Options to Build your Retirement Income - Who We Are
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Options to Build your
Retirement Income
Who We Are
The MoneySENSE-Singapore Polytechnic
Institute For Financial Literacy (IFL) is a
collaboration between Singapore Polytechnic
and MoneySENSE, a national financial education
programme for Singapore that is spearheaded
by the public-sector Financial Education
Steering Committee (FESC).
1
Objectives
Options to Build Your
Retirement Income
Benefits and Downsides of
These Options
IT’S NEVER
TOO EARLY OR
TOO LATE
TO START RETIREMENT
PLANNING
2
Building my
Retirement
Right-sizing Cash Top-up
your
Income to CPF
property SA/RA
Annuities
and
Insurance
Supplementary
Investment Retirement
Scheme
Key Life Stages
Wealth
Pre-Retirement Retirement
Wealth Accumulation Phase
Phase
• • Near
•Starting &
Established Retirement
Raising a
Career
Family
• Married • Golden
•Getting Married with Older Years
•Single Children
•Single with
•Young & Single Elderly
Parents Age
•Starting Work
Youth 20s 30s 40s 50s 65 80s
Copyright © 2017 Central Provident Fund Board. All rights reserved. Reproduction without prior written
consent by Central Provident Fund Board is strictly prohibited. Information is accurate as at January 2017.
3
• Comprises of principal, interest and
survivor benefits.
1a.
• A lump-sum payment is made in return
Annuities for promised future monthly payouts.
E.g. CPF IFEL.
Protects you from outliving your
savings during your retirement years
Downside
Benefits
You receive more by Some annuities do not factor in
living longer inflation into payouts; reducing
future purchasing power
• Whole life, endowment policies: Lump sum
cash value upon surrender or maturity.
1b. • Investment-linked products (ILPs): (a) Lump
Insurance sum cash value when surrendered, or (b)
Regular cash when units are withdrawn at
intervals.
ILP has features that ILPs have fees and charges that will
provide flexibility reduce the cash value of policy
Investment
Benefits risk Downside
Protection ceased Long term
Whole life and endowment
upon termination commitment
policies provide certainty
or maturity
4
2. Right-Sizing • Cash proceeds can be used for daily
To A Smaller expenses and investment.
Home • Can be done at one go, or in stages.
Cash proceeds that can be used for
daily expenses and investments
Downside
Benefits
Government
schemes e.g.
Larger space SHB
may not be Smaller living
Lower cost of space
needed maintenance
What are the factors that
will affect your decision
to monetise your
property?
5
Lease Buyback Scheme
(LBS)
Combined
No concurrent
monthly income
At least one owner is ownership of
of $12,000 or
Singapore Citizen property.
less.
All owners
have lived in
All owners at flat for at least
CPF Payout 5 years.
Eligibility Age
(currently 64) At least 20
or older. years of
remaining
lease.
LBS
2017 Top up Requirements
Sole Ownership Joint Ownership
Required to top up to Each co-owner is
adjusted prevailing Full required to top up to
Retirement Sum* (FRS) adjusted prevailing Basic
Retirement Sum (BRS)
CPF Payout $166,000 $83,000
Eligibility Age
(now 64) to
69
70 to 79 $156,000 $78,000
80 or older $146,000 $73,000
6
LBS
Bonus and Lease Retention
3-room or smaller HDB 4-room HDB
$1 cash bonus for every $3 $1 cash bonus for every $6
topped up to RA, up to $20K. topped up to RA, up to $10K.
Choice of Lease Retained
Age of Youngest Minimum Other Options
Owner
CPF Payout 30 35
Eligibility Age (now
64 to 69)
70 to 74 25 30, 35
75 to 79 20 25, 30, 35
80 or older 15 20, 25, 30, 35
2017
• 4-room paid-up HDB • Lims, aged 65
• valued at $450,000 • Sell 35-year lease for
• 65 years lease remaining $190,000
Cash Mr Lim (CPF RA) Mrs Lim (CPF RA)
Starting Balance $0 $20,000 $5,000
LBS Proceeds $49,000 $63,000 $78,000
LBS Bonus $10,000
Total $59,000 Lims topped up to $83,000 each.
CPF Life Payout ~ $900/month
Source: HDB Website - > Living in HDB flats -> Lease Buyback Scheme -> How it Works
7Silver Housing Bonus (SHB)
AGE & • At least one owner is a Singapore Citizen aged
CITIZENSHIP 55 or above.
INCOME • Gross monthly household income of $12,000 or
less.
EXISTING • No concurrent ownership of second property.
PROPERTY • HDB flat (met MOP for resale), or private
(SELL) property of Annual Value of $13,000 of less.
NEXT PROPERTY • Smaller HDB flat (up to 3-room) or Studio
(BUY) Apartment.
• Purchase price does not exceed selling price of
existing property.
HOUSING • Buy next property within 6 months
TRANSACTION o before selling existing property, or
o after completing sales of existing property
SHB
Top Up Requirement and Bonus
TOP UP
Up to $160,000 Required to use all net proceeds up to
cash proceeds $60,000 to top up into one or more owner’s
CPF RA.
Lessees can decide how to split the $60,000
top-up across their CPF RAs.
More than Required to make a further top-up into the
$160,000 cash CPF RA of the owner with the lowest RA
proceeds balance, up to the prevailing Full Retirement
Sum, after retaining $100,000 of proceeds in
cash.
Owners receive $1 cash bonus for every $3 top up to RA, up to
$20,000.
82017
Sell paid-up 4-room Buy Studio
@ $450,000 @ $100,000 Lims, aged 65
Cash Mr Lim (CPF Mrs Lim (CPF
RA) RA)
Starting Balance $0 $20,000 $5,000
Net Sale Proceeds (after $160,000 $80,000 $95,000
next purchase, refund of
RA and allowed
expenses)
Top-up RA ($60,000) $30,000 $30,000
Silver Housing Bonus $20,000 Top-up RA to $130,000 each
Total $120,000 CPF Life Payout ~ $1,400/month
3. Cash Top-Up • Cash top-up to his/her own and/or loved
To Special ones SA or RA under the CPF
Account (SA) Or Retirement Sum Topping-Up Scheme.
Retirement (*Terms and conditions apply)
Account (RA) • Automatic tax relief
Tax relief of up to $14,000
(*Terms and conditions apply)
Downside
Benefits
Top-ups cannot be withdrawn.
Interest is guaranteed Liquidity may be affected
and risk-free
94. • A voluntary scheme to supplement CPF
savings by saving cash into a SRS
Supplementary
account, capped at $15,300 for
Retirement
Singaporeans and $35,700 for foreigners.
Scheme (SRS) • Distributed upon death by way of a will.
Ad hoc
participation Penalty imposed when withdrawn
before statutory retirement age
Benefits Downside
Tax
incentives Savings in SRS
Impact of
account earns
Option to invest in policy changes
minimal interest
selected products
Source: www.iras.gov.sg
• SRS member has no taxable income.
• Prescribed retirement age prevailing at the time of his first SRS
contribution is 62 years old.
• Starts first penalty-free withdrawal at age 63.
• Amount in SRS account is $400,000.
YA 2016 2017 2018 2019 2020 2021 2022 202 2024 2025
3
Age 63 64 65 66 67 68 69 70 71 72
With- $40K $40K $40K $40K $40K $40K $40K $40 $40K $40K
draw Amt K
50% $20K $20K $20K $20K $20K $20K $20K $20 $20K $20K
taxable K
Tax $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Payable
No tax will be paid as the tax rate is zero for the first $20,000 of the
individual’s chargeable income.
Source: IRAS website – Tax on SRS Withdrawals
10• SRS member starts early withdrawal at age 61.
10 year penalty-free retirement withdrawal period starts from
age 62
YA 2016 2017 2018
Age 61 62 63
Withdrawal $40,000 $40,000 $40,000
Amount
Penalty (5%) $2,000 $0 $0
Withdrawal $40,000 $20,000 $20,000
Amount subject
to tax
Tax Payable $2,550 $0 $0
Source: IRAS website – Tax on SRS Withdrawals
SRS member has $400K balance, starts withdrawal at age 63 but
dies in 2015. All SRS monies shall be deemed to be withdrawn
on the date of his death.
YA 2012 2013 2014 2015 2016
Age 63 64 65 66 67
Withdrawal $40,000 $40,000 $40,000 $40,000 $240,000
Amount
Withdrawal $20,000 $20,000 $20,000 $20,000 Tax exemption*
Amount
subject to
tax
Tax Payable $0 $0 $0 $0 $0
*Tax exemption of up to $400,000 would be granted, based on number
of years remaining in the ten-year withdrawal period
11SRS member has $400K balance, withdraws at 63 – 64,
does not withdraw at 65-66 and dies in 2015.
All SRS monies shall be deemed to be withdrawn on the date of
his death.
YA 2012 2013 2014 2015 2016
Age 63 64 65 66 67
Withdrawal $40,000 $40,000 $0 $0 $320,000
Amount
Withdrawal $20,000 $20,000 ($320K – (6 x $40K) x
Amount 50% = $40K
subject to
tax
Tax Payable $0 $0 $0 $0 $550*
*Tax payable on 1st $40,000 Chargeable Income is $550.
5. • Choose products that are suitable for
Shares, Bonds, your risk profile.
Unit Trusts and • Rebalance your portfolio with lower-
Other financial risk investments when nearing
products retirement.
Provides potentially
higher returns than fixed Market fluctuations
deposits.
Downside
Benefits
Possibility of
losing capital
Impact of policy
More likely to beat changes Requires constant
inflation monitoring
12RISK AND RETURN
TRADE-OFF
Investments that have potentially higher returns will
have higher risk of losing all or part of the capital.
Stocks Highest Risk And
Potentially
Highest Return
Bonds
Cash Lowest Risk And
Lowest Return
Singapore Savings Bonds
• To provide a safe and flexible way to save for
your long‐term financial goals
• Complement CPF and other options already
available
Singapore Savings Bonds
Exchange Traded Funds
Corporate Bonds
http://www.sgs.gov.sg/savingsbonds.aspx
13Main Features of SSB
LONG-
SAFE FLEXIBLE
Fully backed by TERM Exit any month,
the Government Interest steps up with no penalty
over 10 years
Tax-exempt Start with $500
18 years
Non-transferable
and above
http://www.sgs.gov.sg/savingsbonds/Your-SSB/This-months-
bond.aspx
Consider Before Investing
Time Risk
Horizon Tolerance
Liquidity
Objectives
Needs
Transaction How Return is
Cost Generated
Diversify your investment portfolio to
reduce risk.
14Your personal circumstances will change as your life
stage changes. Re-balance your investment portfolio
accordingly.
An Illustration of Asset Allocation According to Life Stages
Accumulation Savings
(20s to early 30s) (early 30s to mid 40s)
High
High Risk
Risk 20%
Medium 30% Medium
Risk Risk
50% 50% Low
Low Risk
Risk
30%
20%
High Low Medium
High Low Medium
When a person is nearing retirement, he should adjust
his portfolio progressively to focus on capital
preservation.
Pre-Retirement Retirement
(mid 40s to late 50s) (late 50s onwards)
High
High Risk
Risk
15% Medium 10%
Medium Risk
Risk 20%
45% Low
Risk Low
40% Risk
70%
High Low Medium High Low Medium
15REVIEW YOUR PLAN
REGULARLY
Interest Rates Health
Inflation Rate
Factors that can
change during the pre-
retirement years and
can have an impact on
your plans
Personal Market
Circumstances Government Conditions
Policies
ACTIVITY
• Sam, 40, needs about $4,000/month to retire at 65.
• He owns a 4-room flat with his wife of the same age who is
not working.
• They have 2 children aged 8 and 10.
• If CPF Life payout grows according to inflation rate of 3%,
expected payout is $2,000/month.
$2,000 x 12 Median Life Expectancy (84) –
Retirement Age
X =
Annual
No. of Years in Gap to fill in
Retirement
Retirement cash
Income Gap in
cash
What options can Sam consider to boost his retirement income?
161. It’s never too late to start retirement planning
2. Considerations when applying age-appropriate
options
3. Be extra prudent when investing your
retirement savings.
USEFUL WEBSITES
The MoneySENSE-Singapore Polytechnic
Institute for Financial Literacy: www.finlit.sg
MoneySENSE: www.moneysense.gov.sg
www.cpf.gov.sg
www.moh.gov.sg
www.iras.gov.sg
www.sgs.gov.sg
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