CPF Life. Have been watching Youtubers on CPF Life. There are lots of discussion in Telegram on it. Then often then not, people will touch on return of investment of CPF life. And then will go on one should live to get as much from it as possible. This never get's into my head. Why on earth do we bothered about able to live longer to gain most from it, joke aside.
As I understood, CPF Life is an Annuity plan for life. In my financial plan, CPF is not the core of my retirement. Is useful as in it provides basic insurance protection. So what's more interesting to me is how much it will provides to cover my basic living expenses therefore some relief figures in my portfolio investment returns.
In fact, if one depends mainly on CPL life, chances are they likely do not have enough to invest outside CPF. This is simply maths. If one can cover with CPF 2.5% to 4%, either their expenses are lean or they have huge cash hordes in there. For my personal situation, despite my networth, the returns will not be able to meet my family financial lifestyle.
And this can be worrisome because I do not feel being extravagant. I would think myself as average or slightly above singaporean family scenario. If one is to dump most of their networth into CPF, there could be situation where we may find out much later in life that is not enough for the returns.
A 4% of 1M is just 40k annually. How many family have this amount in CPF ? If their lifestyle can be met, good for them. Personally I feel there are too many situations when more is needed due to changing circumstances and expectations.
One small suggestion for our government. Is it possible to invest our CPF money directly for all of us into the US equity S&P market instead of locking us into fixed 2.5% to 4% returns. Based on 100 years of S&P500 record, achieving long term 7% seems not difficult. For bad year (or negative), the gov can guaranteed maybe 2% returns and so no capital loss for CPF accounts. For good year the gov can crawl back those losses in stages and mybe save off some % from the profit generated into fixed instruments to even out the distribution. What's this mean is we could see much larger gains of S&P flowing directly into our CPF accounts.
My Wishful thinking ?
Ps. We do not need a big team of GIC/Temesek to feed, just invest in S&P500 ETF will do.
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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.
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