If i have a 15+ year horizon, would I be better off topping up my SA from OA or investing in a low cost ETF like the STI? - Seedly
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AMA Christopher Tan






Asked on 23 Jan 2019

If i have a 15+ year horizon, would I be better off topping up my SA from OA or investing in a low cost ETF like the STI?


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Dear Anonymous, thank you for your question and so sorry for replying late. It is difficult to answer this question in full accuracy as I do not have the full context. So let me provide a general guide towards planning for retirement as well as make some assumptions.

  1. You might want to decide how much money you need per month for retirement. And from the amount that you need, what portion of it is the "die die must have portion". This portion can be taken care of by CPF LIFE. The good thing about CPF LIFE is that it pays out a monthly amount regardless of market condition and it hedges against longevity risk as it is an annuity. Your funds in CPF LIFE is also currently guranteed at 4% p.a

  2. So as a guide, if you need say $1400 per month in today's money at age 65, you will need to have about $176,000 (known as the Full Retirement Sum or "FRS) in your RA today at age 55. Currently, the FRS increases by 3% p.a. Assuming that remains the same, in 15 years time, your FRS requirement would be about $274,000. By then, with an FRS of $274,000, the monthly payout can be conservatively estimated to be about $1800 p.m.

  3. So if your SA currently has not reach $176,000, you can consider topping up from OA to SA to build your FRS for the future. However, please be mindful that this transfer is irreversible and you need to be certain that you do not transfer so much that there is not enough money in your OA for other purposes such as your mortgage.

  4. Nothing is stopping you from doing both the OA to SA transfer and investing in ETFs at the same time. However, I alway find that the STI ETF is too narrowly focused and as Singapore is a very small market, it might be better for you to consider investing in the S&P500.

  5. Depending on your risk appetite, you might also want some bonds in your portfolio to moderate the volatility of your portfolio so that you can remain invested even during extreme market volatility.

Hope this helps.


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If you're comparing OA SA vs using OA to invest in the STI, plus you are 40 years old and can withdraw excess monies in your CPF @ 55, then I'd rather go for OA SA.

But this is because there are better options than the STI ETF.

A globally diversified portfolio using your OA could be a better choice. Also, transfers from OA to SA are irreversible and so make sure you can hit the FRS once you're 55.


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