For discussion - Will most singaporeans be able to achieve FRS?

[THEMIKOS]

Was wondering if majority of Singaporeans will be able to achieve FRS when they turn 55.

Example
Let's say a 30 year old is earning a salary of $3500 a month with $0 balances across all 3 of his CPF accounts.
In 20 years time his balances will be as follows:
OA: 209033
SA: 183540
MA: 57200

This calculation is based on a flat salary of $3500 over 20 years excluding bonuses and pay increments. What more, he still has another 5 years of compounding interest to reach 55.

Based on this, will it be safe to say that majority of singaporeans (those who work consistently) will be able to meet the min sum? Why then do we always read about complains of seniors unable to withdraw their savings because they can't hit minimum sum? I have yet to read a story of anyone who says that CPF is good and he is now a rich man due to the govt's forced savings. Lol. Anyone has any stories or opinions to share/discuss?

 

[gctmls]

Bro where you going to stay

 

[BBCWatcher]

Was wondering if majority of Singaporeans will be able to achieve FRS when they turn 55....

A slight majority of today's Singaporeans, yes, probably. Older cohorts are different. For perspective, the $3,500/month figure you picked is a little below the 2018 median of $3,792. (Note: The Ministry of Manpower reports median wages inclusive of the employer's CPF contribution. Take that MOM reported figure and divide by 1.17 if you want the more common wage figure that most employees talk about.)

Based on this, will it be safe to say that majority of singaporeans (those who work consistently) will be able to meet the min sum?

I think you mean the Full Retirement Sum.

Today's Singaporeans, probably. However, there are significant numbers of stay-at-home parents, self-employed individuals, and disabled adults. These individuals often end up with low or zero CPF balances (except for MediSave for self-employed individuals, which is compulsory).

I have yet to read a story of anyone who says that CPF is good and he is now a rich man due to the govt's forced savings.

Actually, there are such stories. Look for stories about Loo Cheng Chuan, for example.

 

[Oldnerd79]

There is such a man. Ak71, his CPF is loaded. I followed his suggestion to top up cpf Special account via cash and also tRF from OA, after a few years of doing so I managed to hit FRS at age 39.

Without topping up and TRF from OA, it is still possible but maybe not easy for low income earners.

 

[rrr2015]

love reading these real life stories. but by the time we reach 65, worried 1M may not mean much

Actually, there are such stories. Look for stories about Loo Cheng Chuan, for example.

he also very successful investor himself. wish i have read it earlier

There is such a man. Ak71, his CPF is loaded. I followed his suggestion to top up cpf Special account via cash and also tRF from OA, after a few years of doing so I managed to hit FRS at age 39.

Without topping up and TRF from OA, it is still possible but maybe not easy for low income earners.

 

[henrylbh]

Was wondering if majority of Singaporeans will be able to achieve FRS when they turn 55.

Example
Let's say a 30 year old is earning a salary of $3500 a month with $0 balances across all 3 of his CPF accounts.
In 20 years time his balances will be as follows:
OA: 209033
SA: 183540
MA: 57200

This calculation is based on a flat salary of $3500 over 20 years excluding bonuses and pay increments. What more, he still has another 5 years of compounding interest to reach 55.

Based on this, will it be safe to say that majority of singaporeans (those who work consistently) will be able to meet the min sum?

Now FRS is 176,000. 20 years later, SA would be $317,000 if annual increment is 3%, to meet prevailing FRS.

 

[henrylbh]

Was wondering if majority of Singaporeans will be able to achieve FRS when they turn 55.

Example
I have yet to read a story of anyone who says that CPF is good and he is now a rich man due to the govt's forced savings. Lol. Anyone has any stories or opinions to share/discuss?

Have you not read or heard one MP who said he always happy and laughing whenever he receives his CPF statement.

https://www.youtube.com/watch?v=kxOgjmcGJ6g

He receives his CPF statement every month compare to lesser mortals?

 

[BBCWatcher]

Now FRS is 176,000. 20 years later, SA would be $317,000 if annual increment is 3%, to meet prevailing FRS.

Right, but it’s at least fairly likely the BRS/FRS/ERS increases won’t be as much as 3% per year for 20+ years (the government has explained they’re only in “catch up mode” right now), wages are subject to inflation and career progression effects, and most people work longer than 20 years. Also, this forecast assumes zero bonuses (evidently not even a “13th month”), zero cash top ups for tax relief, zero government top ups, zero extra employer contributions to MediSave, and zero OA to SA transfers for higher interest.

 

[THEMIKOS]

Yup, its a little sick to be honest to know that future generations are gonna have to meet ever increasing FRS. I wonder when will this ever stop. Cannot be it keeps increasing till a million dollars right (though we wont be affected coz we would mostly be six feet under).

Now FRS is 176,000. 20 years later, SA would be $317,000 if annual increment is 3%, to meet prevailing FRS.

 

[havetheveryfun]

Was wondering if majority of Singaporeans will be able to achieve FRS when they turn 55.

Example
Let's say a 30 year old is earning a salary of $3500 a month with $0 balances across all 3 of his CPF accounts.
In 20 years time his balances will be as follows:
OA: 209033
SA: 183540
MA: 57200

This calculation is based on a flat salary of $3500 over 20 years excluding bonuses and pay increments. What more, he still has another 5 years of compounding interest to reach 55.

Based on this, will it be safe to say that majority of singaporeans (those who work consistently) will be able to meet the min sum? Why then do we always read about complains of seniors unable to withdraw their savings because they can't hit minimum sum? I have yet to read a story of anyone who says that CPF is good and he is now a rich man due to the govt's forced savings. Lol. Anyone has any stories or opinions to share/discuss?

It's simple, because you forgot to take into account housing.

A lot of young people like to overspend on housing, buying a much more expensive house than they can afford to.

But then again, housing is still the killer, In your above example if the person buys a 4-room flat at 400k, and shares co-pay 200k with his other half, his OA would be wiped.

Also, there are quite a % of people whose salary never gets pass $3000 throughout their lives.

 

[THEMIKOS]

U are correct. Thats why i did a comparison with the figure of $3500. So for those who are worried they cant reach FRS, all they need to do is play around with their bonuses and the figure of 1.17 to see if they ever hit 3500 monthly in whatever combinations they can think of.

Right, but it’s at least fairly likely the BRS/FRS/ERS increases won’t be as much as 3% per year for 20+ years (the government has explained they’re only in “catch up mode” right now), wages are subject to inflation and career progression effects, and most people work longer than 20 years. Also, this forecast assumes zero bonuses (evidently not even a “13th month”), zero cash top ups for tax relief, zero government top ups, zero extra employer contributions to MediSave, and zero OA to SA transfers for higher interest.

 

[THEMIKOS]

Actually i purposely left housing out because i wanted it to be a "fair" comparison. Like u mentioned, ppl tend to buy bigger and more expensive houses. But u are right, perhaps i should have included housing in my calculations.

It's simple, because you forgot to take into account housing.

A lot of young people like to overspend on housing, buying a much more expensive house than they can afford to.

But then again, housing is still the killer, In your above example if the person buys a 4-room flat at 400k, and shares co-pay 200k with his other half, his OA would be wiped.

Also, there are quite a % of people whose salary never gets pass $3000 throughout their lives.

 

[undiscern]

Can be done. Low OA due to servicing house

 

[Toni90]

Now FRS is 176,000. 20 years later, SA would be $317,000 if annual increment is 3%, to meet prevailing FRS.

Salary will increase too.

 

[d9_lives]

Frankly, it's quite easy to hit FRS.
I wish the SA ceiling is much higher.

Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.
Albert Einstein

 

[BBCWatcher]

Yup, its a little sick to be honest to know that future generations are gonna have to meet ever increasing FRS.

No, that's not correct. The government doesn't impose an obligation on anybody to hit a particular minimum(*), or to have even one dollar in their Retirement Accounts. The Full Retirement Sum is the default maximum level of Retirement Account funding on your 55th birthday, and that's pretty much all it is.

I wonder when will this ever stop.

Never, or at least not until the Singapore dollar ceases to exist. Inflation is real.

Cannot be it keeps increasing till a million dollars right (though we wont be affected coz we would mostly be six feet under).

At some point in the presumably distant future the Full Retirement Sum will be S$1 million, but that S$1 million won't have anywhere near the real purchasing power it has today. (Well, OK, those future dollars will be able to purchase an iPhone 68 which will be unimaginably incredible -- maybe it'll brush your teeth for you? -- but that's a different point.)

I wish the SA ceiling is much higher.

Me too.

(*) The government only has contribution requirements for citizens and PRs who work in Singapore in the labor market (not for those who work as homemakers, for example). If the compulsory contributions end up supporting a Basic Retirement Sum-sized Retirement Account or larger, then the BRS is the practical minimum. But if less, then that's the minimum.

 

[mummy1234]

Yup, its a little sick to be honest to know that future generations are gonna have to meet ever increasing FRS. I wonder when will this ever stop. Cannot be it keeps increasing till a million dollars right (though we wont be affected coz we would mostly be six feet under).

That is why some believe in topping up their children's cpf from young.

 

[yoongf]

Are the numbers correct?

Allocation rates for SA is abt 5% abv MA. But numbers show SA is 4 times MA figures?

Yet to do any detailed calculations but the Numbers do look significantly optimistic.

Let's say a 30 year old is earning a salary of $3500 a month with $0 balances across all 3 of his CPF accounts.
In 20 years time his balances will be as follows:
OA: 209033
SA: 183540
MA: 57200

This calculation is based on a flat salary of $3500 over 20 years excluding bonuses and pay increments. What more, he still has another 5 years of compounding interest to reach 55.

 

[THEMIKOS]

No, that's not correct. The government doesn't impose an obligation on anybody to hit a particular minimum(*), or to have even one dollar in their Retirement Accounts. The Full Retirement Sum is the default maximum level of Retirement Account funding on your 55th birthday, and that's pretty much all it is.

.

Why do u say the govt doesnt impose an obligation on anybody? I think they do actually, in a different way. What was promised was that CPF was gonna be the working man's pot of cash upon hitting a certain age. And then CPF Life came up where if u do not hit the FRS, u cannot withdraw anything more than 5k?

Now i do not have knowledge about the 20% that one can withdraw once or just before he starts to draw CPF Life payouts (just found out by reading this forum a few days ago) so let's not consider that as part of the payout one can withdraw after the initial 5k.

Let's consider a person who has a combined OA+SA balance of 174k now. He can only withdraw 5k instead of what he was "promised" of 174k (am guessing, dont know what cpf rules there were previously). Now isn't this considered an imposement by the govt for the man to not be able to use his money, aka save?

 

[THEMIKOS]

99% correct, used the CPF APP to get the numbers.

The parameters were, salary 3500, sa ma and oa acct start with $0.. 20 years compounding based on the birth year 1989

Are the numbers correct?

Allocation rates for SA is abt 5% abv MA. But numbers show SA is 4 times MA figures?

Yet to do any detailed calculations but the Numbers do look significantly optimistic.