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Category: t_CPF
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1M65 plan by MrCPF #w1r2
This short CPF site article has some simple insights derived from Loo’s personal story. Loo’s $1M by 65 is more realistic than many other popularized financial targets.
earn/save/invest .. With Loo’s profile unknown, here’s what we can deduce — Loo is good at saving, and his investment skill shines at CPF-SA.
— current income .. Loo puts too much in CPF-SA with $0 current income, but he likes div stocks.
— inflation .. an unspoken risk when you lock away so much cash for so long. Loo basically bets on SG government to contain inflation risk
— OA->SA transfer .. was a major method.
— unpalatable liquidity of CPF-SA … is the price for the extremely competitive riskless compound 4% growth
🙁 He can’t use the SA fund for education or housing, but after 55, he could pledge his HDB and withdraw the free portion above BRS.
— burn rate habits: Loo’s habits are same as mine.
- “simple holidays”
- rent-out individual rooms
- renovations
— Singaporeans’ popular reasons for wanting to be rich:
Loo polled readers on their reasons for wanting to be rich. (Presumably Singaporean respondents.) An overwhelming majority answered they wanted to be rich so they could retire and not work anymore. The response made him wonder. While there is nothing wrong with wanting to be rich Loo believes the pursuit of wealth should be for the right reasons… not “stop working and wasting life”.
Likewise, Jacob of ERE pointed out “after we solve the free-from problem, we face the free-to problem”.
(necessity)big-tickets pre55 #boy20.5@2029
Before 55, I can housing refund 150k to cpfOA. This amount will lose liquidity.
Q: … but if there’s nothing to require the $150k, then who cares? This blogpost is mostly about the necessity outlays, rather than discretionary items, that I may need before 55.
Note Any time after 55, I can withdraw everything else after committing BRS to RA.
Note on my 55th birthday in 2029, boy is aged 20.5.
Conclusion — to gain 2.5% interest I give up a few year’s liquidity. Not worth it.
— big-ticket: SG home upgrade. Can use OA not SA.
For the proposed OA->SA top up, This big-ticket is perhaps the only big-ticket.
— big-ticket: stocks or gold? Not necessity nor big-ticket items but yes I might want to invest and build up sizeable amounts.
— big-ticket: Medical cost? I think am taken care of in SG (see the blogpost on Cushions), and will be taken care of in the U.S.
— big-ticket: college funding? Discretionary item, as I don’t want to take it on as my job, _b_u_t_ the more spare cash I have, the more flexibility. More importantly, this expense happens mostly after I turn 55. At 55, my son is only 20.5
— big-ticket: U.S. property investment? Discretionary item _b_u_t_without it my rental cost is quite heavy.
So far, I have preferred Asia properties.
When I move to the U.S. I probably want to invest in properties using USD, not SGD.
max out CpfLife P2: How #liquidate
See also
- S$700k: CPF-life^college reserve 鱼与熊掌 — why ERS target is challenging
- covid19$handout reflect`Realistic burn rate #CPF ERS — why ERS is probably sufficient
- why (not how to) max out CPF-life #ERS
— @55 is the time to MAX-out on cpf-life
As I confirmed with CPF hotline, let’s compare two twin brothers aged 55 around 2030
- AA has extra balance in OA or cash, so he immediately tops up (straight into RA, without split) up to the ERS watermark (eg 500k). Each year thereafter, ERS watermark would rise (by projected 3%), but new ERS watermark would never exceed his 750k balance accruing at 4%.
- BB only hits max at or after age 65, to the 2040 ERS watermark. This ERS watermark is most likely far lower than 750k, probably something like 600k.
AA’s plan is the max-out plan i.e. his cpfRA snapshot65 would be the maximum possible.
In terms of the growth of 500k in their wallets as of 2030
- AA relies on 4% compound over 10Y by CPF
- BB relies on his own investments, which could produce higher return in some years and lower return in other years
In terms of liquidity of the 500k
- cpfRA balance has the worst liquidity.
- your own investment can also get stuck around age 65, so you are unable to liquidate it for CPF-life
CPF online estimator shows that as of Sep 2020,
- for someone born 1955 (age 65 in 2020), 275k would immediate generate about $1400/M in basic plan. Assuming 275k is the ERS, then this person is not allowed to top up beyond 275k.
- for someone born 1965 (age 55 in 2020), 275k (would become some bigger amount) would generate about $1900/M payout
- Suppose the twin brother of 1965 guy delays top-up by 10 years, and then does a top-up to 275k (not the new ERS), I bet his payout will be closer to $1400 than $1900. By this time, his early-saver brother has grown his 275k to 410k (monthly accrual), generating $1900/M
So the early top-up guy receives significantly more monthly payout due to 10Y loss of liquidity.
— My current plan — grow some 200k in my own investment account outside cpf. Then top up cpfRA only at the last moment.
- Before 55, double-check and triple check that green_portion is feasible.
- Once confirmed, if I have 500k cash including FLI150k but excluding USD, I might permanently lock up 50k in the RedPortion of cpfRA.
- .. (If you top up 50k to cpfRA at age 58, then this 50k would be locked in for a lengthy 7 years until it transfers into cpf-life and starts “producing milk”.)
- Before wife reaches 55, we will build up towards her green_portion of cpfRA (unborn). See [25]build up150k]wife’s green portion – dTanbinvest
- When wife reaches 55, I will take stock of my SGD liquidity position (600k?), USD cash position (200k?), income security,,,,
- Approaching 65, progressively liquidate assets to aside enough cash, not necessarily the full ERS.
— what assets to liquidate
See also ## assets2designate as legacy #after65
- My 3 annuities
- My USD idle cash
- If I live in the U.S. at that time, then liquidate Asia properties. Hopefully they have recovered by then.
- If I live in Asia, then liquidate U.S. properties.
max out cpfLife P1
CPF-LIFE Liquidity is terrible, inflation-protection is limited (i.e. Escalating payout plan), although payout_rate is high (Y cpfLife payout_rate so high). I worry about imported inflation in Singapore. Assuming I have enough reliable non-work income already, I might put in (and lock up) the minimum amount.
— why it’s a plausible idea to do the max-out only close to 65:
If you top up close to age 65, then no waiting-period like the “accumulation phase” in commercial annuity or endowment policies. At age 65, I top up 100k to RA and immediately start receiving payout from this 100k top-up. Too good to be true but I did confirm with CPF. Estimator also shows that for someone born 1955 (65 in 2020), a 275k balance (top-up) would start producing right away.
— compare to other annuities
Allianz annuity as(poor)cousin@CPF-life provides the best argument why I favor CPF-Life among all annuity products.
I have 3 commercial annuity products [FLI2, FLI2PF and LTIS]. How likely am I to hold them past 65? I will avoid giving a biased impulsive answer. IIF I were to hold these till 65, then I should reduce cpfRA top-up due to inferior liquidity of cpfLife. My commercial annuity products are fully liquid.
— compared to other nonwork incomes
This CPF annuity has the worst liquidity but the best credit rating among all my nonwork income generators. Zero currency risk.
At 65, my risk appetite and risk tolerance are relatively low, so it may be appropriate to liquidate my overseas or local properties to hit ERS for both me and wife, but total sum would be SGD 700k in cash, possibly too ambitious.
— Warning — CPF LIFE return is higher for a person who participates only with the BRS. When you double your CPF LIFE participation amount from 90.5k to 181k, your payout range is not doubled ( $1,390 is less than 2 x $750 ). This can be easily seen from the projection by CPF. Why?
Answer from CPF officer: it’s all due to tiered (non-linear) interest rate. First 30k earns additional 2%; next 30k earns additional 1%. No magic.
So if SGD 700k cash is challenging, we should try to hit lower targets for both of us.
[21]S$900k: CpfLife^college reserve 鱼与熊掌
This sum is just a symbolic sum, not an accurate forecast
- CPF-Life ERS (enhanced retirement sum) may grow to SGD 450k when my wife or when I turn 65.
- typical top college fees may grow to USD 400k/student when my kids enroll, which will happen before I turn 65.
Q: since I can’t save enough for both purposes, which one would I sacrifice? I like this type of sharp questions that focus our mind on the real priorities.
A: short answer — sacrifice college funding. Top U.S. college is like branded products, catering to the affluent. There are many high-quality but inexpensive colleges including NUS. If your focus is quality of education (rather than FOMO, halo, vanity…), I don’t think my kids would receive the very best educatio only in a prestigious college. As explained in many blogposts, prestige is based on research not quality of education.
A: college cost is consumption whereas CPF-life is buying an annuity.
A: My sis and Zeng Sheg both agree to let the kids stand on their own feet at that age…
— liquidity
CPF-life money is committed i.e. locked in. For better liquidity, I may need to consider leaving part of the 700k in my rental properties
College funding is zero liquidity — not an investment with a liquidation value.
— student loan
In Singapore, my kids can get interest-free loans. It’s best to let the kids repay the loan, with whatever partial assistance I can provide.
— bare-bones ffree
Q: looks like I am not really financially free?
A: my earlier analysis of bare-bones ffree was based on $0 college funding. In reality, I may earmark some SGD 200k for college. Zeng
As stated elsewhere, there are some macro risks to derail my ffree, esp. risks affecting my properties. We have to live with them.
Therefore, bedrock of my financial planning is career longevity including dev-till-70.
SA cash top-up@@ No! Prefer OA→SA
Here’s one hidden and confusing restriction about SA top-up: cash top-up to SA can’t be withdrawn at all, even after 55, even if you hit BRS and pledge your property. See https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme and the diagram in https://www.cpf.gov.sg/Assets/members/Documents/Illustration_of_topup_monies_in_RA.pdf
“Cash top-up” means from outside CPF, such as bank accounts.
The liquidity-smart route to SA top-up is
- $100k housing-refund from bank account to OA, assuming your nett OA-usage for housing is below $100k
- $100k transfer from OA to SA, assuming your SA is below FRS
This way, you effectively move money from bank account into SA to earn the very lucrative 4% compound interest, and you still can withdraw it after 55. I confirmed this with CPF hotline.
Q: how much, if any, should we transfer from OA to SA, knowing it might become somewhat “free” after 55? See this blogpost
— https://www.bereadywithcpf.gov.sg/articles/how-a-singaporean-accumulated-cpf-full-retirement-sum-in-his-special-account-by-the-age-of-34/ is a personal story featured on CPF website, where a 34-year old SG national did a lot of OA->SA transfer and cash top-up.
See also my blogpost on 1m65
[20]松一口气65^end@college #U.S. #w1r2
Q: At what age would you feel relieved in terms of livelihood pressure? I think most of us have yet to give this question a critical analysis.
— common Answer …. age 65
For the middle-class Singaporeans with FRS, age 65 means about $1300/M/person. Assuming reasonable inflation and healthcare taken care of, this monthly payout can match retiree’s burn rate, IFF burn rate is well controlled.
In contrast, US burn rate would likely exceed SGD 1300/M/person, partly due to Melvin3++ (car ownership + rEstate tax + med bx… )
If you have no kids in school by then, you may wish to start receiving this payout earlier (like 62) so you retire at an earlier age. You would need non-CPF solutions such as SRS, which can start paying out at 62.
— common Answer …. when my kids complete formal education and start working
This typical Chinese parent’s answer (LZ.Yu?) assumes the college cost is a major burden on the parents. Most middle-class Chinese parents I know seem to voluntarily take up the job to bankroll the children’s education.
I don’t plan to take it up as full responsibility. I want my kids to start saving up, take a student loan, and repay it after graduation.
— My answer …… when my NNIA can match my U.S. burn rate (USD 7k excluding housing?), which is much higher than SG burn rate (SGD 6k?)
Now (2020) I’m very comfortable on my cash flow high ground, thanks to my brbr + Fuller wealth + …
Paradoxically, I foresee worsening livelihood pressure relocating to the U.S. but still want to go.
safe withdrawal rate: 4%rule #U.S.only
update: ffree^carefree^ezlife #horizon explains that ffree analysis is dominated by big shocks and hazzards
—
https://en.wikipedia.org/wiki/Trinity_study , https://www.investopedia.com/terms/f/four-percent-rule.asp describe an influential 1998 paper by three professors of finance at Trinity University, using U.S. data on stock, bond and inflation. However, the 4% rule was actually proposed by a 1994 paper by Bill Bengen.
It illustrates the long-term strength and volatility of the U.S. stock+bond market. It is relevant to me as well as the majority of U.S. retirees.
In Oct 2020 Bill Bengen updated 4% to a higher, more aggressive max_withdrawal_rate.
This blogpost is mostly based on https://www.getrichslowly.org/four-percent-rule/.
— safe …. from running out of money within 30Y. It is assumed that the portfolio needs to last thirty years. The withdrawal schedule is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period.
Capital preservation was not a primary goal, but the “terminal value” of portfolios was considered for those investors who may wish to leave bequests.
— CPF-life and the U.S. stock/bond market
I guess the 4% rule was created based on US market. In contrast, CPF-life invests globally and pays out in SGD.
— alternative nonwork income: The original researchers are very confident about their safe withdrawal rate, but I’m not. I need more cushion, more buffer, like my rental income, CPF-life
— inflation: It is assumed that the portion withdrawn in subsequent years (after 1st year) will increase with the consumer price index (CPI) to keep pace with the cost of living
I have reason to believe SGD inflation is better controlled.
— black swan disasters? Researches used historical black swan events to back-test the withdrawal schedule and vindicated the 4% rule.
I tend to worry about unprecedented, imagined disasters.
— key clarification on 4%: Note that the 4% is calculated against the balance of the account only in the first year: withdrawal amounts in subsequent years are calculated by adding inflation to the previous year’s amount, and not 4% of account balance in later years.
— stable burn rate: https://www.getrichslowly.org/four-percent-rule/ points out that for many retirees, burn rate is nowhere near “level” i.e. consistent and stable.
In my case, I expect my crbr (couple retirement burn rate) to be stable. I have better control of my burn rate than those American young retirees.
I track my monthly burn rate consistently. It gives me confidence and insight. One variable is my wife’s personal burn rate, invisible to me, but I have some observations of this rate.
[25]cpf: stop online theft
Overall, cpf is a safer system than banks, because “immediate/frequent withdrawal unneeded”.
A 2025 cpf roadshow staff told me that so far the only scams occured via online withdrawal (after member reached 55). In-person theft is unheard of.
If you are between 55 and 65 and you don’t need some 100k for the rest of your life, why not lock it away in cpfRA forever? No one can withdraw. See lock up100k]cpf if no liquidity need
— protection: withdrawal lock .. If you are a CPF member aged 55+ and have no immediate plans to withdraw your CPF savings, you are encouraged to safeguard your CPF savings by activating the CPF Withdrawal Lock (MoneyLock) to disable online CPF withdrawals. You can do so via the CPF account settings after logging on to the CPF website using your Singpass.
When you need to withdraw your CPF, you can enable online withdrawals again via the CPF account settings. For your security, this will be subject to Singpass Face Verification and a 12-hour cooling period. Members who do not wish to enable online withdrawals again can withdraw in-person at CPF Service Centres.
— protection: daily withdrawal limit .. CPF Board has also introduced a default Daily Withdrawal Limit of $2,000 for all members aged 55 or older, as part of a suite of anti-scam measures.
Members can adjust this limit via the CPF account settings. All limit increases are subject to Singpass Face Verification and a 12-hour cooling period.