CPF(Central Provident Fund) savings are for old age needs. It’s thus important to use them wisely. Whether you’re buying a home, spending on healthcare or investing, this holds true.
Is CPF sufficient for retirement?
Some financial planning experts say that, as a rule of thumb, you need at least 70% of your last annual income to maintain your current lifestyle during retirement.
On the other hand, CPF savings are only meant for basic retirement needs. If you contribute regularly from the time you start work, by the time you retire you should have enough cash to provide a monthly retirement income of 20% to 40% of your last take-home pay, reserved Medisave for healthcare needs, and paid fully for a property that matches your income.
Thus, CPF savings alone may not be enough for retirement, though this depends largely on your retirement lifestyle needs. You’d probably have to have private savings and/or investments to supplement your CPF. And don’t forget – you’ll be better off during retirement if you use your CPF savings wisely now!
Monthly Retirement Income
“If you contribute regularly from the time you start work, by the time you retire you should have enough cash to provide a monthly retirement income of 20% to 40% of your last take-home pay...”
“Cash” refers to the lump sum amount that you can withdraw at age 55, and it includes the CPF Minimum Sum.
Thus, if you rely only on the CPF Minimum Sum for your retirement income and use your CPF lump sum for other purposes, it’s possible that the monthly retirement income will be lower than 20% to 40% of your last take-home pay.
Longevity risk
This refers to the “risk” that you'll live longer than your income can support you.
This refers to the “risk” that you'll live longer than your income can support you.
In Singapore, female life expectancy at all ages is higher than that of males. Based on 1995 data, a woman at age 55 can expect to live nearly 28 years more to 83 years old, while a man can live about 24 years more to 79 years old.
It’s useful to keep these information in mind as you’re making financial plans for your retirement years.
