Saturday, February 08, 2020

Can you support a sugar baby using CPF payouts ?

In Financial Blogger's Cinematic Universe, the topic that always sparks a reader's interest is CPF.

Another topic that readers like to read about is sugar babies.

In times like the Corona virus infection, it may not be too feasible for some of my friends who are life-long investors in the Geylang region to continue to visit their regulars haunts because there may be a chance of infection. In fact, the 12th Corona victim is likely to be a freelance sex worker. The person who reminded me of this fact is strangely enough, my mum, who was so concerned about my friends, she asked me to remind them to stop visiting Geylang this new year season.

But I am a realist.

If I can't sell my investments in anticipation of the situation getting worse, I am pretty sure my pals would still need to have their needs met. With this realization, why not combine these two topics into one and let's see whether it is possible to support a sugar baby. Sugar babies probably see fewer clients so I expect them to be a safer choice in times like this.

Fortunately, we now have data on how much a sugar baby costs. It takes about $3,000 a month to support one. In fact, A friend gave me another data point of $2,500, but he gave the caveat that at this price point, the sugar babies are kind of plain and not really worth the trouble.

Armed with this data, let's go to the CPF Life estimator website to see whether someone born at the same time as me can support a Sugar Baby.

a) Current FRS sum of $181,000

The first simulation is for the sum of $181,000 for a males with around the same birthday as I do.

The output looks like this :

As you can observe, the standard plan is your best best as it has the highest proportion invested in annuities. The Escalating plan increases at 2% every year but you might be too old to enjoy your sugar baby by the time that reaches $3,000 a month.

Ok, so I estimate in most cases attaining FRS is insufficient to support a sugar baby.

b) ERS sum of $271,500

A CPF member can keep an enhanced retirement sum of up to $271,500. If you are really committed to getting a sugar baby at age 65, you can commit more money in your CPF. Based on the calculator you get the following payout :

You get better numbers at around $2,000 under the standard plan. At this stage, it should be pretty obvious that sustaining a sugar baby with CPF is going to be quite hard.

c) CPF Life supplemented with dividends 

I think by now, you should be convinced that CPF Life can, at best, supplement the sugar baby lifestyle and cannot stand on it's own. Suppose you already have FRS, you can expect a pay out of $2,000 a month, you will need a dividend portfolio to do so.

Suppose you blend a REIT portfolio with some blue chip equities, you should be able to attain a 5%.

To generate an extra $1,000 a month, you will need $12,000 / 0.05, you still need an extra $240,000 to cover your short-fall.

d) Share a sugar baby with friends

With a full FRS sum, you will still need $240,000 to life your sugar daddy lifestyle. This can be  insuperable.

Fortunately I know an old friend who was able support a sugar baby while working as a technician in his 40s with an income below $4,000 - He got a few colleagues to share one.

I don't really recommend that readers do this because it's almost tantamount to sleeping with your colleagues and you might be cultivating a super-infector.

Anyway, I hope that you have learnt something from this article and can experiment with the CPF life estimator.

1 comment:

  1. the title of this post.

    Gahmen should use this to encourage cpf contributions