MoneySENSE Worksheet on Managing Your Retirement Funds
As a general guide, you should aim to pay off your housing loan by 55. This would help you minimise debt obligations in your golden years.
However, if you have an outstanding housing loan when you reach 55, do consider how you plan to continue paying the instalments. This means considering factors such as:
• The need to set aside the CPF Minimum Sum. Note that this could reduce the CPF available for housing.
• Whether you need to continue working to service the housing loan. Note that the total CPF contribution rate for members aged 50 and above will be reduced to 28.5%, and then to 20% for those aged above 55 to 60. So it means that there will be lesser contribution to your OA for use in housing.
• Whether you intend to make a lump sum/partial withdrawal of your CPF at 55.
Depending on your situation, you may have to fork out more cash to pay your housing loan if the CPF available for housing is reduced after 55.
Visit the CPF website (www.cpf.gov.sg) to find out the factors affecting homeowners aged 55 years and above when using CPF to repay housing loans.
You may decide to invest your retirement funds, especially if you have prior investment experience. However, as you may no longer be drawing a regular income, it is generally advisable to take a more conservative approach to investment.
There is a wide range of investment instruments, including stocks and bonds, derivatives, unit trusts, insurance plans, structured deposits and many more.
Remember that all investments come with risk. Invest only in instruments that you understand, and that are suitable for you.
You definitely do not want to make wrong investment decisions that will drain your retirement finances.
TIPS
- Set aside sufficient funds for daily needs and emergencies before you invest.
- Draw up your own investment objectives. Think about how much you are prepared to invest, how long you intend to stay invested, how much return you want and how much loss you can take. This is important as this will help you evaluate which investment instruments are suitable for you.
- Understand your risk profile. Select instruments that are aligned with your risk profile. Investing in instruments that are too risky for you may cause anxiety and loss of sleep.
- Do not invest in anything you do not understand. Make sure you understand key areas such as the investment objective, potential risks and returns, minimum investment periods, penalty charges, terms and conditions.
- Diversify. Do not put all your eggs in one basket. Put your money into a range of investments to offset risks. So if one investment loses money, the loss does not affect your other investments.
- Monitor your investments regularly. Re-evaluate how your investments are performing, at least once a year.
- Do not invest on your own if you do not know how to. Consult professionals for advice.
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You may wish to consider post retirement employment to keep yourself busy and to continue to grow your retirement funds. You may also be tempted to start a small business. Bear in mind that there are risks to consider. Ask yourself if you know enough about the business prospects, or if you have the capacity to stomach losses and risks. You should also note that many businesses take several years to break even or stabilise.
 
| The information in this worksheet is of a general nature and may not apply to every situation or to your own personal circumstances. The information is correct as at time of publication. For more tips and educational resources on personal finance matters, visit the MoneySENSE website at www.moneysense.gov.sg |
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