JKM Fund

Wednesday, August 13, 2014

Moment of Truth: CPF - Having a Good Retirement Life in Singapore (Revision 14)

Revision 14 (last paragraph): updated on August 24, 2019
Revision 13: updated on May 7, 2017
Revision 12: updated on December 9, 2016
Revision 11: updated on August 29, 2016
Revision 10: updated on August 24, 2016
Revision 09: updated on March 20, 2015
Revision 08: updated on March 15, 2015
Revision 07: updated on March 14, 2015
Revision 06: updated on March 4, 2015
Revision 05: updated on August 28, 2014
Revision 04: updated on August 25, 2014
Revision 03: updated on August 18, 2014
Revision 02: updated on August 14, 2014

How many of you really calculate how much CPF money you can withdraw by the age of 55 ?

I do not see anyone writing a blog to demonstrate how CPF can benefit us for a good retirement life in Singapore. Many chose to complain about Singapore government without knowing the true benefits of CPF. I feel pity for them.

Let me tell you a typical scenario of Singaporean/Singapore PR of PMET (Professionals, Managers, Executives and Technicians) by the age of 34.

You have to make some assumption. If you don't, your discussion will go "NO WHERE".

The benefit of Singaporean/Singapore PR is to have extra CPF money from your employer (16% of your monthly salary) and the cap of the monthly salary is S$5,000 per month. Meaning to say you only get maximum of S$800 extra from your employer when you have monthly salary of S$5,000 or more. Even if you earn S$1 million per month, your employer will still only give you S$800 per month max., cool ?

So, here are the assumption for the two scenario below.

Scenario 1: (by the age of 34)

(1) Monthly salary over S$5K.

(2) CPF OA contribution including 13th month bonus (Of course some have more bonuses. I only put 13th month bonus for easier calculation.)

(3) Contribution of S$7K into CPF SA every year. (CPF SA top up to enjoy tax relief) - Okay, that is just for my own benefits of calculation as I contribute S$7K into CPF SA every year now. :)

(4) I have ignored the extra 1% given to the OA and SA for the first S$60K to ease my calculation. Therefore, the final figure will be more.

(5) You have to start somewhere. So, I assume certain balances of CPF OA, SA and MA at the age of 34.

(6) Let's assume you have fully paid the HDB housing loan (OK, I have scenario 2 for servicing the housing loan).

For scenario 1, can you imagine how much cash you will receive by the age of 55, any wild guess?

The answer is a grand total of S$ 915,000 cash! Woo hoo ! (Total amount of CPF is S$1.11 million!)

Minimum Sum of RA, S$155,000 (OA and SA converted to RA by age of 55) and MA, S$43,500. So, we are complaining S$915,000 a lump sum cash by the age of 55 is not enough for retirement ? Take note by the age of 65 onwards, the governemnt will also give you S$1,200 per month until you die. Still not happy?

Of course, one can argue that by the time you reach age 55, the Minimum Sum will be increased again but I do not think it will go up tremendously. Even if they increase the Minimum Sum, you will receive more in monthly payout from age 65 onwards. So, I am still OK if they increase the Minimum Sum. I expect Minimum Sum will be around S$250,000 by the time I reach age 55 and the monthly payout at age 65 will be S$2,000 per month (by linear regression anlysis). That is my estimation.

Please take note that I only take 1 month bonus as calculation (we surely have more bonuses throughout the years) and I exclude additional 1% interest for the first S$60,000 in OA and SA, the compound effect of that 1% extra interest can be substantial ! If I have time, I will generate a separate excel spreadsheet for that 1% extra interest.

Scenario 2: (by age of 35) - (point 1 to 5 are the same)

(1) Monthly salary over S$5K.
(2) CPF OA contribution including 13th month bonus (Of course some have more bonuses. I only put 13th month bonus for easier calculation.)
(3) Contribution of S$7K into CPF SA every year. (CPF SA top up to enjoy tax relief) - Okay, that is just for my own benefits of calculation as I contribute S$7K into CPF SA every year now. :)
(4) I have ignored the extra 1% given to the OA and SA for the first S$60K to ease my calculation. Therefore, the final figure will be more.
(5) You have to start somewhere. So, I assume certain balances of CPF OA, SA and MA at the age of 34.
(6) Let's assume you own a fully paid HDB unit and you bought a new condo, TOP 3 years later and you want to wipe off OA monthly contribution to pay for the private housing loan.

Take note you have to set aside S$77,500 (combined OA and SA) first before you can start to use the CPF OA to serve your private housing loan. Again , I have to assume certain amount of balance available by the age of 35, then within 3 years, you have more than S$77,500 requirement (see example below). Therefore, you can fully wipe off your OA to serve the monthly housing loan when your condo is ready for TOP.

The example is "cut and paste" from scenario 1 and I didn't change the age to 55, so I just say age 56 for withdrawn as an example.

So, even if you now wipe off all the CPF OA for the private housing loan, by the time you want to withdraw CPF money by age of 56 (you can do it at age 55, OK?) , you still able to receive a lump sum cash of S$563K.

This is why, I am very confident that many people can still have a very good retirement life in Singapore.

Just to take note that the Minimum Sum right now is S$198,500 in total.

Are you amazed by the sum of money that you can withdraw at age of 55 ? Well, I am.

Furthermore, this is only CPF money for retirement life. We must know we have another saving vehicle for retirement planning , which is SRS (Supplementary Retirement Scheme) account. That is another good vehicle for investment and to enjoy further tax break. :)

I love both systems, CPF and SRS.

By the way, I did not exaggerate the numbers above. If you are a fresh graduate now, your starting pay (average now) is S$3,200 per month. Let's assume you have 5% pay increment every year (average). By the time you work for 10 years, you will hit the maximum CPF of 16% employer contribution, which is S$5,000 max.

Not to forget some will have bigger pay raise for the promotion (usually 10%) or job switch (usually 20% pay increment or more). You will be there.

Updated on August 14, 2014

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The Straits Times published an article, "CPF 'not enough' for retirement" right after I posted my entry yesterday, "CPF- Having a Good Retirement Life in Singapore".

There are some interesting points:

(1) 47% felt that their savings would not be enough and 44% felt the returns were too small. I hope they calculate the figures carefully. Of course, I cannot assume everyone in Singapore earns more than S$5,000 per month. That is why I said the above two scenarios assumption are for typical PMET. You will be surprised to know most of the people complaint about CPF are actually PMET. Hence, take care of yourself first before you talk about others.Singapore government will help those who are really in needs.

(2) 26% of investors made additional voluntary contributions to their CPF accounts. That is quite a number of people. Good job indeed.

(3) 63% of CPF memebers called for greater flexibility in withdrawing funds. This is very contracting to the next point which said 45% of investors would prefer to take a lump sum after leaving the required minimum balance in the CPF Retirement Account once they reach 55. You see the point here ? There are 55% of the people REFUSED to take all the money out from RA account after they have put aside the Minimum Sum. They have A CHOICE to take all the money out but they are not, that is 55% of the people (I will be one of them).Then, it said 63% of the CPF memebers called for greater flexibility in withdrawing funds. How flexible you want to withdraw your CPF fund? Anything extra besides the Minimum Sum, you can withdraw any amount anytime you want, that is still not flexible enough?

(4) 56% wanted government or employer contributions to be raised. Oh ! That is a good idea! Currently it is 16%, can we raise to 20%? That would be a S$1,000 per month from employer instead of S$800.

(5) "The CPF is an important element of every Singaporean's retirement plan, but it is not the only one". Yes, you have SRS account, your own stocks portfolio, fix-deposits, foregin currency fix-deposits, investment-linked funds, endowment funds, real estate property investment, rental returns and most importantly, your own saving account , right?

Updated on August 18, 2014

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I am surprised that PM Lee spent a lot of time during the National Day Rally 2014 yesterday to explain the CPF system clearly and carefully. I have to say he explained it very well and it is in line with my analysis that in order to have retirement monthly payout of S$2,000 per month, we need this Minimum Sum of S$250,000.

The Minimum Sum that a peson has to set aside in his CPF account will also be raised to S$161,000 for those turning 55 from July 1st next year, but, BEYOND THAT, THERE IS NO NEED FOR ANY MORE MAJOR INCREASES. It may still have to be adjusted from time to time as people are living longer and they will need more money for their retirement but the scale will not be big. I believe for 80s generation, the Minimum Sum will go up to S$250,000 in due time but it MIGHT NOT be that much after PM mentioned there will be no need for any more MAJOR increases.

CPF members now also allowed the option to take out part of their savings in a lump sum, if they need to, subject to limits- 20% at the age of 65 (not at the age of 55), for example. I think this is a responsible government act. If I am the government, I also will not let everyone just takes out all the money by the age of 55, this is dangerous, you will not get any single cents thereafter. As a responsible government, I will try to avoid giving such wild option. But, I think the option can be further revised to withdrawal of lump sum up to 50%. Take note, by withdrawing 50% (that's my example, not PM example), you only get S$600 per month at age of 65, you sure you want to do that ? I will NOT.

We must have a right mindset about CPF. I think SG governemnt can gradually increase the CPF OA interest rate say 3.5%, and SA to 5%, especially Singapore is doing pretty well now but we should also embrace the interest rate cut back to 2.5% again if the economic hits hard to Singapore again. Fair and square. Lastly, I think Singapore government will consider to revise the CPF interest rate. :)

Updated on August 25, 2014

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DEFINITION:

(a) Minimum Sum (OA + SA) = S$161,000

(b) Minimum Sum (MA) = S$48,500

Many of the time we are talking about Minimum Sum of (OA + SA), do take note that there is a separate Minimum Sum for MA account. By the age of 55, (OA + SA) will be converted to RA (Retirement Account).

(c) For owners who have used or are using CPF for an existing property, they must set aside half of the prevailing CPF Minimum Sum (OA + SA) before they can use the excess savings in their Ordinary Account (OA) for the second or subsequent property. Any funds in the SA used under CPF Investment Scheme (CPFIS) will be counted towards meeting the Minimum Sum. The principle (and not market value) of CPFIS-SA funds is used in the calculation. So, the half of the prevailing CPF Minimum Sum now is S$80,500 ($161,000 divided by 2).

I had made two phone calls to CPF Call Centre: 1800-227-1188 this morning and I received crystal clear answers from the sweet lady. I should document down before I forgot! Ha ha. :)

(1) CPF SA $7K top up (tax relief) has nothing to do with Voluntary Contribution (VC).

(2) You cannnot enjoy the S$7K tax relief once your CPF hits Minimum Sum (for me, S$161,000 as for now). It means, you cannot contribute CPF SA $7K anymore.

Once we set aside, S$77,500 (OA & SA), we can use OA to buy stocks and SA to buy solid unit trust, e.g. Arcons of Asia, Singapore growth funds, STI ETF, etc.

Money invested in OA account WILL NOT be counted into Minimum Sum.
Money invested in SA account WILL BE counted into Minimum Sum.
So, if you like, you can use OA money to buy stocks and reduce your Minimum Sum and get "the rooms" to contribute SA $7K to enjoy tax relief.

(3) Mandatory contributions (MC) made within the year: Maximum amount of VC = $30,600 – MC
Typical example, CPF contribution of $1,800 per month x 13 months (include one month bonus) = S$23,400 so, you can contribute further up to S$7.2K maximum into any CPF account per year but there is no benefit of doing so (NO TAX RELIEF) unless you just want to have higher interest rate in the CPF account. Personally, I will not do voluntary contribution here.

(4) Once your CPF MA (Medical Account) hits the cap of S$48,500, the MA monthly contribution will go into your SA account! BUT, if your SA account hits the Minimum Sum of S$161,000, then your MA monthly contribution will go into OA account. Yes, it is your SA account hitting Minimum Sum of S$161,000, not the total CPF account hitting Minimum Sum of S$161,000. Take note. Hence, it will be quite rare that you can hit S$161,000 in your SA account easily unless you are drawing many months of bonuses. The max. monthly SA contribution cap at S$299.88, you need 42 years to hit that Minimum sums (if you calculate 13 months contribution per year without SA $7K top up).

With the above information, my two excel tables are SUPER WRONG.
Scenario 1 case will hit the Minimum Sum at the age of 38.
Scenario 2 case will hit the Minimum Sum at the age of 40.

Both scenario means you are no longer allowed to contribute SA S$7K to enjoy tax relief. That is really bad indeed. Ouch!

I will revise my two examples (Scenario 1 and Scenario 2) excel tables in my revision 05 but not anytime soon. It takes some time to re-strategize now. Stay tuned !

Updated on August 28, 2014

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The scenario 1 & 2 are updated based on the more accurate information as follow:

(1) The different percentage of wage contribution into OA, SA and MA accounts (see table below).

(2) Minimum Sum (OA+SA) = S$161,000, once this Minimum Sum (OA+SA) is hit, the CPF SA S$7K top up will not be allowed (no more tax relief )

(3) Minimum Sum (MA) = S$48,500 , once this Minimum Sum (MA) is hit, the MA contribution will goto SA account. Once SA account hit S$161,000, then MA contribution will go to OA account.

Scenario 1: Updated table is shown below.

(a) Using the correct percentage of wage contribution into OA, SA and MA at different age stages.
(b) Minimum Sum (MA) is hit at age 37. No more MA contribution from age 38 and onwards. MA contribution will go to SA then later to OA once SA hits the S$161,000 at the age of 43.
(c) Minimum Sum (OA+SA) is hit at age 38. No more CPF SA $7K top up from age 39 and onwards.

Scenario 2: Updated table is shown below too.

Take note you actually have more money in OA to fully wipe out for housing loan payment as MA contribution will eventually go into OA account once your SA account hit the S$161,000 sum at age 45.

With more accurate calculation, this is the final cash amount you will get by the age of 55.

Updated on March 4, 2015

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By now, you should know the CPF salary ceiling will be raised from S$5,000 to S$6,000 on January 1st, 2016.

For age 35-45 group: (as I am in this age group by this year)

OA contribution - S$1,050 will increase to S$1,260
SA contribution - S$350 will increase to S$420
MA contribution - S$450 will increase to S$540

So, the total contribution of CPF will increase by S$370.

Out from this S$370, S$170 is from your boss (employer).

So, you can proudly say because of this CPF ceiling increased to S$6,000, you have a pay increment of S$170 per month !

Assuming you have at least one month bonus (AWS):
13 months x S$170 = S$2,210.

You have S$2,210 more from your employer per year!

With the extra money from your boss in your CPF, earning fat interest, by the time you turn age 65, these amount will balloon to a handsome S$100,000 (with compound interest). Can you believe it?

You may visit the nice blog below:

http://www.investmentmoats.com/singapore-stocks/income-ceiling-bump-from-5k-to-6k-might-put-94000-at-age-65/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InvestmentMoats+%28Investment+Moats%29

I made a call to CPF officer today to check on CPF partial withdrawal after we hit the age 55.

If we do not want to withdraw all the money by the age 55, after putting aside the Minimum Sum ( I still love Minimum Sum term even though they now scrap the MS term), you can do partial withdrawal by using the same form RSD55.

Please take note, CPF only encourages you to do such partial withdraw up to 2-3 times per year. If you need more withdrawal in a year, they will look into the cases. They can't expect you to withdraw the money frequently like drawing money from the ATM machine.

It is a bit strange for me but it is OKAY. Take note, any excess in RA account will continue to earn the FAT 4% interest rate (in fact, this year the first S$30K in RA enjoys 6% interest rate!). I don't see a reason why we want to withdraw money from CPF instead of POSB Saving Account that give you a mere 0.5%.

Even if you need to do so, just do a larger amount withdrawal, say S$30K, ONE time per year. :)

Updated on March 14, 2015

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After 10 days of my last revision, I finally have time to update the entire worksheet for the CPF salary ceiling increment from S$5,000 to S$6,000.

Besides, I also update the right percentage of CPF contribution based on the NEW CPF contribution and allocation rates table published at The Straits Times on February 24, 2015.There are many changes on the contribution rates as well as the percentage of the CPF going into OA , SA and MA respective accounts if you compare to my previous table.

The LATEST CPF Contribution and Allocation Rates Table

The Straits Times @ February 24, 2015

Key differences are: both scenario 1 and scenario 2 will hit the MA Minimum Sum and (OA+SA) Minimum Sum one year earlier due to the higher CPF contribution. That indirectly reduce one year opportunity to do the CPF SA top up of S$7,000 to enjoy the income tax relief. That is bad.

At the end of the analysis, you can see both scenario 1 and scenario 2 have a huge 27% increase at the CPF CASH withdrawn amount by the age of 55.

With the new rules, you are able to bring home a CASH of S$911,937 by the age of 55.That is a S$193,244 more compared to the old rules. These numbers will be realistically even more because I exclude the extra 1% interest given in the first S$60,000 in the (OA+SA) account. Imagine the absence of 1% compound interest for 20 years. :)

Anyway, the CPF rule changes are MASSIVE to the end results.

But again, there is another new rule: Medisave Minimum Sum S$43,500 requirement will be removed and it will be replaced by Basic Healthcare Sum (BHS) of S$49,800. Once we have better clarity on this new rule, I shall update the blog accordingly again.

Scenario 1

Scenario 2

Updated on March 15, 2015

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Okay, curiosity kills the cat.

I always exclude the extra 1% interest given in the first S$60,000 in the (OA+SA) combined account at all my above calculations.

OA account capped at S$20,000 and (OA+SA) account capped at S$60,000.

So, the 1% compounded interest for the first S$60,000 in CPF for 20 years is S$13,943.

You can just add this extra amount of S$13,943 at the above grand total. That would be it for the extra 1% interest earned. :)

For those who have an idea to transfer OA money into SA account to enjoy extra 1.5% interest, please do take note that the amount in your SA account must not exceed the current CPF Minimum Sum (S$161,000) after the transfer.

So, if your SA account has reached S$161,000, you are not able to transfer OA money to SA account.

Extra 1% interest given to the first S$60,000 in CPF

Updated on March 20, 2015

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Let's talk about Minimum Sum.

From year 2003 to year 2015, the Minimum Sum had climbed pretty wild from 5.6% up high to 10.4%! Only recently , the increment is below 4%, which is 3.9% to be exact and now the Minimum Sum stood still at S$161,000.

The Government has accepted CPF panel's recommendation by raising the Minimum Sum by 3% per year. See the reply below by Ministry of Manpower.

20 years later when I hit age 55, the Minimum Sum will become S$290,000.

Interestingly, 52 years later, my kid will need to meet a Minimum Sum of S$750,000.

It is a big shock to find out the large Minimum Sum required in the future, especially the S$750,000 Minimum Sum for my kid generation.

The table below is generated based on 3% increment on Minimum Sum. I would think this Minimum Sum somehow shall stop climbing or climb at even slower pace. Don't you think so ? I simply cannot imagine if the increment is beyond 3% like the past 10 years. The final figure might able to choke a donkey.

Updated on August 24, 2016

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The Straits Times has a nice article about CPF lately on how one strategizes to increase CPF by S$1 million at the age of 65. It prompted me to simulate the cash payout at age 65 instead of age 55.

They also talk about transferring the OA to SA to enjoy 4% interest instead of 2.5% interest.

This is the simulation table until age 65. (Scenario 1)

And if you wipe off OA for property monthly mortgage payment , the simulation table will be the following. (Scenario 2).

It is good to realize the big difference by delaying the cash withdrawal from age 55 to age 65. You can have S$1,530,000 by the age of 65 instead of S$911,000 by the age of 55. With 10 years delay of withdrawal, the compound interest has a difference of S$619,000. We all should wait for another 10 years to withdraw the cash in the CPF, it is worthwhile to wait!

Of course, the above simulation is based on current Minimum Sum. We shall expect 3% rise each year on both Minimum Sum of (OA+SA) and MA.

Also, I now started to transfer the OA to SA to enjoy 4% interest. I have done my first OA to SA transfer in August 2016. I transferred S$20,000 from OA to SA to enjoy higher interest.

For my curiosity, I just simulate the OA transfer to SA from age 38 to age 65, the final amount difference is only by S$80,000. That is not very encouraging actually. Take note, my strategy now is to just keep S$20,000 in OA, because the first S$20,000 in the OA will enjoy additional 1% on top of 2.5%, that work out to be 3.50%, so it is close to SA 4.0%, so, you don't really need to wipe off OA to S$0 to SA just to enjoy a mere 0.50% difference.

Below information are from CPF website. It seems like CPF has finalized the figures for Full Retirement Sum (FRS) from year 2017 to year 2020. That is indeed about 3%+ increase per year. For example, by the year 2020, the FRS is S$181,000 .

Updated on August 29, 2016

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Many good articles about CPF again on The Sunday Times. Below is one good example.

It is a good reminder that our Retirement Account will enjoy interest of 6%, 5% and 4%.

For my curiosity, I want to find out the magic age number for the "breakeven".

If you stick to the Full Retirement Sum (FRS) of S$161,000, monthly payout of S$1,250, then, by the age of 82, you are drawing more monies than you have put in. The magic age is 82.

(1) First of all, Retirement Account (RA) is created when you reach age 55. I will choose FRS, transferring (OA+SA) of S$161,000 into RA account. In the RA account, the first S$30,000 will enjoy 6% interest, then the next S$30,000 will enjoy 5% interest, the remaining balance will be enjoying 4% interest. So the table below, simulate the total interest of 6%, 5% and 4% from age 56 until age 65. Your Retirement Account (RA) shall have a balance of S$249,125.

(2) Then, government starts to give you S$1,250 per month (S$15,000 per year). Of course, the remaining balance will continue to enjoy the interest of 6%, 5% and 4% in the RA account until you deplete the monies in RA at the age of 82.

(3) In other words, if you die before age of 82, there shall be bequest for your loved one.

Age 82. Interesting. :)

Should you choose Life Basic or Life Standard ?

The answer is : Life Basic is value for money.

Here is why.

First of all, you log in to the CPF website for the CPF LIFE Payout Estimator. You key in the S$161,000 into the Retirement Account. Below are the breakdown and the bequest values.

The table below shows the LIFE Standard payout at S$1,250 per month.

Based on my calculation, at the age of 65, the RA account shall have S$249,125.

But the bequest at age 65 shows only S$192,775. A shortfall of S$56,350.

RA account will have S$99,125 at the age of 75 but the bequest at age 75 only S$42,870.

The table below shows the LIFE Basic payout at S$1,137 per month. Only S$113 lesser than S$1,250 per month in Life Standard payout.

Based on my calculation, at the age of 65, the RA account shall have S$249,125.

The bequest at age 65 shows S$231,176. A short fall of S$17,949.

RA account will have S$112,685 at the age of 75 and the bequest at age 75 shows S$167,622.

Most importantly, by the age of 84, you already took out all the monies in the RA but the bequest at age 85 still have S$76,225.

Is that possible ?

Updated on December 6, 2016

======================

I had transferred OA savings to SA account for a few times and I made a large decision today.

I had finally transferred all the money in OA to SA account.

Wiping off OA to S$0 balance.

Mission accomplished.

The first S$60,000 in SA account will enjoy 5% interest.

The remaining balances in SA account will enjoy 4% interest.

So I will let the money in SA account to roll for the next 19 years to age 55, witnessing the power of compound interest.

I also hit one milestone this year. Medisave Account (MA)ceiling of S$49,800 was hit. Subsequent MA monthly contribution will flow directly into SA account.

I had utilized CPF OA money of S$103,552.04 for my HDB private housing loan payment.

If I sell the HDB today for example, I have to return this same CPF OA amount of S$103,552.04 back to my OA account + the accrued interest of S$13,145.54.

It also means if you have not used this amount of money, you would have earned this CPF OA interest (2.5%) of S$13,145.54 by putting the money in the CPF OA account.

I as well had utilized CPF OA money for stocks and gold investment. I have since sold Ezion, Gold US$ ETF with profits. I now hold SembCorp Marine and FJ Benjamin only, 2 counters under my CPF OA Investment. I intend to keep this until age 55 and see how's their returns versus the SA account of 4% compound interest. :)

My next strategy would be transferring OA monthly contribution directly to SA account in monthly manner too.

Updated on May 7, 2017

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The values in the table below might shock you. Yes, by the time you reach the age of 55, you will accumulate total cash of S$1.21++ million

After putting aside the Full Retirement Sum (FRS), you will have extra cash of S$812,000++ at the age of 55 and Basic Healthcare Sum (BHS) of S$105,000++ at CPF MA account.

With the Full Retirement Sum (FRS) of S$290,000++ (year 2035 FRS), your monthly pension will be S$2,300, given from the age of 65 to death.

If you do not take out the cash of S$812,000 ++ at the age of 55, you can continue to leave the cash in the CPF account and enjoy the good interest (from 4% to 6%). You will accumulate interest of S$36,570.40 at least every year. At the age of 65, the CPF account balance interest + monthly pension will yield S$5,347 per month for retirement. Isn't that wonderful? Perfect! This is only CPF income! You shall have other source of passive income too.

Now, is the figure above realistic or even possible? Of course!

There are some assumptions to be met:

(1) Continue to work until the age of 55 with at least monthly income of S$6,000 as that is the maximum CPF contribution.

(2) The calculation uses 13 months CPF contribution. If your company gives you AWS (13th month bonus), that will be the figures. If you receive extra1 month bonus or more, the figures above will be bigger too! So, almost all of us will receive certain amount of bonuses.

My company gave out 2.15 months additional bonus this year besides 13th month. :)

(3) Transfer all OA to SA account. OA account is always S$0.

Only with the 3 assumptions above, you will reach this figures easily. Congratulations!

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Some key figures in my calculation.

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37% of our monthly income goes to CPF (from employee + employer). This percentage is the same until age 55.

Based on S$6,000 monthly income, at least, the following figures hold.

OA account: S$1,260.30 x 13 months = S$16,383.90

SA account: S$419.80 x 13 months = S$5,457.40

MA account: S$539.90 x 13 months = S$7,018.70

Total CPF contribution per year = S$28,860. This is the magic number.

By the year 2035 (when I reach age 55):

With 3% annual increment, the Full Retirement Sum (FRS) will reach S$290,901.

With 4% annual increment, the Basic Healthcare Sum (BHS) will reach S$105,342.

With linear algebra extrapolation , S$290,901 FRS will yield S$2,300 monthly pension. CPF is the best retirement scheme in the world.

Quick update (20 June 2017)

======================

I just realized the above table is not possible.

Once the SA figures hit the Full Retirement Sum (FRS), you are not allowed to do the OA transfer to SA account.

Hence, the figures will be much smaller. The table was updated on August 24, 2019.

Updated on August 24, 2019

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The subsequent updates of CPF topic will be in this entry:

"Projecting CPF figures in future".

http://jkfund.blogspot.com/2017/08/projecting-cpf-figures-in-future.html

Tuesday, August 12, 2014

PERSONAL MONEY - AUGUST 2014

Hee... Hee... Hee.. I won a 3 days 2 nights hotel stay (worth RM2,200++) at Bukit Bintang.... :)

Monday, July 28, 2014

Singapoerean Benefits (Part II) (Revision 02)

Revision 02 (last paragraph): updated on August 25, 2014

Private Residential Property Investment in Singapore

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Terminology:

1x Singaporean + 1x Singaporean = Singapore Household

1x Singaporean + 1x Singapore PR = Singapore Household

1x Singapore PR + 1x Singapore PR = Singapore PR Household

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If you are staying at Singapore HDB flat currently and you want to invest in private residential properties in Singapore. Do take note the following points:

(1) Only Singapore household can keep the HDB flat after they completed the purchase of the private residential properties (be it a resale or new property). Singapore PR household MUST sell their HDB flat 6 months after they complete the purchase of the private residential properties (resale) or 6 months after the TOP of the new private property.

Singapore PR household MUST SELL HDB after buying a private residential property (be it for self stay or investment).

(2) If you intend to buy a private property for self stay and rent out the HDB flat, then, only Singapore household can rent out the entire HDB flat for good side income. Singapore PR household is NOT allowed to rent out the HDB flat.

Singapore PR household NOT ALLOWED to rent out the HDB flat.

(3) Singaporean pays 7% ABSD (Additional Buyer's Stamp Duty) for second real estate property purchase in Singapore whereby Singapore PR pays 10% ABSD.

Singapore PR pays 3% more ABSD.

Due to the first two points (1) & (2) , many Singapore PR drops the idea of buying the second private residential property in Singapore. Even if the price of the residential properties drop by 50%, Singapore PR will also not take any actions until the above cooling measures [especially points (1) & (2)] are removed, or at least majority of the Singapore PR will choose to wait.

Based on the news on July 29, 2014, there are many completed projects with many unsold units but most of them are "still expensive". There are also many launched, uncompleted projects with many unsold units too.

Take Clementi new condo, Trilinq, as an example, there are total 755 units. So far, they launched 250 units but 131 units unsold. In short, there are 636 units unsold out of total 755 units. That is 84.2% unsold for Trilinq. If they reduce the selling price to the same level as Waterfront @ Faber and also absorb SPR 10% ABSD, I don't mind to purchase one 1-bedroom for rental investment. Let's see if the selling price will drop to S$1,150 psf. With so many units unsold, IOI developer must cut prices to move units.

Updated on August 25, 2014

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I had made a phone call today to HDB Branch Customer Service Line: 1800-2255432 to confirm that Singapore household HDB can rent out the whole HDB flat and choose to stay at Private Condo at Singapore.

The only criteria: You have to fulfill the Minimum Occupation Period (MOP) of 5 years.

The details of the subletting guidelines can also be found at the HDB InfoWEB below.
http://www.hdb.gov.sg/fi10/fi10323p.nsf/w/RentOpenMktRentOutWholeFlat?OpenDocument

Your tenants profile, ethnics group, Singaporean/ Singapore PR/foreigner will be based on your HDB block quota. It is the same as selling your HDB unit to certain etnics group until the quota is filled. Then, you can ONLY sell or rent to Singaporean only. Take note on this quota too. You can easily check the quota at the HDB website (the links shown below).

(1) For HDB rental:
You can perform "Enquiry on the Non-Citizen (NC) Quota for the Subletting of Flat" at the HDB website.

http://services2.hdb.gov.sg/webapp/BR12AWSublettingQuota/

My search result: I can rent out my whole HDB unit to anyone who is qualified to rent the HDB unit.

(2) For HDB sales:
You can perform "Enquiry on Buyer's Eligibility under the Etnic Integration Policy and SPR Quota" at the HDB website.

http://services2.hdb.gov.sg/webapp/BB29ETHN/BB29STREET

My search result: I can sell my HDB unit to anyone who is qualified to purchase a Resale HDB flat.

Of course my search results above are valid as for now. If you intend to sell your HDB flat or rent out your HDB unit say 3 years later, of course, you have to perform the latest enquiry again when you begin your procedure.

Sunday, June 8, 2014

HDB decouple: (SPR + SC) household (Revision 03)

Revision 03 (last paragraph): updated on August 20, 2014
Revision 02: updated on June 9, 2014

You should hear "HDB decouple" term by now. I will talk about HDB decouple, not private property decouple. HDB rules are more stringent as it is a regulated market. HDB decouple is getting popular after Singapore government imposes heavy additional buyer stamp duty (ABSD). Decouple is not asking you to divorce. It is simply means to remove your spouse name from the property ownership and to become an occupier. What is the purpose by doing that?

" 2 owners = 1 owner + 1 occupier. "

There are two reasons:

(1) Get 80% housing loan instead of 50% housing loan
(2) Avoid paying 7% ABSD

After you become an occupier and not an owner of your existing HDB and when you buy a private property, that is your “first” property and you can get the housing loan up to 80%. It is because for second property, you are only able to get 50% housing loan from the bank. Of course, you can fully pay the outstanding housing loan and go ahead to buy second property with 80% housing loan from the bank without doing HDB decouple. Yes, you can do so too.

Secondly, it is to avoid paying 7% ABSD for Singaporean to buy and own the second property. This will be your first “owned” property (it is because you are an occupier for your "first" property, not the owner). Therefore, you do not pay any ABSD (0% ABSD) but just normal 3% stamp duty which apply to all. So, it makes sense to decouple Singaporean to become an occupier. If you decouple a Singapore PR to become an occupier, then when Singapore PR buys the “first” private property, you still have to pay 5% ABSD, second property for Singapore PR 10% ABSD.

So far so good?

Okay, when you want to do HDB decouple, HDB only allows ownership transfer by gift. No cash involved. But if your bank loan is with private bank, private bank will not allow ownership transfer by gift, it must be done through part sale (because the bank wants to make money!). But, HDB does not allow married couple to do part sale! You can’t just say, I want to buy my wife HDB shares by paying my wife cash and yet you two are still a happy loving couple. If you are in a truly divorce case, then HDB allows part sale. So, at the end, you can only do the HDB decouple by paying the outstanding housing loan in full.

Take note on HDB part sale, when you do that, you have to get the latest market value of the property, then, you buy 50% of the HDB from your wife with the current market price, remember that whatever CPF OA money that your wife is paying for this HDB, you have to repay back to CPF OA account with accured interest. Then, for you as a Singapore PR to buy 50% of the HDB sale is as well subject to 5% ABSD as HDB treats this as a first property "new purchase". That is just when HDB allows you to do part sale.

Next, after Singaporean is decoupled and buy the first “owned” property, hooray, she can save 7% ABSD. But after decouple, the HDB ownership becomes Singapore PR household (1 SPR owner + 1 SC occupier). Singapore PR household cannot rent out the whole HDB unit. Then, what is the point? If you intend to stay in the HDB and rent out the private property, then it is still OK. But, our intention is to rent out the HDB unit and stay at the private property.

Also, if you insist to do HDB decouple, make sure you take note this, since your HDB becomes Singapore PR household, all the SC benefits of owning the HDB will be removed such as the utilities bill rebate, town councils rebate, all SC benefits are removed because the HDB is now a SPR household.

To make the whole matter worse, if you decided NOT to do HDB decouple and pay 7% ABSD by using one Singaporean name to buy the private property , even if you decide to sell the HDB within 6 months of the TOP, you still cannot get back the 7% ABSD, why? It is because Singapore government allows reimbursement of ABSD only if “a couple” is buying the private property for self-stay and disposes the HDB accordingly. Not one individual buyer to purchase the private property. If you buy the private property in one name, government will not refund you the 7% ABSD. The only way to get back the ABSD now is to put both name as a buyer for the private property and pay 10% ABSD instead (as they pick the SPR the highest percentage) and then when you dispose the HDB within 6 months after TOP, you will get this 10% ABSD back. Well, our primary goal is still keeping the HDB.

Who come out with all these well thought rules?!

As for SPR-SPR HDB household, you need not to waste time as you will not get any way out.

As for SC-SC HDB household, congratulations! That is why my real estate agent suggestion is to ask me to convert to Singaporean. Just for 7% ABSD? No thank you.

Updated on June 9, 2014

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VL (Valuation Limit) & Minimum Sum of S$77,500.

If your first HDB housing loan is still outstanding and the 100% Valuation Limit (VL) is not reached, you can wipe off your CPF OA amount to do the partial repayment. How does this Valuation Limit (VL) calculated ?

It is simple. Take the market value of your HDB property as at time of purchase, for example, market valuation was S$350,000 when you purchase your HDB minus off the total CPF used by all owners (you and your spouse) for downpayment and monthly instalments as at today, let say, S$137,000. So, S$350,000-S$137,000 = S$213,000. It means, you can use your CPF OA money up to S$213,000 (you and your spouse combined CPF sum in the OA account) for this HDB property.

Thereafter, if you intend to purchase the second property and would like to use CPF OA account to serve the monthly instalment, you have to set aside a minimum sum of S$77,500 at combined OA and SA account first before you can touch the money at OA account. As for July 2014, the minimum sum is rasied to S$77,500. Take note on this. Thereafter you can use the CPF OA to serve your second property housing loan.

CPF has a pretty good comprehensive CPF Housing Withdrawal Limits Calculator.

http://www.cpf.gov.sg/cpf_info/calculator/vl/vl_input.asp

Enjoy exploring !

Updated on August 20, 2014

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At the end, we did not do HDB decoupling after considering all the disadvantages.

(1) We maintan the SC HDB status.

(2) We pay 7% ABSD for the second private residential property (Real Estate Agent reimbursed us some of his commission, 5 digits sum).

(3) We will move into the privte residential property while TOP.

(4) We will rent out the HDB 4-room flat.

Monday, May 19, 2014

Waterfront @ Faber at Clementi , District 5 (Revision 04)

Revision 04 (last paragraph): updated on August 27, 2021

Revision 03: updated on March 28, 2016
Revision 02: updated on July 31, 2014

Yes!!! We had purchased a 4-Bedroom unit for self-stay. We can't wait for the TOP in late 2017. :)

Project Name: Waterfront @ Faber

Developer: World Class Land Pte Ltd
Address: Faber Walk
Tenure: 99-years lease, starting from 17 September 2013
Site Use: Residential
Site Area: 15,125.40 m2, 162,809.8 ft2
Site Gross Floor Area: 21,176.00 m2
Expected TOP: 15 July 2018
Expected Legal Completion: 15 July 2021

Total Units: 199 Apartments &11 Strata Houses
Total Car Park Lots: 203 Basement Lots & 3 handicap lots, excluding strat houses lots
Unit Mix:
2-Bedroom; 2-Bedroom Dual Key; 3-Bedroom; 3-Bedroom Dual Key
4-Bedroom; 4-Bedroom Deluxe; 4-Bedroom Dual Key & Strata Landed

Unit Size: Type Area (sqm) Area (sqft)
2-Br 65-67 700-721
2-Br Dual Key 70-71 753-764
3-Br 96 1033
3-Br Deluxe 99-100 1066-1076
3-Br Dual Key 95 1023
4-Br 109-120 1173-1292
4-Br Deluxe 122-129 1313-1389
4-Br Dual Key 117 1259
Strata Landed 260-282 2799-3035

Updated on July 31, 2014
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All C1 type 4 Bedroom units at stack 01 & stack 08 are fully sold.

Total: 210 units
Sold: 90 units
Reserved: 9 units

Sold units percentage: 43% of total project
Sold units (include reserved units): 47% of total project