Retirement Guru: What to do with your CPF Money When You Turn 55
For many of us, turning 55 will be like striking Toto. This is because on the day we turn 55, the CPF Board will allow us to withdraw any amount in excess of the Full Retirement Sum and this can be a rather large sum.
Such sudden financial gains often result in what is known as the windfall effect — a psychological phenomenon that influences our behavior in various ways. The most common behavior and, in my view, the most dangerous is an increase in our consumption and luxury purchases. If we are not careful in controlling these impulses, it will lead to serious financial consequences as our CPF is meant for our retirement years.
I know it is unrealistic to fight human nature. After all, you’ve worked hard and deserve to reward yourself. To balance enjoying your windfall while securing your retirement adequacy, I suggest the following 4 Step Approach:
1. Decide how you want to reward yourself.
2. Invest your CPF money in monthly dividend-paying ETFs.
3. Assuming an annual dividend yield of 10%, this equates to approximately 1% cash returns per month.
4. Set aside and accumulate 50% of the monthly returns for your desired reward. Once…
