My Mother Chose Certainty Over Higher Returns In Retirement

My mother is 58 this year.

She has been working for most of her life and currently earns a decent salary as a Business Development Manager. Like many Singaporeans, she understands the importance of investing. She has attended investment courses and knows the basics of financial planning.

But despite understanding how markets work, she never felt comfortable being heavily invested. More importantly, she never felt confident that she could stay invested when markets became volatile.

Her retirement plan today has two parts.

The first is a retirement income policy she bought many years ago, which pays her a monthly income on top of whatever else she has.

The second came last year. When the Enhanced Retirement Sum (ERS) ceiling was increased to 4 times the Basic Retirement Sum (BRS), she topped up her CPF Retirement Account to the prevailing ERS.

Some may call that second decision a poor financial one.

My mother calls it peace of mind.

The Trade-Off: What You Give Up When You Top Up CPF to ERS

She knew she was giving up liquidity. Once you top up your CPF Retirement Account, you cannot take that money back out, and once your CPF LIFE payouts begin, it is committed for life.

She also knew there were other investments that could potentially generate higher returns. Over the next 20 or 30 years, that same money in a diversified portfolio might well have grown to more than CPF's floor rate of 4% a year.

Yet she went ahead anyway, because she knew that at age 65, she would receive approximately $3,000 a month for the rest of her life.¹ On top of that, her retirement income policy would be paying her separately.

So the question was never really whether her decision was good or bad. It was which one she wanted more: the chance of a bigger number, or a number she could count on.

She picked the number she could count on.

How Much Should You Top Up Your CPF? Why There's No Fixed Formula

Of course, I understand the concerns many people have about topping up to the full ERS. Liquidity and flexibility matter, and at Havend, we don't work off a fixed formula for how much should go into CPF.

What we do advocate is a foundation of at least the Full Retirement Sum (FRS), because CPF LIFE remains one of the most efficient ways to secure lifelong income. Beyond that, whether it makes sense to top up further towards ERS, or to complement CPF with an insurance annuity, really depends on the individual. Both routes can offer good and reliable income, and annuities help to add back the liquidity that a CPF top-up gives up. The right balance between CPF, annuities and liquidity is something we work out with each client, not a number we start with.

My mother's plan happens to sit at the higher end of CPF. That is not really the point of her story. The point is that she got there on purpose, with the retirement income policy already in place, after understanding what she was giving up.

Many people never get that far. They leave everything in cash because it feels safer, and never work out what that money is supposed to do for them.

Two Common Retirement Planning Challenges

That experience reinforced something I've observed repeatedly when speaking to people approaching retirement. Despite the abundance of financial products and investment opportunities available today, many pre-retirees still struggle with retirement planning.

Interestingly, the struggles usually fall into one of two camps.

For Experienced Investors: The Challenge of Decumulation

The financial planning landscape in Singapore has changed dramatically over the last 20 to 30 years.

Today, investors have access to ETFs, managed portfolios, unit trusts, trading platforms, robo-advisors, REITs, dividend strategies and countless other investment options. Even insurers have entered the investment space through Investment-Linked Policies (ILPs), which are policies that combine insurance coverage with investment funds.

In many ways, we have never had more opportunities to build wealth.

Yet for the savvy investor, the challenge is often not accumulation.

It is decumulation. How do I draw down my assets in retirement?

Your research may have led you to the 4% withdrawal rule or something similar. Maybe you've explored building a dividend portfolio. Perhaps you've looked at REITs, bond ladders or various retirement income strategies.

The more you read, the more complicated it becomes. You start wondering whether your approach is optimal. Should you withdraw 3% instead of 4%? Should you hold more dividend stocks? Should you be taking more risk? Am I leaving money on the table?

The quest for the "perfect" retirement income strategy can become a rabbit hole. Even if you eventually arrive at the best strategy, there is one problem that remains.

Markets are uncertain.

Markets do tend to recover eventually. But "eventually" is the problem. Retirees cannot simply stop drawing income while they wait for a recovery. Retirement expenses continue regardless of what is happening in financial markets.

If you have been following Providend or Havend, you may have come across the concept of Sequence of Returns Risk.

To address this challenge, Havend developed a retirement approach to secure an income stream that is safe and reliable in your retirement, or certainty of income planning.

It is designed to fund your non-negotiable expenses, your "die-die must have" expenses. These are expenses that need to be paid regardless of whether markets are up or down.

Its foundation consists of CPF LIFE, insurance annuities and cash equivalents such as your CPF Ordinary Account, which together provide a high degree of certainty and predictability.

The objective is simple.

Ensure that essential retirement income is not dependent on market performance.

For Conservative Retirees: The Challenge of Certainty

At the other end of the spectrum are people who are not investment-savvy and have little interest in financial markets. Market volatility keeps them awake at night.

For them, the issue is not decumulation. The issue is certainty.

Many of us spend decades receiving a monthly salary. We become accustomed to income arriving every month. When retirement approaches and that salary is about to stop, it naturally creates anxiety.

As a result, many retirees end up underspending. Even when they have accumulated sufficient assets, they continue living with a scarcity mindset. They save excessively, delay spending and constantly worry about whether they will have enough.

I am not suggesting that retirees should spend recklessly.

However, I find that many retirees struggle because they lack clarity on one simple question:

"How much can I comfortably spend every month?"

When that becomes clear, retirement becomes much easier. You can budget confidently. You can plan your cash flow. You can set aside money for travel and hobbies without feeling guilty. You can finally enjoy the retirement that you spent decades working towards.

The foundation that enables all of this is certainty of income.

Why Certainty of Income Matters for Every Retiree

Whether you are an experienced investor or a conservative retiree, certainty of income solves a fundamental emotional problem.

For the experienced investor, it means knowing that no matter what happens in markets, your essential expenses are covered. Once that is done, your investments can take whatever volatility comes with peace of mind.

For the conservative retiree, it creates what is effectively a spending plan. It feels almost like receiving a salary every month. You know what is available to spend and can enjoy it without guilt.

What I have observed over the years is that retirement concerns are rarely about numbers alone.

More often than not, they are about emotions. The fear of running out of money. The fear of making a mistake. The fear of navigating retirement without confidence.

Both groups are ultimately searching for the same thing: peace of mind and assurance.

At Havend, we call this philosophy RetireSURE.

RetireSURE aims to give clients the high probability of retirement success without requiring them to take on unnecessary investing risk. It covers the 3Cs of Retirement.

Cashflow Management, building a strong financial foundation and optimising your cashflow.

Coverage Management, having a sufficient medical safety net against catastrophic medical bills and long-term care costs.

Certainty of Income, building upon your CPF as a foundation and optimising with insurance annuities to create a diversified and reliable income for your retirement.

The Takeaway: Confidence Matters More Than Maximising Returns

Looking back, my mother's decision was never really about maximising returns.

It was about maximising confidence.

Retirement planning is about balancing certainty, flexibility and growth. She gave up some growth. In return, she knows what arrives every month, for as long as she lives.

It is not a fancy strategy.

It is not the kind of strategy that gets discussed in investment forums.

But it is the strategy that allows her to sleep well at night.

And perhaps that is the point.

Not every financial decision should be judged by whether it produces the highest possible return. Sometimes, the best retirement strategy is simply the one that gives you the greatest confidence that you will be okay.

If you are somewhere near this decision yourself, the question is probably not whether topping up is optimal. It is whether your own balance between certainty and growth is something you chose, or something that just happened.