Dr Khoo recommends discussing your goals with a trusted financial planner to determine the desired retirement lifestyle. “Having a financial plan is a necessary first step of your retirement planning. It will provide a roadmap on how to reach your retirement goals in a structured approach,” explains Dr. Khoo. This is a key step to determine how much you need to save and the financial products you can invest in to complement your CPF LIFE.
Early planning is also crucial. “If you start late, you will either have to save an impossibly large portion of your income or bear unnecessary investment risks to make up for lost time,” Dr. Khoo cautions.
For some members, the Full Retirement Sum (FRS) or Enhanced Retirement Sum (ERS) could meet their needs in retirement. But to live out your dreams for your golden years, it may be wise to diversify your income stream. Dr. Khoo suggests some options:
This voluntary savings scheme offers tax incentives and can be used to purchase investment products from financial institutions for long-term retirement savings purpose.
These provide a high level of cash value accumulation that can be used to supplement your retirement income. Some even offer yearly or monthly payouts during your retirement years.
Apart from providing protection and investment opportunities to underlying funds, they also allow flexible ad-hoc premium top-ups to help build your wealth faster.
Private annuity plans enable policyholders to receive payouts up to a certain period, or for as long as they live.
Owning a property that you can rent out can be a great wealth building tool. The Lease Buyback Scheme is an additional option for elderly households living in 4-room or smaller flats to supplement their retirement income.
This not only offers life insurance protection, but also builds cash value or surrender value in the long term. You can consider exploring limited premium plans where you can finish paying premiums before you reach retirement age and still continue to enjoy the coverage.
As a standalone policy or a rider to an existing policy, this provides benefits in the event of death, total and permanent disability, and critical illness events such as heart attack, stroke or cancer.
This ensures you are well-protected against medical expenses that could deplete your retirement savings. Integrated Shield Plans (IPs) are good complements to the current MediShield and the upcoming MediShield Life.
This type of insurance provides basic financial protection to those who require long-term care, especially in old age. The ElderShield and the ElderShield supplement plans are examples that can help provide for such protection.
While your CPF LIFE monthly payouts helps you sustain your basic needs during retirement, planning ahead for additional streams of income and sufficient protection will go a long way in ensuring your retirement will be one worth looking forward to.