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Relying CPF for retirement need

According to HSBC’s latest study, The Future of Retirement: A new reality, 41% of those interviewed have never saved specifically towards retirement; and 44% are not preparing adequately or not preparing at all for retirement. In addition, Acting Minister for Manpower and Senior Minister of State for National Development Mr. Tan Chuan-Jin said, during a speech on 12 April 2012*, that only 45% of active CPF members turning 55 in 2011 met the CPF Minimum Sum (MS) requirement. This means many of our parents will have to set aside their CPF monies in their CPF Retirement Account (RA) when they turn 55 before they can make any withdrawals.


2)What are the various options available for them with regards to withdrawal of CPF funds?

When our parents reach 55 years old, they have two options:
1. Withdraw a lump sum comprising the balances in their Ordinary and Special Accounts (OA/SA), and any balance above the Medisave Minimum Sum in their Medisave Account. In order to withdraw, they will need to set aside the CPF Minimum Sum (MS) in their Retirement Account (RA). If they have the full MS but have less than the Medisave Required Amount (MRA), they are required to make a top-up to their Medisave Account with part of the CPF balances from their OA and/or SA to meet the prevailing MRA. From September 2009, they will be able to use their RA savings to buy a CPF LIFE plan which is a life insurance annuity.
They will get a payout starting from their Draw-Down Age, for as long as they live. Proper planning for their withdrawn CPF savings is important as these savings will supplement their monthly LIFE payouts together with their personal non-CPF savings.
2. Postpone their CPF withdrawal to a later date.
If they are working after 55 or do not need to use their CPF savings yet, they can postpone their withdrawal and continue to build a larger nest egg. OA savings will earn at least 2.5% pa while SA savings might earn more. In his reply on 8 April 2013 to a Parliamentary question, Mr. Tan Chuan-Jin said that CPF members with balances above the MS generally keep these monies in the CPF for the longer term. These monies could have been retained in the CPF to take advantage of the attractive CPF interest rates.

3) How much should they withdraw and how much should be left inside (for CPF Life, for example)?
The CPF Minimum Sum (MS) is being adjusted annually since 2003 and our parents who turn 55 on or after 1 July 2012 will have to set aside $139,000 as the MS. They can withdraw the balance provided that they meet the requirement of CPF Medisave Required Amount (MRA).

4) If they have excess funds that are above and beyond their minimum sum for CPF Life disbursements, where should they put the money?
CPF Life is designed to meet the basic retirement needs of Singaporeans. It is important for everyone to consult a financial adviser to ascertain their retirement needs as well as explore different alternatives to achieve a comfortable retirement lifestyle. If we cannot find a better way to invest the excess fund, a prudent way is to leave this with CPF to earn a higher interest rate.

5) Do you think that they should invest it in property?
Although CPF savings are allowed for the purchase of properties, there are a few important points to take note of when investing in properties. A person turning age 55 may have to pay a lot more cash up front for a new property as their allowable loan tenure will be much shorter as compared to a young couple. More importantly, there are limits such as Valuation Limit (VL) and CPF housing withdrawal limit which cap the amount of CPF that can be used for property purchases, etc. Please be prudent with your CPF money as it is meant to fund your retirement needs and it's always wise to consult wealth advisers before making that plunge.

6) Do you think our parents are probably too old to chance all their retirement savings on high-risk investments?
Generally, it is advisable to start your retirement planning at a younger age so that you can have a longer time horizon to ride out the ups and downs of the investment market. Also, you should consult your wealth adviser to ascertain your risk appetite and determine if you are able to stomach the risk of losing all your retirement savings on high-risk investments. We have all heard of how many retirees lost most of their retirement funds through highrisk investments such as Mini bond investment, Ponzi scheme and investment scheme promising double digits returns, etc. Most of them are never really ready to stomach the possibility of losing all their retirement savings. Your wealth adviser could then help you to structure an optimal investment portfolio to suit your needs.

7) Does it make sense of them to stuff the money into a savings account?
It really depends on an individual's retirement needs. Having said that, the current rising inflation environment may mean that the money in our savings account could be eroded, especially over the longer term. Therefore, it makes more sense to structure a portfolio to meet your retirement needs. Low risk instruments such as Bonds or investments in Bond funds might be a better choice as compared to keeping cash.

8) Usually, you will see some typical disclaimer worded like the below pointers. Personally, my point of view is the three pointers are very important to take before any kind of fund investments:
1) Past performances of the Fund, the Underlying Fund, Fund Manager and the Investment Manager are not necessarily indicative of future or likely performance of the Fund, the Underlying Fund, Fund Manager and the Investment Manager.
2) The prediction, projections, or forecasts on the economy, securities markets or the economic trends of the markets targeted by the Fund are not necessarily indicative of the future or likely performance of the Fund. The value of the units in the Fund and any income accruing to the units, if any, may fall or rise.
3) You are recommended to seek advice from a qualified Financial Consultant for a financial analysis before purchasing a policy suitable to meet your needs. The information on this website is for reference only and is not a contract of insurance.

*source from : http://www.mom.gov.sg/newsroom/speeches/2012/speech-by-mr-tan-chuanjin-minister-of-state-manpower-and-national-development-at-the-retirement-conference-improving-retirement-security-in-singapore-12-april-2012-915-am-hilton-hotel

My personal  investment using both my CPF-OA and CPF-SA savings invest into an investment-linked policies from year 2002-2014. A nice $33,627.42 profit from the CPF-OA investment with Dollar Cost Averaging & Portfolio Re-balance strategies.

Starting my investment-linked policy with a mere $20K CPF-OA savings and with annual top-up...

Usually, you will see some typical disclaimer worded like the below pointers. Personally, my point of view is that these three pointers are very important to take note of before making any kind of fund investments:
1) Past performances of the Fund, the Underlying Fund, Fund Manager and the Investment Manager are not necessarily indicative of future or likely performance of the Fund, the Underlying Fund, Fund Manager and the Investment Manager.
2) The prediction, projections, or forecasts on the economy, securities markets or the economic trends of the markets targeted by the Fund are not necessarily indicative of the future or likely performance of the Fund. The value of the units in the Fund and any income accruing to the units, if any, may fall or rise.
3) You are recommended to seek advice from a qualified Financial Consultant for a financial analysis before purchasing a policy suitable to meet your needs. The information on this website is for reference only and is not a contract of insurance.