My father recently received a mailer from CPF ahead of his 59th birthday, asking him to choose a from a range of 4 plans that will determine his monthly payout from age 63 onwards. Seriously, the difference is only about $20 dollars per month and whether you want to leave some money to buy a nicer coffin. What do we call this, freedom of choice?
"LIFE" actually stands for something, which I am sure nobody gives a damn. It essentially pays you a sum of money for the rest of your LIFE and I think you would be more interested in the amount then the name.
I am very sure that in the future, our CPF savings will not be able to see us through retirement. Citing my dad as the example, he took out 50% of his CPF savings when we was 55, which was some $40,000 and this sum was supposed to last for 8 years, which works out to $5,000 a year. How to retire? Oh sorry, government got say cannot retire. By the way, the withdrawal at 55 is lesser than 50% now.
And the Balanced plan will pay about $360 per month. I do not know how this is enough to survive. Of course, I have to take the role of topping up the expenses when the time comes. If we look at the scenario where an individual has no children, he chooses the Income plan and leave nothing when he passes on. That will be $400 per month. So what's the solution? Work till die, die, or go to Malaysia and die. Excellent.
Back to the point where I said CPF savings will not be able to see us through retirement in the future. Look, these days we are paying our housing instalments using CPF and the contribution rate is not like the past. Did you know that in 1968, the contribution rate was 25% each from the employer and employee making a total of 50%? Thirdly, the interest rate now is so pathetic. Plus the living standards in this country is world class, I reckon we have to work till we die.
So how? Other financial instruments have to come in to ensure proper retirement planning. Long term illiquid savings that locks in your money till retirement is a must. Next, investment in financial markets can also achieve this goal. People who reach retirement age like to change their investment portfolio to one of fixed income, so they can have a regular income stream from coupon payments. It is not difficult, but your bank savings is not able to work hard enough for that to happen.
In conclusion, my dad wanted to take the plan with higher payout. To which I replied, "You know when you will die? Later money no more how?"
I am very sure that in the future, our CPF savings will not be able to see us through retirement. Citing my dad as the example, he took out 50% of his CPF savings when we was 55, which was some $40,000 and this sum was supposed to last for 8 years, which works out to $5,000 a year. How to retire? Oh sorry, government got say cannot retire. By the way, the withdrawal at 55 is lesser than 50% now.
And the Balanced plan will pay about $360 per month. I do not know how this is enough to survive. Of course, I have to take the role of topping up the expenses when the time comes. If we look at the scenario where an individual has no children, he chooses the Income plan and leave nothing when he passes on. That will be $400 per month. So what's the solution? Work till die, die, or go to Malaysia and die. Excellent.
Back to the point where I said CPF savings will not be able to see us through retirement in the future. Look, these days we are paying our housing instalments using CPF and the contribution rate is not like the past. Did you know that in 1968, the contribution rate was 25% each from the employer and employee making a total of 50%? Thirdly, the interest rate now is so pathetic. Plus the living standards in this country is world class, I reckon we have to work till we die.
So how? Other financial instruments have to come in to ensure proper retirement planning. Long term illiquid savings that locks in your money till retirement is a must. Next, investment in financial markets can also achieve this goal. People who reach retirement age like to change their investment portfolio to one of fixed income, so they can have a regular income stream from coupon payments. It is not difficult, but your bank savings is not able to work hard enough for that to happen.
In conclusion, my dad wanted to take the plan with higher payout. To which I replied, "You know when you will die? Later money no more how?"
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