Oct 21, 2020

Cory Diary : CPF Life Retirement Study

Key financial thing I have done this month is to do Housing refund 50% to my CPF. Probably will completely pays it off before end of this year. From -2.5% to 4% that's a 6.5% swing from cost to profit.

And this can be done electronically through internet which is what's so amazing about today world. This boost my Pension quite a little for it to compound to age 65 producing a base monthly sum to my future retirement. Which comes to my next investigation on CPF Life.

CPF Life Retirement Study

While I was doing above, it strikes me how much should I put into my RA. Will doubling it provides me double monthly income at age 65 or more ?

As you can see from the estimator almost double. Probably slightly lesser if we try to be a little stingy about it.  The escalating plan is interesting to beat inflation but seems not for me as CPF is not my key dependency ( specific to me ).

While studying it strikes me why would anyone want to choose a Basic withdrawal plan. Not that's it is a lot ( roughly 130 lesser than Standard )? The answer lies with Bequests ( see below chart ).

At age 80, there is almost no money left if we choose Standard or Escalating Plans. However Basic will provide about half the money to beneficiaries upon passing. Now, Basic plan do looks interesting. However doubling the RA Amount initially only double my Bequest. Something I need to watch if I do my step correctly ....

So my preference is Basic 192K for now and depending how I do well in my investment financially, this may change. However once is selected, can't change after 30 days. oh dear. I need to make a note on this.

Watch for any error as I am new to this. As usual DYODD.



  1. Cory,

    Standard or Escalating plans are for those who need this money to survive every month. A $130 more per month makes a difference to them...

    CPF Life is their MAIN source of income AFTER retirement.

    There is only "illusion" of choice.

    The Basic plan is for those whose CPF is just a smaller portion of their total networth.

    Especially those bother to Trust but Verify instead of just choosing the "default" plan big daddy so carefully placed in front of us ;)

    $100 to $200 less per month is just 1 to 2 nights less eating out.

    No big deal.

    1. My Preference for the Basic Pan is as you mentioned a small portion. Theoretically I can make it big if I do top-up. However I am the type looking for just the basic protection and would prefer to invest more of my liquid cash actively. There are inherent risk locking most of my fund in CPF though very small but I don't have the crystal ball what is like 20 years later. The world can be very different. Maybe I need the cash to travel to Mars ! Cheers.

  2. My take on the choice of plan is that it should be governed by your overall (holistic) retirement planning, and not be looked at on its own.

    In our case, we are (have been) building up our CPF savings to be the core pillar of our retirement funds. Meaning we intend to live within what the CPF pays us, and anything else we get from our equities (dividends) and rental will be the icing on the cake.

    In terms of numbers, we are planning to receive about $100,000 each year (from 65 onwards) from a combination of interest from our combined OA & SA, and the payout from our RA / CPF Life. Currently our combined interests from our OA & SA come up to about $52,000 (based on 11 months interest). And we are gunning for $48,000 from our RA / CPF Life payout to make up the $100,000 income per year. This gives us certainty of income in our retirement years.

    Why 11 months interest? Thats because of the CPF withdrawal sequence rule as follows:
    1. Interest earned YTD from SA
    2. Interest earned YTD from OA
    3. Contribution for the month to SA
    4. Contribution for the month to OA
    5. SA principal
    6. OA principal

    So in order to preserve (protect) your SA principal amount, one can only withdraw 11 months of interest from his CPF. The interest earned in Dec each year is only credited at end Dec and becomes the principal in Jan. As example, say a retiree makes a withdrawal of $50,000 from his CPF in Jan. In Jan, his CPF accounts have not earned any interests yet, and since he is retired and does not have any contributions made to his CPF, the withdrawal sequence rule dictates that the money comes out from his SA in the first instance. Now, if his SA amount is not enough to cover the $50,000 withdrawal amount, the rest will come out from his OA.

    My current plan is to go for the Standard Plan, but I have up to 65 to make that call. If however, by that time, my health is not quite as good as now, then going for Basic would be a no brainer.

    1. Many people dream of what you have in your combine CPF. Congratulation. As we all know there are many roads to Rome. Every individuals have your unique circumstances. One of mine is the possibility of how able to systematically reject my kids or relatives borrowing large sum of money from me. So CPF maybe a good solution to lock away. I could see certainty in your income. For people like you probably do have also much more asset outside CPF that you could play with.

      Your advise of the interests is something to look into. More likely I hope not to count to the brink to worry. I am a current fan of SA. Who knows this may change over time.

      Ofcourse nothing is more important that health. Which is why I hope to retire early as on/off there is certain level of stress and org change I need to squeeze my brain juices. Life is my toddlers now. Priorities have changed.

      Wish you and wife best of health.