Category Archives for Retirement

Update on my Open Letter about CPF Life payout process

I didn’t get a response from Mrs Josephine Teo, our Minister of Manpower. But you know who contacted me? The friendly folks from the CPF Board. I had a 1-hour long call with them to share my feedbacks and here’s what we have discussed.

In this article, I’ll attempt to be specific about things that are different for CPF members under CPF Life and those who are under the Retirement Sum Scheme (RSS).

What information does CPF Board need before they can start making payouts?

CPF members are required to provide their banking details when they would like to start receiving their payouts for both RSS and CPF Life. They can do this anytime between 65-70 (because doing nothing means you start your payout at 70) to start receiving payouts. For example, if you wish to start receiving payout 3 months after you reach age 67, you can do so.

For CPF members under CPF Life, CPF members are required to select a CPF Life plan (Standard, Basic and Escalating), provide their banking details when they would like to start receiving their payouts. They only have to choose a plan when they decide to start their payout.

What’s the easiest way to get this done?

In my conversation with the folks from the CPF Board, I found that the easiest way to provide all the necessary information to CPF Board is through the CPF website.

PS: It’s also on the right side of the letter in the recent CPF fiasco but everyone got caught up with the body of the letter.

After logging in to my CPF account, I can find the everything related to my CPF Life plan in the “My Requests” section.

As a tech-savvy individual, I’ll definitely get mine done online when the time comes. But for the non-savvy folks, they can consider using the CPF Retirement Planning Service (CRPS) offered by the CPF Board to get a one-on-one session better understand their options.

I feel that for those who aren’t up to date with the latest CPF changes (and there are so many of them), it’s always good to have an unbiased expert from the CPF Board to list out the options available for them. It can be very time-consuming and I applaud the CPF Board for offering this service.

We agreed on the need for better communication

What everyone agreed in the call, was that the current letter to CPF members explaining what they need to do to start receiving their payouts needs to be reviewed. My opinion is that we should just start from a blank page.

I would have preferred something that’s clear and concise with visuals. Maybe a step by step guide or flow chart could help explain things better.

In fact, I would even reconsider the method of communication. Would a SMS or email with links to the CPF website with more details be a better option instead?

What CPF Board can do to create a better experience?

Lastly, here are 2 suggestions I’ve made to the folks from the CPF Board.

Use data to help the public understand decisions made about CPF policies

I’m glad that CPF has sufficient data and insights to help policymakers make decisions. In a recent article, it was revealed that almost three-quarters of those getting monthly payouts from CPF Life or Retirement Sum Scheme receive less than $500 a month. Ouch!

About 6 in 10 active members who turned 55 in 2017 had, at least the basic retirement sum of $83,000 in their Retirement Accounts and that will give them a monthly payout of between $700 and $750 for life.

Let’s look at the recent CPF letter saga. If our Minister for Manpower started the conversation with insights derived from the data before explaining why the CPF payout process is what it is today, it would have been easier to help the general public understand why the process is done this way.

Create a frictionless CPF payout process to provide a great experience

I asked myself, what would I expect from the CPF Board when I’m 65?

I would want to be able to start receiving my CPF payout in a frictionless process once I reach 65. While the existing process allows everything to be done through the CPF website, I still question why I would need to take any action to indicate the age I want my CPF Life payout to start at all.

If I look at the payment process itself, CPF Board has already implemented making payouts using PayNow and they already have my existing mobile number. They can easily find out if I have linked my mobile number with a bank account for to transact using PayNow.

As I am under the CPF Life scheme, I need to indicate the CPF Life plan I want to enroll in. I intend to do this once I reach 65 and at this point, I’m planning to take up a CPF Life Standard Plan with Full Retirement Sum, with payout to commence at 65.

While the existing process does not take up too much time to complete, I hope CPF Board can make use of design thinking to examine what its members really want and make bold changes to make the entire CPF payout process frictionless and automatic.

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Even Jack Ma, the richest man in China has a retirement plan

On 10th September, the richest man in China, Jack Ma has announced that he is retiring.

The Chinese billionaire would step down exactly a year from now, with CEO Daniel Zhang succeeding him.

Why would the richest man with the most valuable company in Asia want to retire?

With that much power in the most valuable company in Asia (not to mention all that money), why would Ma want to give it all up and retire?

The fact is that with great power comes great responsibility (thanks Spiderman!).

Even after retiring as chief executive officer of Alibaba to become executive chairman in 2013, Ma had to put in even more hours at work than before. In an interview with CNBC on 21 June 2017, Ma mentioned that he has spent 870 hours in the air, flying to countries to push the Alibaba towards globalisation in 2016 and he says that he may be spending around 1,000 hours in the air, visiting world leaders and companies.

Working that many hours is exhausting and Ma was caught in a video, dozing off uncontrollably at a conference in January and that went viral on social media.

Ma famously said his “biggest mistake was I made Alibaba”, because of the enormous pressure and responsibility he has had to shoulder to steer the company with a net worth of $84.4 billion and more than 66,000 employees.

“If I still can have the next life, I will never do a business like this. I will be my own self; I want to enjoy my life,” he said.

Let’s look at some of the lessons we can draw from Jack Ma when it comes to planning for our own retirement.

Create your vision of what retirement looks like

Before you can definitively say that you want to retire you need to first visualise what is retirement to you.

Retirement could mean a million different things to different people because we all have our unique personalities and life experiences.

In his letter to employees, Jack Ma highlighted his plan on continuing my role as the founding partner in the Alibaba Partnership and contribute to the work of the partnership. Philanthropy is on to-do list and he plans to dedicate time to this. Ma also wants to return to education because that is what he loves to do. By giving up the massive responsibilities at Alibaba, Ma intends to try new things.

As you can see, Ma has a meaningful and purposeful retirement plan in mind.

Retirement doesn’t mean giving everything up and relaxing at the pool all day (unless that’s what you really want).

What will retirement be like to you? Are you able to visualise, articulate or verbalise what you intend to do when you retire?

Define what you need to achieve your vision of retirement?

Like it or not, retirement needs to be sustained by many things. In most cases, it would be money. For some, it could be specific connections, knowledge or skillsets.

Despite all the challenges faced in life, Ma worked hard and went ahead to create the most valuable company in Asia and become the richest man in China. After 20 years, he has amassed massive wealth and fame that will help him reach his vision of retirement.

While we don’t necessarily have to amass incredible amount of wealth and fame to retire, we have our own list of goals and activities to accomplish in order to achieve our vision of retirement.

Write those goals and activities down on a piece of paper or electronically on Microsoft Word. Whichever works better for you.

Now that you know what you need to achieve retirement, you can take concrete steps to complete your list.

Take steps to accomplish your goals and objectives

You don’t get to retire without lots of hard work. Create a plan and start taking steps towards accomplishing your goals and objectives.

Alibaba didn’t become a multi billion company overnight. Ma brought the company to where it is today with grit, hard work and lots of sacrifices. Are you willing to make sacrifices to achieve your retirement goals?

The thing is, you don’t have achieve all your goals in one day. You just need to prioritise them one by one and decide which one to tackle first.

One of the easiest way to start is to reverse engineer your retirement vision.

Start from the age of 65 to the age that you think you will live up till, how much do you need to have in order to retire? Calculate your lifestyle needs and take action towards growing sufficient wealth to pay for that lifestyle.

What other skills do you need to achieve your retirement vision? You might want to learn how to cook your own meals or build a few skills to run a small business of your own.

Now that that’s done, how about from 55-65? How much more do you need to accumulate if you want to retire at 55?

Sorted out your needs from 55 onward? How about between 50-55. Can you squeeze a bit more effort to accumulate more wealth to cover the expense for that extra 5 years?

Depending on how early you wish to retire, you can keep planning backwards and identify tasks and activities that you need to start today to enjoy the benefits later on.

Have you started planning for your retirement? I’d love to hear about your thoughts in the comments below.

Optimise your CPF retirement with this CPF Tracker spreadsheet tool

How many years do I need to work to accumulate enough money in my CPF for retirement?

Should I transfer money from my Ordinary Account to my Special Account?

Can I work lesser years and have sufficient money to retire if I top up my Special Account with cash?

4 years ago, these were the questions I wanted to find answers for.

At that time, there weren’t any financial bloggers who had an answer for this so I decided to design my own spreadsheet. For the lack of creative cells in my head, I called it the CPF Tracker tool.

Seeing that the Seedly Facebook community has been asking the same questions in the past few months prompted me to make some changes to my CPF Tracker tool to make it more user friendly for others. It took some time, but it’s finally done!

Click here to view my CPF Tracker

Before you start, click on “File” and select “Make a copy…” to save a copy of this spreadsheet in your Google Drive.

Monthly CPF Contributions

Let’s start with the Monthly CPF Contribution worksheet.

I started this CPF Tracker in 2015 at the age of 32. Feel free to change the year and age to suit you.

Decide on how long you plan to be working and your estimate monthly salary. Note that any monthly salary amount above $6,000 will not make any impact because CPF’s Ordinary Wage Ceiling is currently capped at $6,000.

Forecasting your Full Retirement Sum

Using the Full Retirement Sum for the last 4 years to predict the average yearly increments for Full Retirement Sum. You can extend the number of years on your own to forecast how your Full Retirement Sum is like.

If your Full Retirement Sum is different from mine (I reach age 55 in 2038), Update cell M15 in the CPF Calculations worksheet accordingly.

CPF Calculations

Next, click to the CPF Calculations worksheet to make a few changes.

Input the final figures in your CPF accounts for last year in Column M. The CPF OA, CPF SA and CPF MA worksheets will use these figures to forecast your CPF account figures in future.

If you have existing mortgage loans, enter your monthly mortgage loan repayment numbers in Column J. The CPF OA worksheet will make the respective deduction each month.

Transferring money from Ordinary Account to Special Account

Are you wondering if transferring money from your CPF Ordinary Account to your Special Account to accumulate a higher interest rate of up to 5% will help you reach your Full Retirement Sum faster?

In the CPF OA worksheet, I created something to simulate an answer for this question.

Go to Column P and enter the amount you plan to transfer from your Ordinary Account to your Special Account. The CPF Tracker will simulate what happens when you transfer the money in the month of December from OA to SA.

Topping up your CPF accounts with cash

What about topping up your CPF account with cash? Besides the tax benefits that comes with your CPF cash top up, how does it accelerate your retirement?

I’ve added something in all the 3 worksheets, CPF OA, CPF SA and CPF MA, to simulate an answer for this as well. Column O of all 3 worksheets helps to simulate performing a cash top up to the respective CPF account in the month of December.

How forecasting your CPF retirement can help you plan for retirement

With this CPF Tracker tool, I hope you are able to forecast how long you will need to work to meet your CPF retirement needs.

Ideally, you should aim to reach 55 with a positive figure in your CPF OA account after repaying your mortgage loan. Bulk of your Full Retirement Sum should be funded by your CPF SA account for optimum effectiveness because funding it with CPF OA will take too long. This is due to the difference in interest rates between both accounts.

Let me know what you think about my CPF Tracker and what you would like to see improved in the comments below.

Note: The main challenge in the CPF Tracker was calculating the interest rates at the end of each year. CPF has a slightly more complex way of calculating interests that I wasn’t able to replicate in my CPF Tracker. That said, I feel that the deviations were not that far for me to spend the effort to make additional changes.

Additional note: The CPF Tracker ignores the extra 1% for the first $60,000 in the CPF account because it’s just too tedious to code it in the spreadsheet formula.

Photo by rawpixel on Unsplash

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