FIN3719
HOUSEHOLD FINANCE
Retirement
Planning
Strategies
Lorna Tan Department of Finance
NUS Business School1
FIN3719
HOUSEHOLD FINANCE
Guaranteed & Non-Guaranteed Income Flows
Unit Trusts Investment-linked Insurance plans Hedge Funds
NEEDS WANTS
Safe, predictable, Growth, capital
CPF Life SSBs Bank Savings SRS
guaranteed; appreciation;
inflation hedged Shares
not guaranteed;
Bonds
(ideal) can be volatile
Bonds Annuities
Pref Rental Monies Dividends
Insurance from Reits
Commodities Shares PTE Equity
Lorna Tan Department of Finance
NUS Business School
FIN3719
HOUSEHOLD FINANCE
Top up your CPF Accounts – Retirement Sums at 55
Retirement Sum at age 55 Year that members reach age 55
2024 ($) 2025 ($) 2026 ($) 2027 ($)
Basic Retirement Sum (BRS) 102,900 106,500 110,200 114,100
Full Retirement Sum (FRS) 205,800 213,000 220,400 228,200
Enhanced Retirement Sum (ERS) 308,700 426,000 440,800 456,400
Estimated monthly payouts at age 65
Basic Retirement Sum (BRS) 900 930 950 980
Full Retirement Sum (FRS) 1,670 1,730 1,780 1,840
Enhanced Retirement Sum (ERS) 2,450 3,330 3,430 3,540
Table assumes male member under CPF LIFE Standard Plan, starting payouts at age 65.
Lorna Tan Department of Finance
20-Jan-25 NUS Business School3
FIN3719
HOUSEHOLD FINANCE How To GrowYour CPF Savings
1 2
Do Nothing Retirement Sum
Topping–up Scheme Voluntary Contribution
(RSTU) Scheme (VC)
(With Cashor CPF transfer) (To MA or to 3 accounts)
5
3 4
CPF Investment Scheme Matched Retirement
Voluntary Housing Savings Scheme
Refund (CPFIS)
(MRSS)
Lorna Tan Department of Finance
NUS Business School
FIN3719
HOUSEHOLD FINANCE FlooringStrategy
STEP1 STEP2
Identify essential expenses (needs) and Match income streams to expenses
discretionary expenses (wants/luxuries)
WANTS • Fine dining Monthly Payout: Growth, capital
Monthly Total: • Vacations Investments $1,000 appreciation;
$2,000 • Leisure activities Dividends/ Not
• Gadgets Rental Monthly Payout: guaranteed,
• Gifts $1,000 can be volatile
products
sater Monthly Payout:
• Food/Transport
NEEDS • Utilities/Phone Fixed income $1,000
Monthly Total: • Household expenses Monthly Payout: Safe, predictable,
$4,000 • Personal care SG Bonds/ Insurance $1,000
• Insurance inflation hedged
• Healthcare (ideal)
• Netflix Monthly Payout:
CPF LIFE
$2,000
Lorna Tan Department of Finance
NUS Business School
FIN3719
HOUSEHOLD FINANCE
Bucketing Strategy
Bucket 2 Consume from year
21-25
Higher risk
fixed income assets
(consumed from year
Objective: 5 - 10) Consume from year
16-20
To provide a reliable stream of income during
retirement
Consume from year
11-15
How it works:
Assets are allocated into various buckets Subsequent
(investment portfolios) with different risk and Buckets
returns and invested over different time periods. Bucket 1 Correspondingly higher
Cash or near-cash assets risk/return profiles
(consumed over the first
Withdrawal Approach 3-5 years)
Each bucket is withdrawn sequentially at a fixed
period e.g. every 5 years
Lorna Tan Department of Finance
20-Jan-25 NUS Business School6
FIN3719
+ Guaranteed .
HOUSEHOLD FINANCE variable
Retirement Income Insurance Plans
buy
SA first buy insurance .
Exsurrender thea times
no money .
What to consider in choosing a plan:
-
Fixed or variable payouts
When do you want to start?
Do you need an additional lump sum payout at
How much payout do you need?
the end of the policy?
Payouts over a specified number of years vs. Limited regular or.
over a lifetime One-time premium payment
Lorna Tan Department of Finance
20-Jan-25 NUS Business School7
FIN3719
HOUSEHOLD FINANCE
Investments
• Fixed income (SSBs, SGS bonds, T-bills, etc)
• Reits
• Dividend stocks
• Income portfolios – regular cash payouts
• Withdrawals from diversified portfolio of
equities & bonds, adjusted yearly for inflation
Lorna Tan Department of Finance
NUS Business School
FIN3719
HOUSEHOLD FINANCE
Withdrawal from Funds
The 4% withdrawal rule
• Withdrawing $4,000/year for every $100,000 invested over
30 years for a balanced portfolio eg $40k for $1m portfolio
• Adjust for inflation the following year eg if inflation is 2%,
withdrawal amt becomes $40,800, and so on
Consider the components of your withdrawals:
How much is withdrawn from gains?
How much is withdrawn from capital?
Are the withdrawals sustainable ?
Lorna Tan Department of Finance
20-Jan-25 NUS Business School9
FIN3719
HOUSEHOLD FINANCE
Home Planning
What are Mr Tan’s options?
HOME TYPE RENT OUT SELL THE PROPERTY DOWNSIZE UNLEASH EQUITY
HDB Flat
Lease Buyback
Silver Housing Bonus
Mr Tan Scheme
Retiree
• Has some cash savings from CPF Private Property Silver Housing Bonus DBS Home Equity
lump sum withdrawal Only if property’s annual Income Loan
value is <$13k
• Receives monthly CPF payout, but
Conly for HDB bank)
is insufficient for medical & selloff the loan
gDBS Home Equity Income Loan
lifestyle needs Silver Housing Bonus Lease Buyback Scheme (LBS)
• Sell the tail-end lease to HDB and receive the • No mthly loan repayments
Downsize current flat or private housing • Loan is used to top up CPF RA to receive
• Owns a fully paid home (with Annual Value not exceeding LBS bonus
• Proceeds will be used to top up CPF RA, CPF LIFE payouts
$13,000) to a 3-room or smaller flat and • Max loan is the amt required to top up
receive up to $30,000 cash bonus when which will then be used to buy a CPF LIFE
plan to the prevailing CPF Enhanced
• 92,000 households haveLorna Tan Department
Retirement Sumof Finance
you top-up your proceeds into your CPF
opted for LBS since #
($288,000 in 2022)
RA and join CPF LIFE
20-Jan-25 its launch in 2009 NUS Business School 10
FIN3719 TOPICS/SCHEDULE 2025
• Week
HOUSEHOLD FINANCE 1 (17 Jan) - Personal Financial planning
• Week 2 (24 Jan) - Retirement planning & CPF (part 1)
• Week 3 (31 Jan) - Retirement planning & CPF (part 2)
• Week 4 (7 Feb) - Estate planning
• Week 5 (14 Feb) - Insurance planning
• Week 6 (21 Feb) - Consumer protection (12pm-2pm; 345pm-6pm)
• 21 Feb - Test 1: SA1: 2-240pm; SA2: 3-340pm
• Week 7 (7 Mar) - Investment planning
• Week 8 (14 Mar) - Credit management
• Week 9 (21 Mar) - Class Presentations
• Week 10 (28 Mar) – Well-Being Day – no class
• Week 11 (4 Apr) – Class Presentations
• Week 12 (11 Apr) Test 2 – SA1: 2-240pm; SA2: 3-340pm)
• Week 13 (18 Apr) – Good Friday – no class
Lorna Tan Department of Finance
NUS Business School
