The payout of system 12 is higher that normal quick pick

i see the anticipation and excitement of my colleagues during such events. i really do not enjoy such things coz i calculate too much. sometimes i wish i could be as naive as my friends and enjoy the occasion.

You don't need mathematics for this, you just need to think a bit of the expected outcome.

However, you can still buy for luck and not for probability.

 

[kickass22]

That will probably be what I will do for my wife, buy some annuities to make sure she can fixed amount monthly.

You can top up your Wife CPF to ERS so that she will get about 2K at age 65 . You can do the same for yours and get another 2k. Total 4k. This will be better than a private annuity right?

 

[zoneguard]

In that statement above, there are so many uncertainties, how is a straight-line amortization gonna help? It helps from a planning perspective, but I think you need to built a few safe guards as well as plan for changes based on changing circumstances ( if there is a need too)

2.5% withdrawal rate has a few safe guards:
1. 2.5% is OA's yield and forms the income floor for retirement.
2. 2.5% is much lower than 4% SWR used by FIRE advocates or SA yield.
3. 2.5% is also lower than the 3.X% from CPF LIFE for any plan.

So there is some margin of safety if P (more than half is invested for compounding) is at least 40X annual expenses to assume inflation risk, longevity risk, medical expense risk etc. If you want more safety, go for 50X or 2%.

 

[kickass22]

you are right that you are a real idiot if you try to derive all the formulae. You are so right that there are many functions and apps that were written. Using these apps would be a lot more convenient.

The problem comes in when you dont want the standard case, as in when you want to find out the payout based on a 2% escalating plan. You will realize that no one has written such an app. with this, you may need to apply the mathematical principles to solve the problem. of course if you do not have ocd, then an estimate would do.

also for me, mathematics is not fun. i see many people betting at football, playing system 8 at toto, buying 4d. to me, i will use mathematics to analyze everything. i realize that singapore pools is the greatest con group. whatever you do, they win. many uncles enjoy gambling. they take it as their hobby. mathematics has taken the fun out of gambling for me

So far all the calculation

2.5% withdrawal rate has a few safe guards:
1. 2.5% is OA's yield and forms the income floor for retirement.
2. 2.5% is much lower than 4% SWR used by FIRE advocates or SA yield.
3. 2.5% is also lower than the 3.X% from CPF LIFE for any plan.

So there is some margin of safety if P (more than half is invested for compounding) is at least 40X annual expenses to assume inflation risk, longevity risk, medical expense risk etc. If you want more safety, go for 50X or 2%.

If I get what you are saying, simplistically to summarize, make sure you have a large enough fund to amortize and draw at a lower rate then the returns, then you don't have to worry as the safe guards are built in and thus that will take care of the risk. Correct?

 

[BBCWatcher]

You can top up your Wife CPF to ERS so that she will get about 2K at age 65 . You can do the same for yours and get another 2k. Total 4k. This will be better than a private annuity right?

Yes, but you can do much better for longevity defense....

1. Top up your Retirement Accounts to the Enhanced Retirement Sum within your 55th birthday months.

2. Top up your Retirement Accounts within every calendar month that the ERS is raised.

3. Start CPF LIFE Escalating Plan payouts at age 70.

If you do only #1 and #3 (not including #2), are celebrating your 55th birthday this year (2021), and are male, your CPF LIFE Escalating Plan monthly payout will start at about $2,370. A female starts at about $2,140, so the combined monthly payout is about $4,510 in this scenario. That amount then increases at 2%/year for life and should support real lifestyle stability. You can get well above $5,000/month in starting combined payouts if you do at least some of option #2, particularly as early as possible (mid to late 50s). That's a pretty good amount of longevity insurance. If you want/need more, you can turn to the private sector.

 

[zoneguard]

If I get what you are saying, simplistically to summarize, make sure you have a large enough fund to amortize and draw at a lower rate then the returns, then you don't have to worry as the safe guards are built in and thus that will take care of the risk. Correct?

Yes and P is invested sensibly in a suitably constructed portfolio for retirement drawdown - not in some meme stocks or crypto or whatever latest concoction the finance industry comes up with...

 

[hwmook]

You can top up your Wife CPF to ERS so that she will get about 2K at age 65 . You can do the same for yours and get another 2k. Total 4k. This will be better than a private annuity right?

There is of course a reason for me thinking of doing so. As long as I am alive, there is nothing to worry about but if I am not around anymore then my wife might not be sensible enough to handle the money so I want to make sure she has enough money to get by on her own but she cannot choose to do anything stupid with it.

 

[zoneguard]

so I want to make sure she has enough money to get by on her own but she cannot choose to do anything stupid with it

Actually a private annuity runs the higher risk of doing stupid things with it compared to CPF LIFE? Either way, there are many ways to do stupid things with the payout...

 

[celtosaxon]

This is actually a very important point. It frequently happens that one spouse does all the financial planning and the surviving spouse has no clue.

It is highly recommended that the spouse that does the financial planning educate the other spouse over time… take it slow, but start today!

 

[hwmook]

Actually a private annuity runs the higher risk of doing stupid things with it compared to CPF LIFE? Either way, there are many ways to do stupid things with the payout...

CPF life only go up to $2+k monthly payment which is not a lot if you are living by yourself.

 

[kickass22]

This is actually a very important point. It frequently happens that one spouse does all the financial planning and the surviving spouse has no clue.

It is highly recommended that the spouse that does the financial planning educate the other spouse over time… take it slow, but start today!

That is so true as I have seen many cases of such and even family members cheating the beneficiary to take the money for their own use.

However, the major issue I have seen is that the other spouse either has not interest or does not even want to do it. I think for cases like that, the only option I think is make use of a trusted financial planner or have a trust family member to help or simplify your investments in way such that you write down step by step what they need to do in case of the the "life event". This you can present to them and hopefully they can execute.

 

[Okenba]

CPF life only go up to $2+k monthly payment which is not a lot if you are living by yourself.

I wasn't joking when I said it could reach 4k in a previous message.
If you try the CPF life estimator:
ERS (279k) and payout at 65: $2230/mth
ERS (279k) and payout at 70: $2920/mth

And that is without topping-up to ERS every year.
If you do that every year, you should just cross the $4k/mth mark.
And that's for 1 person. Not bad for CPF life.

 

[Okenba]

That is so true as I have seen many cases of such and even family members cheating the beneficiary to take the money for their own use.

However, the major issue I have seen is that the other spouse either has not interest or does not even want to do it. I think for cases like that, the only option I think is make use of a trusted financial planner or have a trust family member to help or simplify your investments in way such that you write down step by step what they need to do in case of the the "life event". This you can present to them and hopefully they can execute.

Its less difficult if you plan a 'simple' investing strategy for the spouse. Likely index investing.
Warren Buffet has said that I think. Basically advised his wife to just buy the index.
An alternative might be Robo-advisors.

I have a document somewhere detailing all our assets and what my wife should do with them. (Basically simplify everything into a single vehicle.) If I go, she should have got enough from the insurance payout so she doesn't need to maximise and squeeze every last investment dollar anyway.

If in retirement, again, CPFlife and perhaps CPF SA would be sufficient (I think) for the surviving spouse to live comfortably. No need to overcomplicate.

 

[hwmook]

This is actually a very important point. It frequently happens that one spouse does all the financial planning and the surviving spouse has no clue.

It is highly recommended that the spouse that does the financial planning educate the other spouse over time… take it slow, but start today!

It's not only about financial education. Females can sometime be easily persuaded to make the wrong decisions

That is so true as I have seen many cases of such and even family members cheating the beneficiary to take the money for their own use.

However, the major issue I have seen is that the other spouse either has not interest or does not even want to do it. I think for cases like that, the only option I think is make use of a trusted financial planner or have a trust family member to help or simplify your investments in way such that you write down step by step what they need to do in case of the the "life event". This you can present to them and hopefully they can execute.

Exactly, even family member also can con you and when you are old and weak, it's even worse. I need to make sure that my wife can still live a decent life

I wasn't joking when I said it could reach 4k in a previous message.
If you try the CPF life estimator:
ERS (279k) and payout at 65: $2230/mth
ERS (279k) and payout at 70: $2920/mth

And that is without topping-up to ERS every year.
If you do that every year, you should just cross the $4k/mth mark.
And that's for 1 person. Not bad for CPF life.

Is there any limits to topping up to ERS? Can you do it all the way to age 70 or later? I have not seen it written explicitly, that is a good idea.

 

[BBCWatcher]

Is there any limits to topping up to ERS? Can you do it all the way to age 70 or later? I have not seen it written explicitly, that is a good idea.

Under current rules you can top up to the Enhanced Retirement Sum as soon as your Retirement Account is created. Thereafter you can top up to the new ERS every time it's raised as soon as it's raised, and for the rest of your life. These ERS limits are based on principal only.

 

[Okenba]

Is there any limits to topping up to ERS? Can you do it all the way to age 70 or later? I have not seen it written explicitly, that is a good idea.

Until payout. And since payout starts latest by 70, that would be the max.

However, you can still contribute to RA after that, but I believe the calculation for the subsequent payout would be quite different. I have not seen the numbers on that.

 

[BBCWatcher]

Until payout. And since payout starts latest by 70, that would be the max.

However, you can still contribute to RA after that, but I believe the calculation for the subsequent payout would be quite different. I have not seen the numbers on that.

Once CPF LIFE payouts start you have two choices for how to handle subsequent Retirement Account top ups:

1. "Do nothing." The CPF Board will compute and start Additional Monthly Payouts (AMPs) from the following July. The AMPs are akin to the classic Retirement Sum Scheme, atop CPF LIFE. AMPs are scheduled to end at a fixed point in time (i.e. not necessarily lifetime).

2. "Ask." If you ask the CPF Board any time prior to the "do nothing" deadline (whatever that is), the CPF Board can recompute your CPF LIFE monthly payout and increase it for the rest of your life.

 

[zoneguard]

However, the major issue I have seen is that the other spouse either has not interest or does not even want to do it. I think for cases like that, the only option I think is make use of a trusted financial planner or have a trust family member to help or simplify your investments in way such that you write down step by step what they need to do in case of the the "life event". This you can present to them and hopefully they can execute.

I came to know of such services through this forum, not an endorsement for them as I've not engaged them (yet) but sharing to let folks know there's such a thing.

 

[zoneguard]

It is highly recommended that the spouse that does the financial planning educate the other spouse over time… take it slow, but start today!

Crafting an investment policy statement and walking the spouse through the document helps to start this narrative. I learnt this from the Bogleheads forum.

 

[little pupsky]

Yes and P is invested sensibly in a suitably constructed portfolio for retirement drawdown - not in some meme stocks or crypto or whatever latest concoction the finance industry comes up with...

You sound like an educated person in your posts, but not quite so when you sweepingly bash crypto like that. There are crypto and there are crypto. And having crypto doesn't mean all in crypto. And the crypto multi-millionaires are probably laughing at your statement all the way to their banks, DEXs, cold wallets whatever.