What are the advantages of purchasing a retirement plan vs. just relying on CPF LIFE with “guaranteed” returns?

Hi Anon, I'm of the opinion that your CPF Life is something that you can not pass up. The baseline is your CPF Life, supplemented by your annuity/retirement plans.

​

As others have mentioned, your non-CPF Life plans give you more liberty and freedom to do as you please, but they are still subject to your usual 3.25%/4.75% rates of participating funds, while CPF Life gives you a 4% return year-on-year as is.

​

CPF Life also gives you payouts till your demise, while retirement plans do allow the same, it'll cost a bomb to do so.

​

Here's my recommendation, if you don't prioritise freedom too much and you just want a steady payout, bump your CPF Life to the ERS and have a bit of supplementary retirement plan. But if you prioritise freedom, you can get the BRS and then get an appropriate retirement plan for yourself.

Hello! Yes you are right with the "" on guaranteed. CPF Life returns are guaranteed by the Singapore government. And you are guaranteed to get an income for life. However the return rates are not guaranteed, its fixed. https://www.cpf.gov.sg/member/growing-your-savi.... You should consider supplementing your retirement income with other sources, if you are not too concerned with fixed returns since you have CPF life which provides some stability, investing a portion of your funds into a fixed income fund will help you with some upsides and flexibility too. On top of that, if your money outlives you, you can pass the remaining money to someone else. If you are concerned about fixed returns and you dont mind the lack of control, then annuities would be a good idea, often its also a good way to manage your funds in our old age since our minds might not be as agile to manage investments as well.

CPF SA interest is computed based on the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, subject to the current floor interest rate of 4% per annum. The interest rate is reviewed quarterly. Currently, 10yrs SGS yield is at 1.64, which means CPF SA interest is in theory guaranteed at only 2.64%. The 4% current floor yield is subjected to review quarterly. CPF Life payout, however, is non guaranteed, even though the interest earned is guaranteed. That really means the CPF LIFE is non guaranteed. Private annuity plan is at least partially guaranteed and has more flexibility. Also, there is a limit of how much you can contribute to your CPF Life payout, so the excess money can be used for allocation into private annunity plan.

Just looking at the guaranteed portion of the retirement plan vs CPF, CPF returns may be a solid 4%, but it may change in the years to come, whereas the guaranteed return of the retirement plan is in a signed contract.

​

Having said that, I feel like the retirement plan should only be used to supplement CPF life instead of being the main source of retirement income.