Hi Gurus, How should I help my retired parent invest a 200K sum, based on the following needs:?

From the following criterias,

I can safely say CPF Life has the highest possible payout to give you (if your parents happen to reach age 65). But, i wouldnt recommend putting ALL into it (because it will be drawing from capital).

You can mix and match your finances in according to how you want it to be done.

I would personally do the following (helping my mum to do it too)

(1) CPF LIFE / RSS payouts. These are very helpful to hit the 3.5% minimum payout first. For e.g $7,000 a year = about $600 a month payout.

Using CPF LIFE estimator at age 65 today, about $100k can be used to achieve the 3.5% drawout based on Standard plan.

If you wish not to, you can choose basic putting in $110k but at age 82, you will need to put in investment returns into CPF LIFE to boost up the RA amount (to get the same payout).

Even if you do not wish to depend on CPF LIFE, just to share, the first 60k of the RA account earns 6% (first 30k) / 5% (Next 30k) of, which is why it is good to put some into it no matter.

(2) The rest of the monies will depend on your parents. It can be under private annuity, or some other products etc. It can ride the wave of 15 years, or you can choose some slightly riskier assets (going contrarian) if you can.

(3) if your parents are still at nearing 55, and able to hit CPF FRS (Full retirement sum) etc, then you can consider SA shield etc.

IF your parents are past 55 and able to hit FRS, any excess can also do CPF topup instead to have OA and SA, and use the interest from it to form your payouts, and if interest rates drop further, you can drawout from the OA/SA and reinvest or you can choose other products instead.​​​

Hi anon,

I'd suggest helping your parent attain at least a basic level of income through CPF Life first. As an annuity, CPF Life has one of the best payouts in the market. I have not seen any private plan that gives a better payout, although CPF Life does not have much upside (the range of income is rather small), but it is a truly a lifetime of payouts, which means your parent would have negated longevity risk.

The trade off is that the money is not accessible once it has been put in RA, and the bequest (the capital) will drop over time. To me, that is an acceptable trade off since having a large capital easily accessible might just tempt one to take it out and spend it. The key is to ensure that this $200K is spread across various instruments other than CPF Life. You will easily attain 3.5% of payouts from CPF Life.

However, if your parent has already attained say, FRS for CPF Life, then you will want to consider a private annuity to supplement CPF Life. There are many out there in the market and you will want to look at all the options available before making a decision. Very boardly, private annuities can function like CPF Life, i.e. paying a monthly payout while drawing down gradually on the capital, or they can be capital guaranteed and pay a yearly payout to you. Both have their merits, again, I would suggest that you have an in depth conversation with an independent financial advisor to fully understand how they function.

Beyond that you can also consider investment grade bond funds. However, this will likely be the last in the pecking order, and you will probably not want to park more than 10% - 15% of the capital inside. There's no capital guarantee whatsoever, but you can get a yield slightly better than most FD rates at the moment. The flexibility is that you can access your monies at any time since it is an investment, however, the value of this investment will fluctuate.

It's probably best to ensure a good mix of income streams from multiple sources, so do consider having all these 3 income streams in your parent's portfolio of income assets.

This depends completely on the safety/reliability of the product (and it's company) You are considering.

whether points 1 - 3 are really fulfilled You should consider well.

And discuss also with Your whole family to avoid stress later, if things would not go so well.

Nowadays it is very difficult to define a product that

has low risk AND constant payouts (f.ex. REITs could drop dividends currently and in the future) AND preserve capital

Hi Anon,

Based on what you mentioned, it makes sense to look at annuities, those are policies that provide a continual stream of income, it can be for life or it can also be for a specified period.

As to what the rest have mentioned it depends on whether your parents are willing to take some form of risk in the form of investments, but based on the fact that your parents are retired, I think the safer way would still be annuities.​​​