Opinion

Will We Ever Get Our CPF Money? CPF Raises the Minimum Sum by $7,000 to $155,000

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Jeff Cuellar

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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.

Images:
Ernest Chua

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.

  • Jonathan Tan

    Wrong. For a person who started work at the age of 25, he would have at least 30 years to save.

    For a gross salary of $2,500, he would be saving $575.10 (36% inclusive of employer’s contribution) per month. This becomes $307,889.87 at age 55.

    This is even when we exclude wage increments, annual and performance bonuses, preferential interest rates for the first $20,000, savings in Special account and the returns on CPFIS investments.

    I have also excluded potential profits from the sale of subsidized housing and the fact that 50% of the amount required for the Minimum Sum can be pledged by the value of your house. The Minimum Sum can be met even if a person earns less than $2,500.

    Disclaimer: The CPF contribution rates decreases with age. For illustration purposes I have ignored this but the difference is easily offset by the any of the factors I have excluded.

    • Edwin Zeng

      You are the one who is WRONG. The minimum sum will continue to increase by at least 10k per year when accorded to inflation, which is what you DID NOT take into account. So the person who is 25 today will need about a total of 500k for both minimum sum and medisave minimum sum, when he/she turns 55.

      The person wages has NOT been increasing in tandem with inflation nor with the increase in minimum sum. Thus, the minimum sum CANNOT BE MET.

      And the 4% CPF fixed interest rate is computed ONLY on an annual basis. Whereas app developers make money from Apple/Google and advertising networks on a DAILY BASIS. So this 4% interest rate is utterly USELESS to even consider as a form retirement savings plan, since it has been disrupted by the apps economy.

      • Not to mention the nice little scam that’s run on all of us who were foolish enough to use our CPF to pay our HDB mortgage. Not only do you have to repay the principal you’ve borrowed from yourself (as you would with any similar scheme anywhere), there’s a Uniquely Singapore™ twist: you have to repay the (ever-compounding) interest that you’d have earned had you not borrowed your CPF money from yourself. That itself explains a good number of the Pioneer Generation aunties and uncles working menial jobs, scrounging or “selling tissues” (begging) to be able to buy their food and medicines for the next day.

        A Government in any other country that swindled its citizens thus, especially those who have worked their entire lives for this country’s survival and success, would lose a vote of no confidence in Parliament, be smashed at the subsequent polls, and its leaders banned afterward as “heartless, selfish and with pathological conflicts of interest”. But this is Singapore, more properly known as PAP Pte Ltd, so…

        What are we going to do about it?

      • Jonathan Tan

        You are right, CPF interest is compounded annually. Thanks for highlighting the error.

        I’ve corrected the calculations. For the sake of the argument, let’s include what I did not highlight and see if it meets the minimum sum of $500k (adding $10k every year).

        At age 55:
        $302,981.34 (OA)
        $100,952.89 (SA)

        The combined sum of $403,934.23 is transferred into the RA for the next ten years.

        At age 65, you will have $597,921.34.
        Whose onus is it to have enough for retirement? If I don’t have enough to meet arbitrary figures on my future expenditure, I should do what is within my control to stay above water.

        I could grow it through CPFIS. I could buy a house and have its value appreciate with inflation. If I fail to do all that, I could choose to live frugally for the rest of my retirement.

        Whatever it takes to make life a little easier in this world.

  • Din

    Yes you are absolutely right, nothing to add more !! I’m now at 55’s and in the verge of getting my home repossed and yet I’m always denied to use my RA to cover my monthly installment or rather arreas. I’m really depressed by this. Work,work and work,even doing some p/time job. really stressed. If I’m at my 30’s I might be tempted to take the shortest way. Well at this age still surviving but sometimes really feel like you are in the sinking ferry.