Here are my thoughts on the following topics:
1.
CPF SA & RA
Both the
CPF RA & SA attracts 4% interest pa. The government gives 6% interest for the first $30k in your RA and 5% interest for the next $30k and 4% interest for the rest of the amount in the RA. RA is only applicable to people who are 55 and above.
Question is, is it wise to top up the RA to ERS using your SA money? We know currently the SA earns the same interest (4%) as the RA, so should you move your SA money to top up the RA to ERS?
Considerations- at 55, any extra money left over in your SA after they moved the full retirement sum (FRS) to the RA, can be withdrawn. On ther other hand, money in your RA cannot be touched until you are 65. So in my case, what I did was, I used cash to top up my RA to ERS - $249k. I left the excess money in my SA untouched to earn the 4% interest pa.
2. SRS
The SRS was introduced to help people save on income tax and at the same time save up for retirement. So I treat my SRS money (currently at $200k) as a form of standby money to be available for drawdown when I turn 62. I thus don't use my SRS money for shares investment which come with higher risk. Using the SRS money to invest in shares exposes you to the risk that the money may not be there when you need it (from 62 onwards) in an economic downturn or when the stock markets are depressed. I mainly used the SRS money to buy single premium insurances with guaranteed returns and payouts. In return for the guaranteed payout, I am willing to accept a lower return.
3.
CPF as a steady source of income in retirement
The
CPF can be a steady source of income in your retirement if you build it up steadily and carefully. Many people either dont have the means to build it up or didnt realise it can be a good source of income in retirement.
In our case, the
CPF is one of 3 key sources (not counting the SRS) of passive income for our retirement sustenance. Here is what the
CPF will provide us:
1.
CPF Life (payout at 65): $3.2k pm (for both of us) or $38k pa
2.
CPF OA (just the yearly interest) : $4k pm or $48k pa
These two already provide us a total of $86k pa
The other two sources are dividend income and rental income. The two sources are more volatile and very dependent on market/economic conditions. In good years, we can expect $90k from them, while in bad years, we could have no tenant!
So we plan our lifestyle based on the
CPF income alone so that we wont have drastic changes between good and bad years.