There are many ways to generate income after we stop working — dividends from stocks, rental income from property, interest from bonds, even part-time work or small businesses. These can all be useful sources of cash flow.
But here’s the hard truth: not all of them are reliable enough to fund the essentials in your retirement.
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If you want to sleep well at night, your needs — the core expenses you can’t live without — must be covered by sources that are stable, predictable, and guaranteed for life.
Always start with the safest foundation first.
CPF LIFE — Your Retirement Income Baseline
For Singaporeans, CPF LIFE is one of the best tools available. It’s a government-backed, lifelong annuity that gives you guaranteed monthly payouts for as long as you live. No market risk, no guessing when your money will run out.
However, CPF LIFE is designed to provide for basic living expenses, not necessarily your desired lifestyle. And for many, that means there’s a gap between what CPF LIFE pays and what they actually need.
Step 1: Separate Needs from Wants
The first step is to get clear about what’s essential, and what’s optional.
- Needs are the non-negotiables: food, transport, utilities, insurance premiums, medical expenses, and home maintenance.
- Wants are everything else that makes life enjoyable but isn’t strictly necessary: frequent travel, dining at restaurants, hobbies, and luxuries.
Your needs number is what you must secure with guaranteed income. Your wants can be funded by more flexible, higher-risk investments.
Why Needs Shouldn’t Depend on Market Investments
Markets go up and down. Dividends can be cut. Tenants can move out. Even bonds can be affected by interest rate changes.
If these sources make up the bulk of your “needs” income, you risk having to cut back your lifestyle during bad years — or worse, sell assets at the wrong time.
On the other hand, having your needs covered by annuities means you can ride out market cycles without stress. Any investments you hold can then be used purely for your wants, with no pressure to sell during downturns.
Step 2: Check If CPF LIFE Is Enough
Once you’ve calculated your monthly needs, compare it to your projected CPF LIFE payout.
If there’s a shortfall, the most straightforward solution is to boost your CPF LIFE payouts:
- Top up your Retirement Account (RA) — Transfer from your CPF OA or use cash.
- Aim for the Enhanced Retirement Sum (ERS) — The higher your RA balance at age 55, the higher your CPF LIFE monthly payout will be.
For most people, topping up CPF LIFE first makes sense because CPF LIFE usually offers higher payouts compared to private annuities for the same premium.
However, you may have concerns about locking up too much money in CPF LIFE. In that case, aim to at least secure the Full Retirement Sum and then top up only to a level you’re comfortable with.
Common reasons for holding back include:
- CPF LIFE funds are illiquid — once set aside, they cannot be withdrawn as a lump sum.
- You want your payouts to begin earlier than age 65.
- Concerns about future CPF policy changes.
Step 3: If You’ve Optimised CPF LIFE, Use Private Annuities
So what happens if you’ve already maxed your CPF LIFE to the ERS, or to a level you’re comfortable at, and you still fall short? That’s where private annuities come in.
Private annuities work similarly to CPF LIFE — you commit a lump sum to an insurer, and in return, they pay you a fixed monthly amount for a set period or for life.
They don’t match CPF LIFE’s payouts, but they give you flexibility:
- You can choose when payouts start.
- You can structure them for a fixed term or for life.
- You can decide the payout amount to match your needs.
The big advantage is that you lock in certainty. Your basic needs are no longer dependent on market returns, interest rates, or rental occupancy.
Example: Yusof’s Retirement Plan
Yusof calculated that he’ll need $5,000 a month to cover his essential expenses in retirement. Even after maxing out his CPF LIFE at the Enhanced Retirement Sum, his payout projection is $3,300 a month.
That leaves a gap of $1,700.
To fill it, Yusof buys a private annuity that guarantees $1,700 per month until 85 years old. Now, his needs are fully covered — $3,300 from CPF LIFE plus $1,700 from the annuity.
Any other savings or investments he has can be used for holidays, hobbies, and other lifestyle upgrades — without putting his essentials at risk.
How to Find Your Number
Identifying your retirement needs isn’t always straightforward. It’s more than just adding up your current expenses — you need to account for inflation, changing healthcare needs, and potential lifestyle shifts.
That’s where Havend’s CPF-Optimised Retirement Essentials (CORE) Assessment comes in. This process:
- Helps you calculate your exact needs and wants in retirement.
- Shows you how much CPF LIFE will cover.
- Identifies the gap and the best way to fill it — whether through RA top-ups, private annuities, or both.
The outcome is a personalised, risk-managed retirement income plan that works hand-in-hand with CPF LIFE.
Leave your contact here to express your interest in a CORE Assessment and take the guesswork out of your retirement planning.
