Let’s be honest. You’re not a huge fan of the Central Provident Fund (CPF) are you? If you’re below the age of 50, seeing 20% of your monthly salary disappear into that black hole known as your CPF account probably doesn’t make you too happy.
After all, its money you really can’t touch.
The reason why the government won’t let you touch it is because it’s for your “retirement.” If you’re lucky enough to surpass the CPF Minimum Sum (MS) (and Medisave Minimum Sum) by a few hundred thousand dollars, you can withdraw that “excess” balance plus $5,000 to possibly retire “early” at the age of 55.
Of course, most of you won’t be so fortunate. You’ll probably end up taking the $5K and any excess balances at age 55, or keep it in your CPF account until you hit the “real” retirement age – the big 65. Then you can apply to receive your CPF in monthly payments.
This is, of course, assuming you’ve hit the MS already.
Oh, I forget to mention that the MS keeps on rising. This July, it’s going to be $155,000 an increase of $7,000 dollars!
Is it me, or is it just getting harder and harder to retire every year?
Why Is the CPF Minimum Sum (MS) Raised Every Year?
The short answer to this question is simple – inflation. The MS is increased every year in order to account for inflation. If you’re unfamiliar with the concept of inflation, you can read this.
The reality is that the price of everything will rise every year, and the powers that be over at CPF have dictated that your CPF MS must increase as well to keep up with the ever increasing cost of living.
To give you an idea into just how much your CPF MS has increased over the last 14 years, in 2000, it was ONLY $65,000. Now it’s going to be $155,000 – that’s a 138% increase!
That’s a Great Reason, But What About Wages?
While the annual CPF MS increase is tied to the rate of inflation, what it misses out is wage growth. That’s the number that’ll determine whether you’ll be able to make the CPF MS or not.
Think about it. The CPF MS went up from $148,000 to $155,000 – a 4.7% increase. Look back at your salary over the last few years and calculate whether your wages went up higher than that.
You might be surprised (or disappointed) with the results you find.
What’s worse, according to a press release by ECA International, a global consulting firm, companies in Singapore are only expected to give employees a pay increase of 4.5%.
That brings up a very important question – are wages in Singapore rising fast enough to keep up with the annual CPF MS increase?
Sounds like a good future article to cover. Follow us on Facebook as we look deeper into the issue.
In Short, the Yearly MS Increase Is Like an Annual Kick In the Crotch (And a Wake-Up Call)
A few years ago, I asked my cousin what it was like to graduate Ranger school at Fort Benning, Georgia. His response was something like, “It’s like getting kicked full force in the nuts every day for two months, but it’s worth it!”
He did have a point though – at least there’s an end goal to the pain you have to endure.
The annual CPF MS increase on the other hand is more like a yearly financial kick in the crotch – especially if your income isn’t increasing along with inflation. That means there might be NO payoff for all the financial pain you endure.
Well, there is a way you can get your all of your CPF funds, but you’re not going to like it (*hint* it involves a casket and mourning relatives).
So if your annual “salary reviews” only provide you with a $50-$100 annual increase, it’s going to be hard to keep up with the CPF MS when its going up by thousands of dollars every year!
What can you do? Well, aside from asking your boss for a better raise every year – not much. That’s especially true if you’re using your CPF account to finance your mortgage repayments like most other Singaporeans.
In that case, you’re probably getting farther and farther away from retirement every time the CPF MS goes up.
Then again, if you’re relying just on your CPF account for retirement, you’re setting yourself up for failure. If anything, the CPF MS increase should be a wake-up call to start taking charge of your finances and retirement planning.
If you’re already in your 30s, and haven’t started investing, you’ll want to get started soon.
To find the investment information you need, check out our extensive selection of investment articles today – don’t wait for the next $7,000+ CPF MS increase.
What do you think about the latest rise in the CPF Minimum Sum? Are we ever going to get our money? Share your thoughts here.
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