CPF Changes and the Impact of Investing Costs on Retirement

Thursday, 13 January 2011 03:33

CPF Changes

The CPF Minimum Sum (MS) was increased to $106,000 on 1^st July 2008, and the MS 50% withdrawal rule began to be phased out from 1^st January 2009. By 2013, the MS would have increased to $120,000, and the Medisave Required Amount (MRA) to $25,000.

This means that CPF account holders with less than $145,000 ($120,000 CPF Ordinary Account (OA) + Special Account (SA), plus $25,000 MRA) in 2013 can only withdraw $5000 at age 55. Those who do not meet the MRA will be required to transfer any OA/SA in excess of the MS to meet the MRA.

According to the Longevity Insurance Committee (LIC), 60% of CPF account holders are projected to have at least $67,000 in their CPF OA and SA in 2013, whilst 25% are projected to have less than $40,000.

How many are expected to have less than the MS + MRA requirement of $145,000 in 2013? And, will more Singaporeans be financially stressed between the ages of 55 to 65, which is the deferred CPF life annuity starting age, under the new CPF life scheme?

The MS increase from $99,600 to $106,000 is an increase of $6,400 or about 6.4%.

Since historical inflation in Singapore is only about 2%, why has the MS increased by 6.4%?

According to the LIC, the MS in 2013 is projected to be $134,000 after adjusting for inflation. So is the MS $120,000 or $134,000 in 2013?

At this current rate of increase, does it mean that Singaporeans like my daughter, who is 23, may only be able to withdraw $5,000 when she reaches 55, as the MS may have increased to about $280,000 by then?

After using CPF for their HDB flats, how many Singaporeans will have more than $280,000 in their CPF when they reach 55? And what will the MRA be by then – about $105,000 at its current quantum of increase at $2,500 a year?

Leong Sze Hian

A Wharton Fellow and alumnus of Harvard University, has authored 3 books, been quoted over 1000 times in the media, and been invited to speak more than 100 times in 20 countries across 5 continents. He has served as Honorary Consul of Jamaica and is the President of the Society of Financial Service Professionals.

Last Updated on Thursday, 13 January 2011 03:56

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