Sunday, August 13, 2017

Projecting Your CPF figures (Revision 11)

Revision 11 (last paragraph): updated on January 1, 2021
Revision 10 : updated on April 16, 2020
Revision 09: updated on February 25, 2020 
Revision 08: updated on January 8, 2020
Revision 07: updated on October 22, 2019
Revision 06: updated on August 24, 2019
Revision 05: updated on April 18, 2019
Revision 04: updated on August 29, 2017
Revision 03: updated on August 21, 2017
Revision 02: updated on August 18, 2017
Have you projected your CPF figures? It is interesting to find out.
There are some important figures below and assumptions (of course).
(1) I have to emphasize that S$6,000 monthly income and S$30,000 monthly income, both the CPF contributions are all the same. With 13th month bonus included, you will contribute at least S$28,860 into the CPF account every year. If you have more bonuses, your CPF figures will be more than the below figures. This calculation takes 13 months contribution only.
(2) To simplify the presentation, this is what happen. Always transfer OA to SA, hence, OA account is S$0 balance at all times.

(3) No further S$7,000 SA top up in the table below, yearly contribution of S$28,860 go straight into the column of (SA+MA).

(4) Why 4.3% interest? SA and MA interest are 4% but the first S$60,000 will attract additional 1% interest, which is 5% interest in total. With my magic formula, you just calculate the total sum as 4.3% interest will be close to (the first S$60,000 sum enjoying 5% interest, remaining balance 4% interest).

(5) Steady increase of FRS by S$5,000 per year.

(6) Steady increase of 4% in BHS per year.

(7) By the age of 55, the full retirement sum will be S$256,000 and basic healthcare sum will be S$105,342. Total (FRS + BHS) of S$361,342 will be locked at age 55.

(8) FRS of S$256,000 will yield monthly pension of S$2,081 from age 65 until death.

(9) If you die earlier, they will calculate the total monthly pension you have received, then minus from ( the FRS sum of S$256,000 + interest earned for the 10 years , while you are age 55 to age 65 and beyond), the proceed will be given to your spouse and children.

(10) The table below shows that you stop working at age 55, which is quite unlikely for me. I would love to continue to work even up to age 65 if my health allows. So, the table below would be dramatically different as you will have monthly contribution yet again.

(11) Even if you don't work at age 55, you will still see a cool S$1.028 million cash by the age of 58 and you have all the absolute right to withdraw that cash from the CPF. Why withdraw? Just leave it for the fat compound interest. Let it rolls, baby! CPF is the best retirement scheme in the world. Trust me.

This section is for workaholic. Some may not want to retire at age 55, they want to work until age 65 or even age 70. Assuming the monthly income is still at least S$6,000, you will see:
(a) S$1.047 million cash in the CPF account at the age of 57.
(b) S$1.747 million cash at the age of 65.
(c) S$2.321 million cash at the age of 70.
With that figures in the CPF account, please don't work anymore.
Give chance to the younger generation.
Updated on August 18, 2017
Reality check. Hitting the first milestone, (SA+MA), S$200,000 mark broken.
Re-cap, my age 55 (SA+MA) requirement shall be: S$361,342.
Additionally, I have utilized OA account of S$103,552.04 for HDB flat, accrued interest is S$15,088.48 as for today, total : S$118,640.52 shall be in OA account IF I DO NOT USE IT for housing loan. If I sell the flat TODAY, the sales proceed of S$118,640.52 will be returned to CPF OA account first, then remaining balance of sales proceed goes into my bank account.
I also have small portion of investment in CPF OA amount to S$1,668.10 (too small figures, negligible).
If I never use CPF OA money for housing loan and investment, the balance of OA account will be S$120,308.62, after transfer all OA balance to SA account, the total (SA+MA) will be S$322,345.66.  The yearly interest (~=4.3+%) is S$13,860 ! 

Updated on August 21, 2017
I made a phone call to CPF hotline today and realized I made a BIG MISTAKE on the calculation above.
(This mistake is corrected and updated in Revision 06)
Once your CPF SA account reaches Full Retirement Sum, e.g. S$166,000 (year 2017), you are NOT able to do CPF OA transfer to SA. Please take note.
If you use SA money to buy unit trust/ insurances and the balance of SA account drops below FRS (for example, below S$166,000 this year), you are able to transfer CPF OA to SA as well as CPF SA S$7,000 TOP UP to enjoy tax relief.
In other words, CPF strictly looks at the SA account balances only.
Same for your MA account, if your MS reaches the BHS and SA reaches FRS, then, your MA contribution will flow to OA, not SA !
Key takeaways:
(1) SA reaches FRS, you cannot do CPF SA S$7,000 TOP UP to enjoy tax relief. You cannot transfer CPF OA to SA account.
(2) If MA reaches BHS and SA reaches FRS, CPF MA contribution will go to OA account.
 Updated on August 29, 2017
One reader alerted me that there is one error in the posting above.
Hence, the CPF hotline operator is wrong then.
The amount withdrawn from Special Account (SA) for investments are counted as Full Retirement Sum , do take note! See the information below for clarity.
Updated on April 18, 2019
Some milestones achieved.
I finally hit FRS (S$166,000) in CPF SA account on 3rd January 2018.
With the new FRS figure (S$171,000) in year 2018, I only able to top up S$5,000 into CPF SA on 3rd January 2018.
With the new FRS (S$176,000) in year 2019 and subsequent years, I no longer able to top up CPF SA to enjoy any tax relief. I see that as a good problem.
How to accelerate CPF contribution ?
(1) More bonuses ! Thankfully, I received good bonuses in year 2018 and 2019 (credited in March 2018 and March 2019), e.g.3.82 months & 2.75 months.
(2) 13th month payout which was credited in December every year.
(3) Annual Leave (AL) en-cash, which was credited in September 2018, for example.
Well on target to hit S$1 million goal in CPF !

 It will be really great if you have a lot of bonuses. It can speed up your CPF balances hugely!

Updated on August 24, 2019 (Revision 06)
There are two big news announced during the National Rally 2019 on August 18, 2019.
(1) The retirement age goes up to age 65 from age 62.

(2) Raising CPF contribution rates
National Rally 2019
The current CPF contribution rates
The new CPF contribution rates
from age 56-60 , contribution rate increased from 26% to 37%
from age 61 to 65, contribution rate increased from 16.5% to 26%
from age 66 to age 70, contribution rate increased from 12.5% to16.5%
What is the increased quantum with the above changes?
Firstly, let's tabulate all the magic numbers (shown below).
Take note:
(1) Once the SA account hits FRS sum and the MA account hits BHS sum, the monthly MA account contribution will flow to OA account, not SA account.
(2) Once you hit the age of 55, the FRS sum will be deducted from the SA account to RA account. Hence, there is a big drop in SA account at the age of 56.
By the age of 45, OA: S$209,247, SA: S$294,187
By the age of 50, OA: S$359,665, SA: S$395,240
We can take out all the monies from the OA and SA accounts at the age of 55 after putting aside FRS to the RA account.
By the age of 55, S$792,706 can be withdrawn.
(OA:S$515,142 , SA: S$277,564 as S$256,000 will be transferred from SA to RA)
By the age of 60, S$1,081,442 can be withdrawn.
(OA: S$691,049, SA: S$390,393)
By the age of 65, S$1,369,982 can be withdrawn.
(OA: S$877,464, SA: S$492,518)
By the age of 70, S$1,665,029 can be withdrawn.
(OA: S$1,052,656, SA: S$612,374)
With the old existing contribution rate:
By the age of 60, S$1,033,685 can be withdrawn.
By the age of 65, S$1,272,838 can be withdrawn.
By the age of 70, S$1,534,004 can be withdrawn.
The quantum increment with the NEW CPF contribution rates are :
S$47,757 more by the age of 60.
S$97,143 more by the age of 65.
S$131,026 more by the age of 70.
That is a big increment!
If all circumstances stay, I would like to work until age 65 as well.
Last but not least, there are no changes to the CPF withdrawal policies with the new CPF policies change.
(1) After putting FRS aside at the age of 55, you can take out all the CPF monies if you want.
(2) The monthly CPF payouts will still start from age 65. No change at all. Great !
Updated on October 22, 2019 
Please read this good article, "Four ways to optimize your CPF savings" on The Sunday Times, published on October 20, 2019.
There is a good tip here to maximize CPF Special Account (SA) savings, namely, right before you turn age 55, after setting aside S$40,000 in SA (CPF Board's requirement), you withdraw all the SA savings and invest them temporarily in a low cost and stable investment vehicle, for example, bond fund as a "parking facility fund", and have them transferred back to SA account after you turn age 55 once your RA account has been created.
Why doing so ?
FRS figures would be S$256,000 for me when I reach age 55.
CPF Board will first deduct SA account first before touching your OA account. In other words, they will deduct S$256,000 from my SA account to form RA account. By doing the above strategy, CPF Board will then deduct S$40,000 from the SA account (as your SA account now turn S$0 balance) and S$216,000 from OA account instead of SA account.
That says, you now have S$216,000 earning additional 1.5% compound interest .
SA pays 4% while OA pays 2.5%.
How much more will you gain by doing so ?

By the age of 55, S$792,706 can be withdrawn.
(OA:S$216,000 & SA: S$40,000 = S$256,000 ) will be transferred from OA/SA to RA)
By the age of 60, S$1,099,855 can be withdrawn.
(OA: S$435,575, SA: S$627,683)
By the age of 65, S$1,413,216 can be withdrawn.
(OA: S$586,113, SA: S$780,625)
By the age of 70, S$1,741,201 can be withdrawn.
(OA: S$721,584, SA: S$962,478)
With the deduction of S$256,000 (FRS) all from SA account only:
By the age of 60, S$1,081,442 can be withdrawn.
By the age of 65, S$1,369,982 can be withdrawn.
By the age of 70, S$1,665.029 can be withdrawn.
The quantum increment with the strategy of S$40,000 from SA & S$216,000 from OA)
S$18,413 more by the age of 60.
S$43,234 more by the age of 65.
S$76,172 more by the age of 70.
Not bad !!! 
Updated on January 8, 2020
My SA balance finally hit S$200,000 mark on 2nd January, 2020.
Net amount used in OA for stocks : S$13,500.24.
Net amount used in OA for HDB : S$103,552.04.
Accrued interest : S$22,374.21.
Missing opportunity of OA stood @ S$139,396.49 (due to stocks & HDB)
FRS for year 2020: S$181,000.
BHS for year 2020: S$60,000.

Updated on February 25, 2020
The FRS (Full Retirement Sum) figures are announced for year 2021 & 2022.
FRS for year 2021: S$186,000.
FRS for year 2022: S$192,000.
The FRS will be increased by 3% each year.
Updated on April 16, 2020
There are 3 ways to increase monthly CPF contribution:
(1) JUL 2019 - Annual Leave en-cash
(2) DEC 2019 - AWS (13th month)
(3) MAR 2020 - Yearly Bonuses
MA account finally hit the new BHS (for year 2020) : S$60,000 cap.
Total S$18,918.41 withdrawn from OA account to purchase stocks in year 2019-2020.
 Updated on January 1, 2021

CPF interest received for year 2020 is : S$12,493.53.

Year 2021 FRS is S$186,000 and BHS is S$63,000.

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