Work out how much money you need between stopping work and your first CPF LIFE payout.
Jasmine stops full-time work at 60, and her CPF LIFE payouts start at 65 (an invented example). From 60 to 64 her salary has stopped and CPF LIFE has not started, but her spending carries on.
That gap after the last pay cheque is the bridge years: the period after full-time work stops and before the first CPF LIFE payout, when salary has ended and CPF LIFE has not begun. How long it lasts depends on when you stop work. Someone stopping at 60 has a shorter bridge than someone stopping at 50. Jasmine's lasts five years, ages 60 to 64. For someone stopping at 50, the bridge could last fifteen years.
Financial independence: planning the number and the path, lesson 3.3, "The bridge years before CPF pays", explains why a large CPF balance cannot carry the bridge years and gives a quick way to size them. Building on that, you can size the bridge year by year, decide where the money should sit, and see how much a little paid work changes the total.
Start by counting the years from the day you stop full-time work to your first CPF LIFE payout. Check your payout eligibility age on cpf.gov.sg. If you plan to defer CPF LIFE, the bridge runs to your chosen start age instead of the eligibility age.
For a quick estimate, multiply the number of bridge years by your yearly spending at today's prices. Jasmine spends S$40,000 a year at today's prices, so her quick estimate is five years at S$40,000, which is S$200,000.
For a better estimate, use the spending sheet from lesson 1.4, "Build your retirement spending estimate". It is in future dollars, so add up the spending it shows for each bridge year. On Jasmine's sheet, spending in her five bridge years, ages 60 to 64, runs from about S$46,000 to about S$51,500 a year, about S$243,000 in total, and her healthcare line rises faster than the rest.
The better estimate comes out higher than the quick one because prices keep rising between now and the bridge years, and healthcare costs rise faster than other spending.
Once you have the total, subtract any income you expect in those years. What remains is what your own cash and investments must cover.
Part-time work in the bridge years cuts the money you need almost dollar for dollar, since every dollar you earn is a dollar you don't take from savings. Jasmine plans to consult three days a week for her old employer and a couple of smaller firms from 60 to 62. She expects about S$1,500 a month, which is S$18,000 a year and S$54,000 over the three years (3 x S$18,000).
This income arrives when sequence risk is highest, which makes it especially valuable. Lesson 5.1, "Why a crash early in retirement does more damage", explains sequence risk.
From 63, Jasmine draws her SRS account with favourable tax treatment, adding about S$43,000 over the last two bridge years. Lesson 3.3, "Time SRS withdrawals around your other income", covers when to make SRS withdrawals.
After taking off both, what her own cash and investments must cover falls from about S$243,000 to about S$146,000 (S$243,000 - S$54,000 - S$43,000). Without the part-time work she would need about S$200,000 (S$243,000 - S$43,000). This matches her quick estimate of S$200,000 by coincidence, since the two are different calculations.
Part-time income is less certain than a salary, so treat it as likely but not guaranteed, as Jasmine does. Lesson 5.4, "Run your plan through three scenarios", tests what happens if her part-time income stops early.
Money you will spend in the next few years should not sit in assets that can fall by a third just before you need it. Shares suit money you will not touch for ten or twenty years. For money you will spend at 62, holding shares is a gamble on the next two years of markets.
Bridge money belongs in assets whose value does not swing much and that you can reach when you need it: savings accounts, fixed deposits, Treasury bills (T-bills), Singapore Savings Bonds (SSBs) and short-dated Singapore Government Securities. Each has its own access rules, so check them before you rely on one. A fixed deposit may lose interest if you break it early. An SSB can be redeemed in any month, with the money arriving the following month. A T-bill pays out on its maturity date. "Bonds, T-bills, SSBs and fixed deposits" covers how each of these works and where to check current rates.
The cost of this safety is a lower expected return than shares over long periods. On money you will spend within five years, that cost is usually worth paying.
Instead of drawing from one large pot, you can build a ladder: a set of safe holdings arranged so that one matures in each year you need money. Each holding is a rung, matched to one year's spending need, so you know that year's money will be there.
Jasmine's rungs are each year's need after part-time pay and SRS:
about S$57,000 for her first two years, held in cash and short deposits about S$31,000 for the year she turns 62 about S$29,000 for 63 about S$30,000 for 64
Each rung matures just before she needs it. The rungs add up to about S$147,000 against her total of about S$146,000, and the S$1,000 gap comes from rounding.
Two habits keep a ladder working. First, build it before you stop work, so the bridge does not depend on the market on your last day. Jasmine will build her later rungs from T-bills, fixed deposits and SSBs in the year or two before she stops work, so a market fall in her late fifties does not leave the bridge short. Second, when a rung matures in a good year, spend it and leave the next rung alone. In a bad year the rung buys you time, because you don't have to sell shares to pay for that year.
From 55, you can withdraw money from your CPF Ordinary Account (OA), and in some cases any amount from it. How much you can take depends on your own CPF position, so check the current rules with the CPF Board on cpf.gov.sg. Treat these withdrawals as a possible addition to the bridge, confirmed on cpf.gov.sg, and leave them out of your first plan. CPF Mastery, lesson 6.3, "What you can withdraw at 55 and after", covers these withdrawals.
Now work out your own bridge. You need the number of years, your spending in each from your sheet, and any work or SRS income you expect in those years.
Write down how many bridge years you expect, what you will spend in each one, and the total you would set aside to cover them.
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