24 May 2026

Tan Ooi Boon

Source: The Straits Times © SPH Media Limited. Permission required for reproduction

SINGAPORE – Inflation is often used as the bogeyman to get people to invest, but rising cost is not the most scary thing to hit you in old age because you can run out of money even before things become more expensive.

This is why you need to have a solid back-up plan such as CPF LIFE. If you have set aside money for it, the national annuity scheme will provide you with a stable and decent monthly income that can allow you to pay for most, if not all, of your expenses for as long as you live.

With fuel prices going up in recent months, it is not surprising that inflation was a key concern of readers who attended the first InvestMe financial literacy course on May 16, which focused on ways to retire with more money.

Here are three common financial concerns and how you can plan for better cash flow.

Plan for desired lifestyle, not inflation

The annual inflation rate, usually a low percentage point, is often bandied about as a reason to get people to invest in certain financial products because the returns on such investment can supposedly help you cover rising costs in the future.

While everyone should look at their investment needs, tackling inflation alone will not solve all your problems – you need a long-term solution that will enable you to pay for most of your needs.

For instance, the premium for private healthcare insurance can cost you $15,000 to $25,000 annually when you are in your 70s or 80s, and you cannot invest in a cheaper investment product that will pay such costs for you annually.

This is why there is a need to look at how you can use CPF LIFE to the fullest so that you can have spare cash to pay for your essential expenses, healthcare needs and perhaps even an annual holiday.

For example, those who hit 55 in 2026 can top up to the enhanced retirement sum (ERS) of $440,800 in their Retirement Account. Doing so enables them to receive monthly payouts of up to $3,400 from 65.

Unlike private investments that come with risks, CPF LIFE payouts, which are guaranteed by the Singapore Government, are stable and for life.

According to past research by OCBC Bank, retirees with such income can not only foot most expenses, but they can also look forward to short overseas holidays annually.

For instance, just saving $1,400 of their monthly payout will enable them to have $16,800 annually, and this sum can go a long way towards maintaining their medical insurance.

Of course, there is the power of two – couples who plan together can enjoy a monthly payout of almost $7,000, and if they have the same savings plan, it means they can have $4,000 to spend every month and still save over $30,000 annually for other expenses.

Such payouts come from CPF LIFE only and do not include interest earnings from your balance in the Central Provident Fund Ordinary and MediSave accounts, bank savings and gains from your other investments.

The best part about CPF LIFE is that you can also use it to hedge against inflation.

Those older than 55 can continue to top up to the prevailing ERS year after year so the monthly payout can go up by about $100 each time.

For instance, if you have already hit the ERS and you top up an additional $15,600 to meet the ERS of $456,400 in 2027, your monthly payout can increase to up to $3,500, which means your annual income from CPF LIFE alone will be $42,000, or $84,000 for couples.

CPF LIFE and the 4 per cent investment rule

Many non-Singapore investors often aim to achieve $1 million in their portfolio of stocks and bonds so that they can take advantage of the 4 per cent rule that will allow the withdrawal of at least $40,000 from the pool annually to pay for their expenses.

As the portfolio is projected to yield profits, it can last for about 30 years even if they spend 4 per cent of it every year.

Although the idea sounds attractive, it will require you to be savvy in managing your portfolio because you have to know what to buy and what to sell every year in order to get your 4 per cent reward.

Of course, such investment narratives do not include CPF LIFE because this option is available only to Singaporeans and residents.

If you aspire to amass a $1 million portfolio, you should consider setting aside $440,800 of the fund for CPF LIFE so that you are guaranteed an annual payout of $40,800. This sum alone is more than the projected $40,000 from the $1 million private investment, which can be affected by global financial turmoil.

The good news is that after you set aside funds for CPF LIFE, you will still have $559,200 left, which allows you to test the 4 per cent rule and hopefully yield an extra $22,368 from it.

What this means is that if you include CPF LIFE as part of your investment portfolio, you stand to gain $63,168 annually, or over 50 per cent more than similar investors who do not share your good fortune of having a state-backed scheme in your portfolio.

Don’t include inheritance in your planning

A young participant at the InvestMe talk highlighted a growing trend of younger people factoring the possible inheritance they may receive in future into their financial planning. She wondered if this is a good practice, presumably because the additional funds mean you don’t have to save more.

Invest highlighted this trend in January 2026 after a wealth transfer survey done by Etiqa Insurance Singapore found that more than 10 per cent of about 1,000 people polled actually hope to inherit $1 million or more from their parents so that they have less to worry about their own savings and retirement planning.

The dependence on parents’ wealth is higher among younger Singaporeans, with 62 per cent of those under the age of 24 anticipating an inheritance.

Of course, everyone welcomes additional fund injections but the question is whether such an expectation matches the reality. In another poll by insurer AIA Singapore, it was found that many parents here actually underestimate their own needs and can end up being short of cash in old age.

So, instead of leaving an inheritance, these parents may even need financial help from their children.

Even if you have wealthy parents who can provide a huge inheritance, you may still have to work hard because you will face the same million-dollar conundrum of having to meet similar expectations from your kids as well.

Frankly, apart from wisdom, the best gift that parents can give their kids is not an inheritance, but an assurance that they can take good care of themselves financially, and will never be a burden to their children.

After all, good parents would groom their kids to become even more successful than them so they can earn their own fortunes and will not need to hanker for an inheritance.

Ultimately, financial planning remains a personal responsibility, and those who work hard to make such plans will tell you that financial freedom feels more satisfying if you achieve it on your own.

Invest on your own? It depends on whether you can manage money in old age

Some people opt not to top up their CPF LIFE to the maximum because they believe they can do better by investing their funds themselves, as well as have access to more cash.

At 55, when the full retirement sum (FRS) of $220,400 is moved to the Retirement Account, these Central Provident Fund (CPF) members will stop there because they are content to just get about $1,700 in monthly payouts when they hit 65.

They choose not to voluntarily top up another $220,400 to hit the enhanced retirement sum (ERS), which will enable them to double their payout to $3,400, because they think they can do better by investing the $220,400 on their own.

At the first InvestMe financial literacy course on May 16, some participants wanted to know which decision is better.

There is no right or wrong answer. because it boils down to how savvy you are at investing, or your choice to let the CPF Board pay you a decent amount every month.

Those who opt to invest on their own should note that when they make such a decision in their 50s, they are still at the peak of their financial acumen. But can they still manage their money wisely three decades later at 85 and beyond?

At 85, those who opted for the FRS would have received $408,000, while those who topped up to the ERS would have received double the sum at $816,000.

So those who are investing should ask whether they are confident about growing $220,400 to $408,000 or more, without spending much of the capital sum in 20 years, as doing so would certainly reduce the chance of making more money.

This begs the million-dollar question – do you want to spend your retirement still dabbling with money or do you want a high monthly sum to just appear in your bank account every month?

After all, if you opt for the ERS and are blessed with longevity genes, you stand to receive over $1 million by 90, and $1.2 million by 95, without any stress over managing your funds.

CPF LIFE before any financial products

One participant sounded a note of caution: He was told by a financial adviser to top up only to the FRS so that he could use the $220,400 to invest in a private annuity instead.

You should know that CPF LIFE is also an annuity scheme, except that its payouts are guaranteed by the Singapore Government and are for life.

So before you sign up for a private annuity with the $220,400, you should check whether it can pay you more than $1,700 every month for life.

If you are really keen to plan for more money, consider putting money in private annuities only after you have set aside $440,800 for CPF LIFE. Do note that even after 55, you can continue to increase your monthly payouts by making annual top-ups to the incremental increase of the ERS.

When you top up matters

There was a question on whether you can top up to the ERS only at 65 to receive a higher payout, because the participant wanted to invest the $220,400 for a decade first.

You can top up to the ERS any time after hitting 55 because CPF LIFE is a very inclusive scheme that allows members to manage their cash flow and do their topups based on their affordability.

Indeed, there is no need to hit the ERS – if you can top up only to\ $330,000, you can still receive up to $2,600 as your monthly payout.

Do note that just like other financial products, the timing of top-ups matters because all investment needs time to grow.

The monthly payout of $3,400 for the ERS in 2026 applies only to those who top up when they hit 55. So if you make the top-up a decade later, you will not receive $3,400 but a lower amount, because you have missed out on the 10 years for your sum to grow.

If you are over 55, it is prudent to book an appointment at the CPF Board to check your estimated payout before you make a substantial top-up.

Finally, if you are looking to increase the ERS payout by making annual top-ups, you get more bang for your buck if you do so on Jan 1 every year so you can get a bit more than others who do so later in the year.

After all, when it comes to growing money, it is always better to start earlier than later.

Article was first published on The Straits Times on 24/5/2026