In August, the CPF Advisory panel announced two key recommendations.
One was the CPF Lifetime Retirement Investment Scheme (LRIS), and the other was a new CPF Life option that offers Escalating Payouts. These are on top of existing options like the CPF Investment Scheme (CPFIS) and the two CPF Life plans – Standard and Basic.
Now some of you may ask, so many options, which one is better? How do I choose?
Think of all these options as an expanding kopitiam – you now have a stall selling laksa, but soon there will be stalls selling chicken rice, nasi lemak and more! Still can’t decide? Let’s do some food tasting together!
Decide what your goal is
When planning for retirement, you should start by thinking about your end goal, like how much do you want to receive each month after you turn 65. This would help you figure out the retirement sum you need to set aside in your planning years, and then decide on the CPF Life Plan that best matches your needs.
For those who are concerned about coping with inflation and rising costs of living in their golden years, the new CPF Life Plan with Escalating Payouts option will give members the option to choose a payout that increases by 2% every year.
Regardless of the CPF Life plan you choose, you can also enjoy higher starting payouts by topping up your CPF Life premiums. Or you can defer your starting payout to when you turn 70, and for each year that you defer your starting payout, it can increase by up to 7%.
Make plans to achieve your goal
Now that you have decided on the payouts you want, you should next start growing your retirement savings to achieve them.
If you’re risk-averse, you can transfer your savings from your Ordinary Account to your Special Account to earn higher interest. On the other hand, more experienced investors can opt for the CPFIS.
If you are busy or an investment newbie, with either no time or financial expertise to manage your investments, the Lifetime Retirement Investment Scheme (LRIS) is a new and simple option that could work for you.
With the LRIS, your CPF savings are pooled together with other members’ to purchase investments in bulk for economies of scale i.e. low fees! You also don’t need to actively manage your portfolio to adjust risk, great for newbies who prefer minimum fuss.
So will it be nasi lemak, chicken rice or laksa? It really depends on your tastes and preferences. Similarly, you should base your choice on your retirement needs and goals, not just what your friends are having! If you haven’t figured those out yet, consider visiting the CPF Advisory Panel's recommendations webpage for more details.