In Singapore, a growing demographic known as HENRYs—High Earners, Not Rich Yet—represents individuals earning between SGD 250,000 to SGD 500,000 annually.
These professionals, typically aged 25 to 40, are on the cusp of financial success. However, they may not yet have substantial wealth accumulated.
As they approach retirement, understanding their options for sustainable income becomes crucial.
This guide will explore two primary retirement income options available in Singapore: CPF LIFE and private annuities.
We will provide insights and comparisons to help HENRYs make informed decisions about their retirement income strategy for 2025.
How CPF LIFE Works:
CPF LIFE (Lifelong Income For the Elderly) is a national scheme designed to provide lifelong monthly payouts to Singaporeans aged 65 and above.
Upon reaching 55, individuals have their Retirement Account (RA) created from their CPF savings. The funds in the RA are used to pay premiums for CPF LIFE.
There are three plans available:
Benefits of CPF LIFE:
Limitations of CPF LIFE:
How Private Annuities Work:
Private annuities are contracts with insurance companies that provide regular payments in exchange for a lump sum premium.
These annuities are designed to provide individuals with a steady income during retirement or a specific period, supplementing other retirement savings such as the CPF (Central Provident Fund) payouts.
They come in various forms:
Benefits of Private Annuities:
Limitations of Private Annuities:
When considering private annuities, it’s crucial to conduct thorough due diligence:
| Aspect | CPF LIFE | Private Annuities |
|---|---|---|
| Payouts | Fixed based on RA savings | Varies based on policy terms |
| Guarantees | Government-backed | Insurance company-backed |
| Flexibility | Limited options | More options for payout timing and amounts |
| Fees and Charges | No additional fees | Various fees may apply |
| Risk | Longevity risk only | Longevity risk, market risk, counterparty risk |
| Inflation Hedge | Escalating plan available | Varies by product; some offer inflation protection |
HENRYs often have higher spending needs due to lifestyle expectations. As such, they must assess their risk tolerance when choosing between CPF LIFE and private annuities.
Furthermore, diversification of retirement income sources is essential. Relying solely on one source may not meet all financial needs during retirement.
Additionally, it’s important to consider tax implications related to private annuities. Understanding how these products fit into your overall financial plan can maximise benefits.
| Combining CPF LIFE and Private Annuities | Using Private Annuities for Specific Needs | Investing for Higher Returns |
|---|---|---|
| Using both CPF LIFE as a foundation and supplementing it with a private annuity can provide a balanced approach. | Consider using private annuities to fund specific retirement goals such as travel or healthcare expenses. | To supplement retirement income further, HENRYs should explore investment opportunities outside of CPF. |
| This strategy allows HENRYs to secure guaranteed income while also benefiting from potentially higher returns from private products. | This targeted approach can help manage cash flow during retirement effectively. | This could involve stocks, bonds, or real estate investments that align with personal risk tolerance and financial goals. |
Both CPF LIFE and private annuities offer unique advantages and disadvantages. HENRYs must carefully consider their individual circumstances and financial goals when deciding which option—or combination of options—best suits their needs.
As you explore your retirement income strategy, utilise online resources and consult with financial advisors for personalised advice.
Making informed decisions today will pave the way for a sustainable retirement income tomorrow.
Read more about articles related to maximising CPF here.
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