Many Singaporeans think CPF savings alone are enough to cover their retirement costs in Singapore. Here’s why they’re sorely mistaken.
Most Singaporeans rely on their CPF savings to provide for retirement. But with the rising cost of living, and CPF already used to pay for your flat, there’s a chance it may not be enough for a comfortable retirement.
Here’s what you need to know about whether or not your CPF will suffice.
Your CPF is an important retirement tool – but it’s not going to be enough. Here’s why:
Inflation Rate Risk
Typical rate of inflation in Singapore: 3% per annum
CPF interest rates: 2.5% – 3.5% for Ordinary Account, 5% for Special Account and Medisave Account
After inflation, the CPF OA may only be growing at around 0.5% per annum. Enough for a basic retirement, but it may not be a comfortable one!
The CPF Must Pay For Your House Too
HDB loan rate = 0.1% ABOVE the prevailing CPF rate (approx. 2.6%)
Downpayment for the house: 10% of property value. For a S$200,000 flat, S$20,000 is deducted from CPF for the down payment.
If your flat is too expensive, you might have nothing but a “bare bones” retirement.
CPF Can’t Save You From Loss of Income
CPF is made of 20% of your pay, plus 17% employer’s contribution.
If you are ever unable to work (e.g. medical emergency), your CPF will stop growing. You may not have enough for retirement.
Complement your existing MediSave with private insurance policies!
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.