You will be able to set a sensible order for drawing cash, investments, SRS and CPF.
Jasmine has four places her money sits: cash and deposits, an investment account, an SRS account and CPF. In her first year without a salary she needs about S$46,000, and any of the first three could pay it. Her instinct was to spend a little from each, so nothing ran down too fast. That feels balanced. It also wastes tax-free years, sells shares at random times and leaves her unsure which pot is meant for what.
Financial independence: planning the number and the path, lesson 6.2, A simple drawdown order, gives a default order and the reasons behind it. This lesson turns that draft into a year-by-year order, with the age each account opens and the rules that decide the sequence.
You can't draw from an account before it opens, so the order starts with dates.
Cash and your own investment account open at any age. In Singapore, IRAS does not generally tax capital gains for individual investors, so selling shares or fund units you hold in your own name doesn't usually create a tax bill, unless IRAS treats you as trading as a business. That makes these accounts the most flexible you have.
SRS opens without penalty from the statutory retirement age that applied when you made your first contribution. Withdraw before then and you pay more tax plus a penalty, under rules IRAS publishes. From that age, only part of each withdrawal is taxable, and you can spread withdrawals over a number of years. Lesson 3.3, Time SRS withdrawals around your other income, works through the timing.
CPF pays mainly through CPF LIFE, from your payout eligibility age or the later start you choose. Some savings may be withdrawable from 55 under your cohort's rules. Check both on cpf.gov.sg.
Jasmine's dates, in this example: cash and investments now, SRS from 62, CPF LIFE from 65.
With the dates in place, three rules decide the sequence.
The first rule is to spend safe money first in the early years. Sequence risk is highest in the first years of drawdown, and lesson 5.1, Why a crash early in retirement does more damage, puts numbers on it. Paying the first years from cash and the ladder you built in lesson 3.1 means your shares aren't sold in a fall right after you stop. Growth assets left alone in the early years get time to recover from any fall and to grow.
The second rule is to draw taxable money in low-income years. SRS is the account where timing changes your tax. Your taxable income in any year is the taxable part of SRS withdrawals plus other taxable income such as part-time pay or rent. Because income tax in Singapore is progressive, the same withdrawal costs less tax in a year when little else is taxable. So you place SRS withdrawals in years with little other taxable income, spread over as many of those years as the rules allow.
The third rule is to sell investments when prices suit you, not on a calendar. Your investment account refills your cash, but it doesn't have to pay any particular year. In a good year you sell more and top up cash. In a bad year you sell nothing and let the cash and the ladder carry you. Module 4 turns this into written refill rules.
Put together, Jasmine's order looks like this.
From 60 to 61, she spends from cash and short deposits, with her part-time pay on top. Her shares are untouched.
At 62 her SRS account opens in this example, but she is still earning part-time pay that year. Adding SRS withdrawals on top would raise her taxable income for the year, so she leaves SRS alone and spends the first rung of her ladder instead.
From 63 to 70, her part-time work has ended, so these are low-income years. She draws SRS in roughly equal steps over these eight years, which keeps each year's taxable amount small. The last two bridge years are paid by SRS plus her ladder rungs.
From 65, CPF LIFE starts and covers a little over half her essential spending. SRS and her investment account cover the rest, with investments sold mainly in years after markets have done well.
From 71, SRS is empty. CPF LIFE pays the floor, and her investment account pays everything above it and tops up a cash reserve each year.
Notice what she didn't do. She didn't draw from every account at once, and she didn't start CPF LIFE early just because it was available. Each pot has a job and a period.
The order is a default, and there are good reasons to break it.
After a market fall, spend more from cash and the ladder, and less from investments, even if the plan says otherwise. That is what the safe money is for.
If you have a year with unusually high income, such as a large consulting fee, skip the SRS withdrawal that year and take it in a quieter year.
If your health changes or you need a large sum, the most flexible accounts are cash and your investment account, so keep enough there to handle a shock rather than locking everything into SRS or CPF.
And if you decide to defer CPF LIFE, as lesson 2.2 discussed, the bridge gets longer and investments and SRS have to carry more of the early years, though the order itself stays the same.
Write your accounts down in a single list: what each holds, the age it opens for withdrawals without penalty, and its job in the plan. Jasmine's list fits on four lines: cash and the ladder pay 60 to 64, SRS pays 63 to 70, CPF LIFE pays the floor from 65, and investments refill cash for life.
Make the same list for your own accounts. You'll need the opening age for each one, checked on cpf.gov.sg and the IRAS website.
Write the order you would draw your accounts in and the age each one opens for withdrawal.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).