03 June 2019

$3,000,000 for Retirement; How about $1,750,000 instead?

So there was an article in the papers a few weeks back that said a $3,000,000 portfolio is needed for retirement. That seems daunting. Scary. Seemingly beyond the possible.

I presume that magic number was derived based on a need to generate $120,000 per year for 4% extraction from the $3,000,000 portfolio.

But this can be reduced significantly for a Singaporean couple who can max out their CPF accounts. If both husband and wife (assuming of same age) can meet the Enhanced Retirement Sum ($250,000 to $275,000), they can collectively generate close to $50,000 per year from age 65 from CPF LIFE payouts (CPF LIFE Estimator).

That being the case, the investment portfolio will only need to generate the remaining shortfall of $70,000 per year. That means a portfolio of $1,750,000.  Seems far less daunting.

So all in, that is a combined investment portfolio of $1,750,000 investment portfolio, plus $250,000-$275,000 each in CPF-SA account.  More do-able?

For more info on CPF LIFE:  How much CPF LIFE payout will I receive?

p/s: Ok ok, so if you math it up, it should be $2,250,000 to $2,300,000 in terms of net asset value.


Anonymous said...

I wonder how many Singaporean couples earns a total of $120,000 cash per year. I believe most don't. So why do we need to have $120,000 cash per year for retirement?

Anonymous said...

The median Singaporean household income (2018) was $9,293 per month. Notwithstanding that, there will be many households who are earning well beyond $120,000 annually. And having gotten used to a certain lifestyle while they're in active employment, they would want to maintain that lifestyle in retirement. And a $120,000 a year lifestyle isnt all that high life living. Let me show you the math for my situation. We are a few months from retirement.

1. Condo maintenance fees for residence: $330
2. Condo maintenance fees for investment property : $350
3. Maid (to help look after elderly parent) : $650
4. Maid levy & medical : $150
5. Car road tax and insurance : $170
6. Petrol and maintenance : $450
7. ERP charges and car park: $50
8. Property taxes for 2 condos : $280
9. Utility, broad band and phone bill : $350
10. Insurance : $300
11. Food : $1,000
12. Medical : $100
13. Eating out (at restaurants once a week): $400
14. Gifts (for wedding, birthdays, funeral etc): $500
15. Travelling (long trip): $1,500.
16. Personal allowance for wife and I (to do our own things with own friends) : $1,200 (about $20 a day each)
17. Household consumables / upkeep : $100
18. Clothing items : $50
19. Tithing / Charity : $150

The above adds up to about $8,080 per month. And if we have to change a new maid every two years, we will have to add to the expenses. We have not included the car depreciation cost! We are wondering if we could afford another car once our current car COE expires. And the car is a necessity for us to bring our aged parent for medical checkups.

The rental condo helps to bring in rental income, so it is not a luxury item. We are certainly not living a luxurious lifestyle. In fact, we shopped at Sheng Siong and NTUC for our groceries and household stuff.

The saving grace for us is that we started investing in property and shares, early in our career and that has paid off. Our passive income is able to comfortably cover the above expense.

Azrael said...

I am wondering if the ERS is better or getting the FRS and leaving the rest in the RA/SA is better in this instance (you can topup to the ERS but you can choose the FRS I think).

Lizardo said...


Seems like $120,000 per household in earnings may not be as far fetched as it seems. But even if that is around the median, there will be some above, and some below.

Of course, a "household" may be more than just a "couple".

Anon-2 shared some interesting data points.

Lizardo said...


Interesting data you shared here. Maybe it's worthwhile for me to compare against mine, to get some sense of where the differences are and if there is room to reduce my expenses.

You have a heavy responsibility having to take care of the elderly. Financial impact aside, it can also be an emotional one.

p/s: I thought you could get a reduced maid levy of $60 under certain parameters. Perhaps you didn't meet those conditions?

Lizardo said...


Interesting question. Didn't occur to me. I assumed the payout would be higher with ERS, compared to leaving the difference in SA/RA at 4% interest. Need to do some computation to compare. You want to give it a go?

Azrael said...

I did the XIRR months a go. ERS is slightly lesser (about 0.1%) than FRS, which is also slightly lesser than BRS.

BRS basic yields the most though, the rest averages below 4%

The curve is a bit like a smiley shape for all of the plans.

Lizardo said...


Nice! So I guess both ways are similar. Maybe 0.1% is an error due to the estimates used? It's close enough that I personally wouldn't want to bother with.

Azrael said...

The return curve is a smile shape, it dips to about slightly below 3% before going up (that's including bequest).

I used the CPF LIFE payout estimator and transcribed all the data points manually though.

Anonymous said...

I am amused that you (Azrael) are so interested about the RA at such a young age. I mean, its not like that you are 50 yo and has only 5 more years to 55. At your current age, and by the time you reach 55, there could be policy changes to the CPF.

When I turned 55, four years ago, I immediately topped up my RA to ERS using cash. I still had money in my SA after a sum (equal to FRS at that time) was transferred automatically to form the FRS in my RA. And every January since, I have been topping up my RA by $7,500 (in cash) to keep up with the new ERS.

The first $30,000 in the RA earns 6% interest, and the second $30,000 earns 5%. The rest of the money in RA then earns 4% interest. To calculate the yearly interest earned in the RA, you can use this simplified formula (valid for amount $60,000 and above):

Interest earned in RA = RA amount x 4% + $900

For example, you have an RA amount of $200,000. The interest you will earn is = $200,000 x 0.04 + $900 = $8,900

As to whether I would top up my RA with SA money, I would leave the money in my SA. This is because both the SA and RA offer 4% interest. Keeping the money in SA offers the advantage of liquidity. At 55 yo and above, and having fulfilled the FRS (or BRS if you pledged your property), I could withdraw the SA money anytime. On the other hand, once I transferred the SA to my RA, I can no longer withdraw the money in a lump sum.

The trick is to top up your RA with cash if you can.

Azrael said...

Hi Anonymous,

Well, let's just say building a safety net, based on current projection, I should be able to hit the FRS with the SA alone.

I'm still wondering is it worth it to topup the RA to ERS, need to do math on that (this is excluding opportunity costs).

Do you know how the first 30k and 60k of the RA works? If the RA is insufficient, do they count the SA or OA first?

Anonymous said...

Hi Azrael,

For me, as mentioned earlier, I would not top up my RA using money left over in my SA because the money in both accounts are earning 4% interest, and that keeping money in SA provides great liquidity.

And the CPF policy as it stands currently dictates that transfers to RA will come first from your SA. So if you intend to top up your RA with CPF money, the money in your SA will be used up first before they take money from your OA.

For eg, in my case, when my RA was created, they moved the FRS amount of money from my SA to the RA. After that I still had $80K left in my SA. I could have used the remaining SA money to top up my RA to ERS. But I chose to use cash because it is hard to find a low risk instrument outside of CPF to earn 4% interest year on year! At the same time, if I do need the money for whatever reason, I could simply withdraw from the SA. Hope this should help answer your query if it is worth it to use SA money to top up the RA to ERS.

The other question you had regarding the diminishing returns from topping up the RA to ERS comes from understanding the maths. The highest returns is when your RA amount is $30,000. For example, if you have only $30,000 in your RA, then the returns is 6%! If you have $60,000, then the interest is calculated thus:

1st $30,000 get 6% interest, and 2nd $30,000 gets 5% interest. So your returns for the $60,000 is 5.5%!

Any amount higher than $60,000 earns 4% interest. So, the more you have in your RA, the closer the average moves towards 4%.

Hope this clarifies.

Whatever the case, I find the CPF SA, RA and MA still provides one of the highest interest rates around for almost next to zero risk!

Azrael said...

Hi Anonymous,

I was referring to the order of granting bonus interest rates, not the make up of the RA, sorry if I misled you.

Say before 55, it will look for your OA funds for up to 20k, and the amount less from the OA for the 60k from your SA for bonus interest, if OA (after including the 20k cap) and SA is insufficient to hit 60k, it will check the MA. So if your OA has say 10k, then it would look for 50k for your SA, however, if your SA only have 40k, it will look at the MA for 10k for bonus interest calculations.

Not sure about the RA at age 55 onwards, I guess RA first, but I'm not sure if the SA or OA is next in the calculation for the bonus interest.

I was wondering because the ERS XIRR (includes bequest) is lower than 4% (subjected to which plan you pick), the XIRR of the BRS is highest, followed by the FRS then ERS. If that's the case, it would make more sense to drawdown from the SA because the 4% yields more, unless you live beyond 88 or 90+ (depending on which plan as well).

I do agree that thanks to the Special SGS coupon at 4%, it is one of the best interest rate because it is a 4% AAA sovereign bond, you need a higher risk premium to be worth it (risk free rate).