CPF reform

[djchris]

As Tan Chuan Jin's example shows, even a diploma holder with a slightly-below-median starting salary and minimal assumptions - e.g. no salary raises in 30 years - will earn enough for his SA to meet today's Full RS. If you've missed it, please go look at that.

Rather than worry about something you have no control over - what the BRS or FRS is going to be in 30 years' time, which nobody knows, not even the minister himself - you should worry about something you do have control over: what you earn. Are you putting in effort in your studies and your work to command a good salary. Do you deserve raises because you are adding value. Or are you just coasting along and hoping for the best.

Also, it's not just what you earn, but what you save. If your expenses equal or exceed your income, you will always feel you don't have enough. But if you can save and invest wisely, you don't even have to care what the retirement sum is. You already have enough outside the CPF to retire and your CPF money is just a fallback. That's called taking charge of your financial life. I think it's an ideal we can all aim for, even if we are starting from zero.

While I agree with your points on the second and third paragraph, I just want to say that Tan Chuan Jin's example is ******** because the basic retirement sum is a moving target and there's now way hitting 165k 30 years later will be sufficient for the basic retirement sum.

I think that the man is one of the better MPs in PAP but his recent comments are quite disappointing.

Younger workers can save enough to retire: Tan Chuan-Jin - Singapore More Singapore Stories News & Top Stories - The Straits Times

 

[anfielder]

While I agree with your points on the second and third paragraph, I just want to say that Tan Chuan Jin's example is ******** because the basic retirement sum is a moving target and there's now way hitting 165k 30 years later will be sufficient for the basic retirement sum.

I think that the man is one of the better MPs in PAP but his recent comments are quite disappointing.

Younger workers can save enough to retire: Tan Chuan-Jin - Singapore More Singapore Stories News & Top Stories - The Straits Times

I find those calculations super conservative. No increments? No bonuses? That doesn't happen to the average worker does it? And 165k is only referring to the SA. OA can't be zero can it?

 

[djchris]

Here are my thoughts.

I did some calculations of my own and I found that the SA plays a major role towards funding the Basic Retirement Sum compared to the OA. The ratio is around 1:4:3.5 among OA, SA and MA. Naturally the excess from MA will spill over into SA.

In my case, as the OA is used to fund my HDB mortgage loan repayments, the growth is very small compared to SA. I even have plans to do monthly top-ups of $210 from OA to SA due to the increase in CPF contribution salary ceiling.

I dare say hitting 500k in my RA won't be a problem. But what the Basic Retirement Sum would be like (I am forecasting to be less than 350k) will depend on the government.

I don't think I will be able to hit the Full Retirement Sum so the payout will be low. As of now, the plan is to withdraw all the excess money and buy an annuity to my monthly payout.

And along the way from now to retirement, build a prudent and sustainable investment portfolio.

Sometimes I feel that we shouldn't worry too much about what we can't control, but focus on those that we can. A few forum members have mentioned this before.

 

[anfielder]

Here are my thoughts.

I did some calculations of my own and I found that the SA plays a major role towards funding the Basic Retirement Sum compared to the OA. The ratio is around 1:4:3.5 among OA, SA and MA. Naturally the excess from MA will spill over into SA.

In my case, as the OA is used to fund my HDB mortgage loan repayments, the growth is very small compared to SA. I even have plans to do monthly top-ups of $210 from OA to SA due to the increase in CPF contribution salary ceiling.

I dare say hitting 500k in my RA won't be a problem. But what the Basic Retirement Sum would be like (I am forecasting to be less than 350k) will depend on the government.

I don't think I will be able to hit the Full Retirement Sum so the payout will be low. As of now, the plan is to withdraw all the excess money and buy an annuity to my monthly payout.

And along the way from now to retirement, build a prudent and sustainable investment portfolio.

Sometimes I feel that we shouldn't worry too much about what we can't control, but focus on those that we can. A few forum members have mentioned this before.

BRS should be around $200k in 30 years time if it increases at a rate of 3% per year. So, if you think you're going to have $500k in your RA, you have a pretty good chance of hitting FRS.

 

[dork32]

you so right about tan chuan jin maths but he cannot do it himself.

if you 25 today and 2200 a month, you will have 165k by 60+ years old. By the time you reach 60+. correct. but by the time he hit 65 the minimum sum would have risen to whatever level?

you are 25 years old and earn 2200 a month 40 years ago, you would have 165k by 60+ years old now. But how many poly diploma holders earn 2200 a month 40 years ago? Also how many people hold at least a diploma at that time? my parents dont. most of the parents of colleagues dont. all my colleagues hold post grad degrees.

that is the reason why so many people could not reach the min sum.

 

[djchris]

BRS should be around $200k in 30 years time if it increases at a rate of 3% per year. So, if you think you're going to have $500k in your RA, you have a pretty good chance of hitting FRS.

I put a more aggressive forecast on my end. I also placed a stop-working-age of 50 for myself in my calculations.

That means that you also can achieve this. The trick is to achieve a $6k income in your early 30s.

 

[lzydata]

So people in the past did not earn so much money and do not have so much in their CPF accounts. So to you all, that means that people today cannot hope to meet any retirement sum in the future. People in the past also did not have smartphones, how come now everyone does?

OK, a more serious answer. One advantage of Tan Chuan Jin's example is its generous assumptions. Let's assume that instead of getting the same salary for 30 years, this dip holder at least gets cost-of-living increases. His salary maintains the same real value, and so does his CPF contributions. Then, assume that the retirement sums are also designed to keep pace with inflation, or are just slightly higher, like 3% per year. The CPF interest rate at 4%++ is also more than enough to keep pace.

In short, it is entirely likely that this dip holder will have enough in his SA to meet whatever is the Full Retirement Sum 30 years from now. Mind you, this is only the SA, we are ignoring any "left over" money from his MA or OA. Assume he spent all his MA on bills and his house never appreciated, so he's only left with the SA.

Btw, if someone has other income sources, other assets, or just has few needs, is it a big problem if he misses the FRS or BRS? Why is there is preoccupation with hitting a figure, whether the Basic or the Full Retirement Sum? It feels like people think they have to be working towards a certain number like you're taking a test in school and you have to get an A. At age 55, shouldn't we at least have a broader perspective?

 

[dork32]

So people in the past did not earn so much money and do not have so much in their CPF accounts. So to you all, that means that people today cannot hope to meet any retirement sum in the future. People in the past also did not have smartphones, how come now everyone does?

OK, a more serious answer. One advantage of Tan Chuan Jin's example is its generous assumptions. Let's assume that instead of getting the same salary for 30 years, this dip holder at least gets cost-of-living increases. His salary maintains the same real value, and so does his CPF contributions. Then, assume that the retirement sums are also designed to keep pace with inflation, or are just slightly higher, like 3% per year. The CPF interest rate at 4%++ is also more than enough to keep pace.

In short, it is entirely likely that this dip holder will have enough in his SA to meet whatever is the Full Retirement Sum 30 years from now. Mind you, this is only the SA, we are ignoring any "left over" money from his MA or OA. Assume he spent all his MA on bills and his house never appreciated, so he's only left with the SA.

Btw, if someone has other income sources, other assets, or just has few needs, is it a big problem if he misses the FRS or BRS? Why is there is preoccupation with hitting a figure, whether the Basic or the Full Retirement Sum? It feels like people think they have to be working towards a certain number like you're taking a test in school and you have to get an A. At age 55, shouldn't we at least have a broader perspective?

tan chuan jin mentioned that you have to depend on the 4% interest to hit the 165k. otherwise saving it in a biscuit tin will give you only 55k. if cpf min sum were to rise by 3% a year and interest in cpf by 4%, your saving will not hit the min sum by tan chuan jin's calculation.

i am not saying that people cannot hit the min sum. i definitely will hit the min sum long before i retire. i am saying tan chuan jin's maths is flawed. the picture he painted is too rosy

 

[cscs3]

So people in the past did not earn so much money and do not have so much in their CPF accounts. So to you all, that means that people today cannot hope to meet any retirement sum in the future. People in the past also did not have smartphones, how come now everyone does?

OK, a more serious answer. One advantage of Tan Chuan Jin's example is its generous assumptions. Let's assume that instead of getting the same salary for 30 years, this dip holder at least gets cost-of-living increases. His salary maintains the same real value, and so does his CPF contributions. Then, assume that the retirement sums are also designed to keep pace with inflation, or are just slightly higher, like 3% per year. The CPF interest rate at 4%++ is also more than enough to keep pace.

In short, it is entirely likely that this dip holder will have enough in his SA to meet whatever is the Full Retirement Sum 30 years from now. Mind you, this is only the SA, we are ignoring any "left over" money from his MA or OA. Assume he spent all his MA on bills and his house never appreciated, so he's only left with the SA.

Btw, if someone has other income sources, other assets, or just has few needs, is it a big problem if he misses the FRS or BRS? Why is there is preoccupation with hitting a figure, whether the Basic or the Full Retirement Sum? It feels like people think they have to be working towards a certain number like you're taking a test in school and you have to get an A. At age 55, shouldn't we at least have a broader perspective?

Retirement sum is very subjective. Once a financial planner did a calculation for me and told me you need nnnn.mm per month for retirement. I told him to do a detail break down. Inside has something like x$ for phone bill, X number of travel etc. Question is do you really need that?

If this is what you really want. Then you better work hard now and not later! To me, phone bill can be replaced by prepaid card as at this age, is better to meet and talk vs thru the phone. Replace travel to USA to Malaysia etc.

 

[henrylbh]

tan chuan jin mentioned that you have to depend on the 4% interest to hit the 165k. otherwise saving it in a biscuit tin will give you only 55k. if cpf min sum were to rise by 3% a year and interest in cpf by 4%, your saving will not hit the min sum by tan chuan jin's calculation.

i am not saying that people cannot hit the min sum. i definitely will hit the min sum long before i retire. i am saying tan chuan jin's maths is flawed. the picture he painted is too rosy

That's what I thought so too.

I was thinking that he is smoking parliament with numbers, though I am no good in maths. Ha ha "This is not magic, it is just basic mathematics".

 

[djchris]

Retirement sum is very subjective. Once a financial planner did a calculation for me and told me you need nnnn.mm per month for retirement. I told him to do a detail break down. Inside has something like x$ for phone bill, X number of travel etc. Question is do you really need that?

If this is what you really want. Then you better work hard now and not later! To me, phone bill can be replaced by prepaid card as at this age, is better to meet and talk vs thru the phone. Replace travel to USA to Malaysia etc.

You're right. Retirement planning is very subjective. I feel that a detailed breakdown of your expenses is a good estimate of what you need to prepare for your retirement. But just be careful that a financial advisor is just an insurance saleman who wants to close your deal and may use the worst case scenario to make you spend money.

 

[Funerei86]

For young adult. The picture is indeed not rosy as we would most likely be spending all our OA towards our housing. Leaving only our SA primarily for retirement. Even after all is said & done, the worry of balancing current needs vs future need is still not easily understood. At least the decision not to make member decide on CPF life at 55 is a positive one. 20% for those born 1958 & after is also good move toward introducing more flexibility. The CPF system indeed is too complex but all these are due to calls to enhance it to better serve our future needs. Surely changes take time to accept but sooner or later become the new norm.

My advise: Study the system & choose what works best for yourself. Investment savvy can invest to grow your retirement monies.
Bet on your house then clear your OA to pay what you can. People forget that there is a cash out option if you renounce your citizenship. E.G Sell off 5 room, renouce get back CPF, liquidate investments, i am sure you can live comfortably elsewhere with a lower standard of living & less stress in your life

 

[mosaic1979]

For young adult. The picture is indeed not rosy as we would most likely be spending all our OA towards our housing. Leaving only our SA primarily for retirement. Even after all is said & done, the worry of balancing current needs vs future need is still not easily understood. At least the decision not to make member decide on CPF life at 55 is a positive one. 20% for those born 1958 & after is also good move toward introducing more flexibility. The CPF system indeed is too complex but all these are due to calls to enhance it to better serve our future needs. Surely changes take time to accept but sooner or later become the new norm.

My advise: Study the system & choose what works best for yourself. Investment savvy can invest to grow your retirement monies.
Bet on your house then clear your OA to pay what you can. People forget that there is a cash out option if you renounce your citizenship. E.G Sell off 5 room, renouce get back CPF, liquidate investments, i am sure you can live comfortably elsewhere with a lower standard of living & less stress in your life

Lol the problem is alot of Singaporeans like to complain about the government, the country etc but when you ask them to renounce the citizenship and leave all diam diam. Humji. Truth is they probably know they re no better off elsewhere in terms of retirement or job prospects.

 

[highsulphur]

Lol the problem is alot of Singaporeans like to complain about the government, the country etc but when you ask them to renounce the citizenship and leave all diam diam. Humji. Truth is they probably know they re no better off elsewhere in terms of retirement or job prospects.

And medical coverage upon retirement

 

[Perisher]

Lol the problem is alot of Singaporeans like to complain about the government, the country etc but when you ask them to renounce the citizenship and leave all diam diam. Humji. Truth is they probably know they re no better off elsewhere in terms of retirement or job prospects.

Don't make it sound so simple, everyone has family, friends and other things they can't let go other than jobs or retirement prospects. $ isn't the only factor though it's a major one.

These days whatever you say mostly is also a complaint, like you right now is complaining about singaporeans.
Sometimes it's reasons, sometimes it's unreasonable, need to filter.