Basic, Full or Enhanced Retirement Sum?

Happy Chinese New Year! 祝大家马年行大运！Wishing all of you are enjoying a healthy and prosperous start to the Horse year ahead.

Recently, I have been reading and watching quite a few posts and videos on this topic. Basic, Full or Enhanced Retirement Sum? It got me thinking about what I would actually choose for my own retirement. Here is where I stand today, and how I am thinking about it.

Where I stand today.

Using the CPF calculator to project my balance at age 55, I am around $100,000 short of the Enhanced Retirement Sum (ERS) in my SA before I turn 55. This is based on an assumed 3.5% FRS growth rate.

The good news is that I will have enough in my OA to top up my RA to the ERS when I turn 55 if I choose to. That means I am on track to hit the ERS without needing any additional cash top-up at all.

The Options This Opens Up for Me at 55

Knowing this gives me some flexibility.

If I am in a good financial position at 55 and want to lower my portfolio risk, I could do a cash top-up to ERS instead of using my OA funds. This way, my OA continues earning 2.5% while the ERS top up to my RA earns 4%. Two accounts working for me at the same time.

But it really depends on where I am financially when I hit 55 and a lot can change in 10 years.

So, BRS, FRS or ERS? Here Is My Thinking.

If I can consistently beat 4% returns outside of CPF, I would go with FRS and put the freed-up capital to work elsewhere.

But realistically, getting a 4% risk-free return is not an easy feat. And so far, CPF LIFE remains the best annuity plan providing monthly payout option I know of.

So my most likely choice is ERS, funded either by OA or cash top-up depending on my situation at the time.

Why ERS Makes Sense as a Retirement Foundation

Going with ERS would almost double my monthly CPF LIFE payout compared to FRS. That forms a very solid base to cover my daily expenses in retirement and more.

It is not the flashiest strategy but a reliable, lifelong income that you cannot outlive. That is worth building towards.

What about you? Are you going for BRS, FRS or ERS? Share your thoughts in the comments below.

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