One of my biggest qualms about the CPF Retirement savings system has always been about the lack of options.
You basically had one choice: accept the current system.
Today’s announcements by the CPF Advisory Panel are probably a step in the right direction – more choices. It gives you more choices in how you want to save for your retirement.
The enhancements are a continuation along the journey to perhaps make CPF great again.
The panel proposed two major additions to the current CPF system:
(1) the addition of a new CPF Life Plan with escalating payouts and
(2) the Lifetime Retirement Investment Scheme (LRIS).
CPF LIFE Plan with escalating payouts
Basically, the panel recommended a new plan for CPF payouts – it allows people who don’t need the payouts between 65 and 70 to get higher payouts later when they need it. (Of course this would depend on one’s lifestyle and financial obligations but it is a good choice for those that can afford it.)
Instead of having a fixed sum every month, the new plan would instead give you increasing payouts at 2% per year but starting from a lower level.
Under both plans, a person would receive the same total payout by the time one reaches 90 years old.
Lifetime Retirement Investment Scheme
The panel also proposed a new Lifetime Retirement Investment Scheme (LRIS) for CPF members to invest in a few well-diversified funds, with the cost of investment being kept low.
CPF members with more than $20,000 in the Ordinary Account (OA) and/or more than $40,000 in their Special Account (SA) will be eligible for the scheme. The scheme is aimed at more savvy investors looking for long-term investments with higher returns.
But higher returns come with higher risks and there is a risk that the LRIS investments might not do well and you could even end up with less money than if you hadn’t touched the funds. Hence, it is perhaps only for those who have knowledge of investing and are able to afford the risks.
So there you go. More options to choose what you want to do with your CPF monies! Yay!!!