Retirement Planning: How Should You Complement Your CPF-Life Annuity?

Me: Have you thought of retirement?

Client: Retirement?!?! Nah..I’m too young for it..retirement planning is for the old!  Anyway I have CPF for retirement!

Me:  That’s forced savings!

As much as aging is a certainty, retirement planning is not an instinctive thought to most people.

Many dabble in and out when it comes to their financial lives and they pay a huge price for it. That’s not because they don’t care. It’s because they get swamped with all the stresses in their daily lives and they don’t have the expertise in this area, which makes retirement planning seems more intimidating, confusing and overwhelming.

Some felt it’s too early to plan for something that either won’t happen so soon or it won’t happen because they plan to work for the rest of their life.

Without any basis of the big “why”, there’s really no reason to do anything which brings us to the point of…..

Why should you plan for retirement?

1. There’s no better time to do it

For the young, there may be lesser resources but there is the advantage of time. In the absence of resources, time is our next best friend, to accumulate by leveraging on the effect of compounding interest. In fact, if planning is done early, retirement planning is achievable!

Assuming a gross 9% investment rate, let’s consider Mr Now & Mr Later:

At the age of 65, Mr Now had invested only $50k and it multipled 32-fold, while Mr Later invested $180k and it multiplied only 5-fold.

Moral of the story: The earlier you start saving/investing, the easier it is to get rich. In the absence of financial resources, time is our next best friend to make the money grow.

For the ones with family commitment, we’re either attending to the needs of our family or busy at work. If you’ve children, you’ll start to observe how time flies when your child turns 1, 2 and starts to grow up. Kids are a reflection of how fast time flies. Do not forget to plan for retirement in the midst of your busyness. This is also an area of life that requires commitment.

For the singles, you have the advantage of being better positioned for old age because you don’t have the financial commitment of raising a child. Take advantage of it!

2. The industry and economy is always changing

Singapore moved from a manufacturing industry in the 70s to a current financial and technology hub and this have resulted in changes.

From flagging cabs on the road, people now use Uber/Grab. As a result, very few people are hailing taxis from the street now and the demand from customers shifted from taxis to private-hire cars.

From Nokia mobile phones, people are now using smart phone like Apple and Android.  As a result, since 2007, Nokia’s mobile phone market share has plunged from 46.7 percent to just 9.5 percent.

The impact is that businesses are turning over and restructuring to adapt to changing conditions. Some existing jobs are being lost, even while we are creating more new jobs. Times have changed and businesses have changed more quickly. Some business that flourished in the past has become irrelevant with changing times.

Part of planning for retirement, is having more control of the future no matter how it changes.

3. Health may have a way of changing

“I love what I’m doing and I don’t plan to retire! I’ll work till I die.”

One of the mistakes people make when planning for retirement is, making the assumption that they can work forever.

From 1st July 2022, retirement age will be raised to 63 and the re-employment age to 68. By 2030, statutory retirement age will go up to 65 and re-employment age will eventually be 70.

While retirement age in Singapore has been increasing over the years, good health is not an entitlement.

Do you know:


Part of aging comes with increasing probability of illness. When an illness strikes, sometimes we had to retire much earlier than expected.

What do you currently have?

All Singaporeans & Singapore PR have a default retirement plan called CPF Life.  And what is CPF Life?

From the CPF website:

“The CPF Lifelong Income For The Elderly (CPF LIFE) is a national longevity insurance annuity scheme that insures you against running out of your retirement savings, by providing you with a monthly payout no matter how long you live.”

With an ageing population, CPF Life is set up to cope with rising life expectancy and the potential problem of outliving of resources when a person lives longer.

More details including FAQs can be found on the CPF website.

Understanding CPF Life

CPF Life can be quite complex with rules around different payout options, Basic retirement sum (BRS), Full retirement sum (FRS) and Enhanced retirement sum (ERS).

Here are some key things you need to know about CPF Life:

a. Retirement Account – This is the account which will be created at age 55 in which monies from OA & SA will be transferred to.

b. Retirement sumAs of 1/1/23, $99,400 is the Basic retirement sum (BRS). BRS is meant to provide monthly payouts in retirement that cover basic living expenses. If a property is owned in Singapore with remaining lease that can last to at least 95 years old, BRS in Retirement Account can be set aside and amount in excess of the BRS can be withdrawn, by using the property. This means you can withdraw a lump sum from Retirement Account at the age of 55 only if you’ve at least $99,400 in your OA and SA combined.

The retirement sum will be adjusted annually to account for higher standards of living and to ensure that payouts keep pace with inflation.

c. Standard Plan – This provides level monthly payouts.

d. Basic Plan – This provides lower payouts than Standard plan and the payouts will get progressively lower when your combined CPF balances eventually fall below $60,000.

e. Escalating Plan – This provides payouts that increase by 2% a year for life.

How can you complement CPF Life with your personal plans?

Here are 3 questions to consider in finding the right fit to your retirement plans:

1) How much do I want for old age?

In a recent article, it was calculated that a 30-year-old who expects to retire at 65 and to live a simple lifestyle by taking public transport and eating at hawker centres rather than restaurants, for instance, would need about S$5,600 per month at the age of 65.

If you’ve no idea how much is needed, you can use the above example as a basis. Do consult a professional if you want to work out your numbers.

2) How do I determine how much payout I can get at age 65?

Your CPF Life monthly payouts will depend on the savings you have in your retirement account.

Most Singaporeans has a property and depending on the type of property that you have bought, a person may have little or no OA to be transferred to the retirement account at the age of 55. This means that the main contribution to retirement account comes only from the growth of SA.


3) How can I do more for retirement on top of what CPF Life can provide?

Here are some suggestions:

a. Plan for payout to start before age 65

Current CPF Life start paying at the age of 65. Because health, youth and employability has a way of changing, it makes sense to plan for retirement income earlier.

CPF has evolved over the years to cope with rising life expectancy and the risk of members outliving their CPF savings. From the early years where members can fully withdraw their CPF savings upon retirement, Minimum Sum Scheme was introduced in 1987, to help members to spread out their savings over their retirement years, by streaming out members’ CPF savings monthly instead of having it withdrawn in a lump sum.

In 2009, the Minimum Sum Scheme (which provides payouts for 20 years), was replaced by CPF Life (which provides payouts for life). As life expectancy improved, CPF Life was designed to cover the longer lifespan of Singaporeans and to ensure that members will not outlive their CPF savings.

To cope with changing times and needs, the government has every good reason to make the necessary changes to our retirement plans. While it has good intention, it is also something that we can’t control.

Part of planning for retirement is to have more control of what we want at old age and planning minimises any impact, regardless of regulatory changes.

b. Consider retirement plans with disability income

With aging comes changes in health and changes in health usually results in more care giving and medical expenses. During the National Day Rally 2017, PM Lee said, “On average, we live to 82 years and out of these 82 years in old age, we experience 8 years of ill health.”

While CPF Life is positioned with lifetime payouts, to cope with increasing life expectancy, there is no additional payout for the additional care giving cost that may arise due to the 8 years of ill health at old age.

One way of complementing with CPF Life, is to consider having retirement plans that provides disability care benefits.

There are retirement plans that provide disability care benefits during the accumulation period and during the payout period. Premiums can be waived during the accumulation period. This provides the certainty that the planned retirement funds will be available at old age even if a person lost the ability to work and to save for retirement. The certainty of retirement funds is important because while health may have a way of changing, it doesn’t mean that life expectancy will change. That is the reason why, when a person lost their health and the ability to work (especially before the intended retirement age), the impact is not just on current life, but also on future because they didn’t get to work and accumulate for their retirement as it was meant to.

c. Incorporate legacy planning

The current CPF Life has a bequest component, meaning CPF LIFE premium balance (which is the total CPF LIFE premium that you have paid less the total payouts you have received from your premium, together with any remaining CPF savings will be paid to the beneficiaries in the event of death.

Consider this example:

Male age 55 with retirement account balance of $176,000

Depending on the plan that was chosen, the following shows the payout and bequest with time.

While CPF Life does provide some form of bequest, it also means that the longer a person lives, the lower the amount of bequest that will be distributed to your loved ones.

Having retirement plans that provide payout with legacy component, let you spend your retirement payout with ease and knowing that there will be wealth that can be passed on, even if you live longer. Whether it is to say thank you to the care givers who has taken care of you, to give for charitable purpose or to leave behind legacy for your loved ones, having wealth to leave behind, impact generations.

In summary:

There are many ways to plan for retirement. Some rely on children’s allowance given to them every month, some hope that their children will provide for them at old age, some receive income from rental, dividends, interest from the savings, CPF Life etc. Regardless of the type of income that a person is receiving, it is a fact that a person will have to receive some form of income when the working income stops.

A “middle ground” option is to invest into insurance and retirement products. If you’re looking to complement what CPF Life can provide, you can get started by downloading this “Guide to retirement income plans”.

(NOTE: Get our Guide to Retirement Income Plans to help you complement CPF Life. Get your guide Here)

Just as everything in life, retirement planning is all about character and personal habits.

Do not forget to start planning for retirement because there’s no better time than now!

Article by Sheela Tay Siew Ling (ChFC, AFC)


If you want to know more about Retirement Planning or any other enquiries, you may contact me through whatsapp, schedule an appointment with me or fill up the form below and I will get back to you as soon as possible.


Sheela Tay
Executive Financial Services Consultant

RNF No. TSL200165677
B.Bus (Actuarial Science), ChFC, AFC


July 2024


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