With retirement age gradually increasing, Singaporeans are given the option of working until an older age. While this gives you more time to build up your nest egg for retirement, is it aligned with your ideal life plan or do you wish to retire before 60?
What is CPF Life
Introducing CPF Life, a government scheme developed to help Singaporeans plan for their retirement.
Essentially an annuity plan, CPF Life offers monthly pay outs after retirement and provides lifetime coverage regardless of the plan chosen. For Singapore residents born in and after 1958, joining CPF Life is mandatory if you have S$60,000 in your retirement account when you are near eligible pay out age.
#1 Hitting the Basic Retirement Sum (BRS) is achievable and easier than you think
Are you daunted by the Basic Retirement Sum (BRS) required in your retirement account by 55? Do not be intimidated as obtaining this amount is easier than you think.
Take for example a 25 year old male, who has a monthly income of S$3,500. Without factoring in any bonuses or increments, he would still have nearly enough for the BRS, given that he pledges his house as required. Therefore if bonuses and increments were to be factored in, he should comfortably exceed the BRS by a good margin.
Table 1: Projected BRS amount for the next 30 years
Age |
Year |
Basic Retirement Sum |
Projected Percentage of Inflation |
55 |
2016 |
$80,500 |
- |
55 |
2017 |
$83,000 |
3.106% |
55 |
2018 |
$85,500 |
3.012% |
55 |
2019 |
$88,000 |
2.924% |
55 |
2020 |
$90,500 |
2.841% |
55 |
2021* |
$93,188 |
2.971% |
55 |
2026* |
$107,876 |
2.971% |
55 |
2031* |
$124,880 |
2.971% |
55 |
2036* |
$144,564 |
2.971% |
55 |
2041* |
$167,351 |
2.971% |
55 |
2046* |
$193,729 |
2.971% |
*BRS provided by CPF for 2016-2020 with the remaining BRS calculated based on the average inflation rate of 2.971%.
Table 2: Potential amount in CPF Special Account
Age |
Income Per Year |
CPF Special Account (Per Year) |
Total Amount |
25 |
$42,000 |
$2,520 |
$2,520 |
30 |
$42,000 |
$2,520 |
$17,261 |
35 |
$42,000 |
$2,940 |
$35,632 |
40 |
$42,000 |
$2,940 |
$59,913 |
45 |
$42,000 |
$3,360 |
$89,891 |
50 |
$42,000 |
$4,410 |
$129,385 |
55 |
$42,000 |
$1,050 |
$178,764 |
Looking at Table 1, we can understand that by 2046, the projected BRS would be at S$193,729 while Table 2 shows an accumulated S$178,764 in his CPF Special Account.
Comparing between both tables, we can understand that the 25 year old male would only require an additional S$14,965 to attain the required BRS, assuming that his pay remains stagnant with no increments and bonuses.
(See "You Might be in Massive Trouble, Without These 3 Insurance Policies")
#2 70% of Singaporeans will have enough for their Basic Retirement Sum (BRS) in 2020
A survey conducted in 2016 found that almost half of Singaporeans were not prepared for retirement and have yet to start on retirement planning.1 While this is shocking, it reinforces the idea of CPF Life - to help Singaporeans prepare for retirement.
With longer life expectancy rates, the need for adequate retirement funds is becoming increasingly important. It is projected that the active CPF members who can meet the Basic Retirement Sum (BRS) are set to increase by 15 per cent in 5 years.2 This means that more Singaporeans should be able to receive monthly pay outs with over half of the active members having at least enough for their BRS by 55.3
(See "Worried About Critical Illness? Here's 3 Plans You Should Know")
#3 Pay outs from CPF Life can be enough to lead a simple retirement life
CPF Life provides monthly pay outs, with these varying according to the plan chosen and your retirement account balance. Would it then be surprising to know that these pay outs could help to cover most of your post-retirement expenses?
While monthly retirement expenses vary among individuals, a basic lifestyle is estimated to require S$1,200 a month.4 This takes into the assumption that by retirement age you would have repaid any outstanding loans and would no longer have any financial obligations. Naturally, this also means leading a simple and non-extravagant lifestyle.
Given that the CPF Life Standard Plan offers monthly pay outs of S$700-750, you would only need to top up an additional S$500 to supplement this modest lifestyle. This additional S$500 could come from your savings, investments, endowments or annuities. As CPF Life is meant to provide you with a head start in retirement planning, it is important for you to build your own savings and manage your retirement plans so as to complement with CPF Life.
Government schemes such as Medisave and Medishield can also help with your medical costs should the need arise.
(See "5 Awesome Facts You Didn't Know About Medisave & Shield Plans")
How FSMOne can help you get on track
Our team of friendly advisers is able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan, you can contact our advisers at advisory@fundsupermart.com.
Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
1Source: http://www.straitstimes.com/business/invest/over-4-in-10-have-not-saved-for-retirement-poll
2Source: https://www.areyouready.sg/YourInfoHub/Pages/Work-out-your-CPF-sums-for-retirement-.aspx
3Source: https://www.parliament.gov.sg/lib/sites/default/files/paperpresented/pdf/2015/S.88of2016.pdf
3Source: http://www.channelnewsasia.com/news/singapore/retirement-planning-how/2640474.html
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