Commit to ERS at age 55 for higher payout at age 65

With the ceasation of CPF SA, and the increase in ERS, how many of you will pledge for ERS at age 55 for higher payout at age 65? I assume the earlier you pledge the amount, the earlier the 4% RA interests kick in, hence the snowball starts earlier/bigger.

Originally, i intend to keep to FRS and have the excess remain in SA to withdraw the interest monies (aka more cash younger betwee 55-65). Now my strategy has changed to growing my current cash pot (quite hard, no strategy yet), and commit to ERS so that I can fully rely on CPF Life payout from age 65.

Discussion (12)

What are your thoughts?

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Hailey

10 Apr 2024

My preference for now is to top up to ERS. With a 4% compounded interest, the amount will grow significantly over the years. And it is pretty much risk free. Then at 65, the monthly payout will be substantial. Hopefully I can live long enough to enjoy the long term benefits.

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I.L.

02 Apr 2024

I still feel you shouldn't rely fully on CPF since it is obviously not stable, subjected to change in govt policies, as we have seen.

So it is better to have another more stable source of income that you can control, not locked, and liquid for your retirement.

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Elijah Lee

01 Apr 2024

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi anon,

I was thinking along your lines as well (i.e. to shield and draw on CPF SA interest).

Now that this is no longer possible, I would say that my next course of action would be to grow my income sources so that I am still in control of my retirement; I believe that just because CPF LIFE starts paying at age 65, doesn't mean you have to retire at 65. If I had the ability to retire earlier than that, of course I would want to.

Retirement doesn't have to mean I stop working, it means I can just enjoy my activities (travel; some quiet time, etc) without any impact financially. So having said that, a lot hinges on what kind of resources I have at 55. If I have sufficient cash and liquid assets at 55, and pushing my RA to the 4x ERS barely makes a dent , then I'll do it. (Just how much cash that will be will be based on personal circumstances though). If I don't, then I'll stick with FRS in exchange for liquidity from my OA in addition to my liquid assets. Of course, the former scenario is very much preferred.

Having said that, policy risk is very real. I still have 15 years before I turn 55, a lot can happen between now and 2039. I don't think CPF would make any drastic changes of course, and changes are always meant to keep the system sustainable as well as in line with the goals of providing a basic safety net for all Singaporeans. Having said that, while I'm fairly certain that CPF will be a part of my retirement, I'm not going to retire on the terms of the system, and I will be building other income sources such that even if the start date of CPF LIFE gets pushed back, I can retire when I want to, without any worry that it will be delayed by black swan events or something similar.

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