Options to invest retirement savings

1. If you have to invest your retirement savings, the following options are available:

a) Retirement account of CPF - 4% plus 1%
b) Government bonds - 3%
c) Bank deposits - 1.5%
d) Life Annuity -5% plus bonus
e) Unit trust - 5% (average for long term)
f) Foreign currency - 4% with currency risk

2. If you have limited savings, say less than $500,000, you should invest as follows:

a) Keep the maximum allowed in CPF (say $150,000 at 65)
b) Use $200,000 to buy a life annuity at 65 to pay about $900 plus bonus each month
c) Invest the balance in government bonds or a unit trust

Use the monthly income from CPF and the annuity to meet your regular expenses. You can draw down on your other investments for emergency cash needs, e.g. large medical bills or education expenses.

If the monthly income is not sufficient for your expenses, you can do part-time work basis to earn a supplementary income.

If the monthly income is more than sufficent for your expenses, you can save and re-invest the balance.

Lesson: choose investments that have low expense charges, so that you can keep most of the yield (instead of giving it away to the intermediary or financial institutions).