https://www.straitstimes.com/business/invest/use-cpf-life-to-pay-for-important-retirement-expenses
2024-10-05
Tan Ooi Boon Invest Editor The Straits Times
SINGAPORE – It is critical to have monthly income in retirement, such as through CPF Life, so you can meet your expenses without having to rely on family members.
People hitting 55 from 2025 can save the maximum amount of $426,000 for the enhanced retirement sum of CPF Life and receive about $3,300 a month from age 65.
So couples who plan for this and set aside such retirement sums in their own CPF accounts can expect to get more than $6,000 from two sets of such monthly payouts from age 65. By age 75, they would have received a total combined payment of over $720,000.
The total payments for the couple would be $1.44 million by age 85 and these monthly payments continue for life.
Older folk can also top up their CPF Retirement Accounts to enjoy higher payouts so long as they are below 80. Those keen to make such plans should check with the Central Provident Fund Board to find out how much they can get with their lump-sum deposits.
Many people still do not realise the versatility of the national annuity scheme, which allows them to have stable monthly payouts even when times are bad.
The same cannot be said for private funds or investments, which will face the risk of lower returns or even losses if the global economy goes into a tailspin.
It pays to have a lifelong income source as you will need money to fund these three important retirement expenses.
Lifelong medical coverage
Your existing Integrated Shield Plan, which is affordable when you are working, will become more expensive as you inch closer to retirement.
From age 70, such plans can come with an annual price tag of $10,000 to $20,000, depending on your policy. It is no wonder people who do not plan for such hefty expenses are forced to drop their coverage.
If you enjoy maximum payouts from CPF Life, you can still afford to keep such medical cover in old age if you plan for it. For instance, setting aside just $1,000 from your monthly payout would enable you to have $12,000 annually for premium expenses.
If you start doing this from 65, you will probably have more than enough savings from CPF Life alone to pay for a lifetime of coverage, without even having to touch your other savings.
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Unexpected expenses
Medical expenses are not the worst thing that can derail your retirement plan, especially if you put in the effort to stay healthy. Your real nightmare can begin when the roof falls in and your home badly needs a renovation.
Many people never factor in such hefty expenses, which can wipe out their savings, especially if they live in private homes.
Almost every household appliance will need to be replaced in time, but most of us forget about this because such outlays are no big deal when you are still working.
But when you are retired, every big-ticket item will reduce your savings, unless you get a monthly retirement income.
A strong incentive for planning for a high CPF Life payout is that you will not have to feel guilty about spending every dollar that comes in as you will get it all again the next month.
Fun retirement
Inflation should not be the main reason to start planning for the future. After all, where is the fun in just being able to buy the same things you can afford now but at a higher price in the future?
You make plans so that you can do the things that you cannot do now, such as being able to travel and live overseas for longer periods since you are retired.
If you and your spouse get decent payouts every month, such outings will be more enjoyable because you can save for them from the payouts alone, without having to draw on your savings.
This reason should be incentive enough to ensure you do not miss out on the chance to secure the best lifelong income deal you are entitled to.
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