### Will we have enough CPF savings to retire on after using it for housing?

SOURCE: SG Young Investment

*Not sure about how the CPF works and what is the CPF minimum sum? Read my earlier post here: All about CPF minimum sum and CPF life*

There were some concerns from the public out there which i've gathered:

- Will we have enough CPF savings to retire on after using a substantial amount for housing?
- Will we be able to meet the minimum sum by the time we reach 55? How much will the minimum sum be then?

**High housing price leads to depleted CPF savings?**

**Young person earning $3000 starting salary**

- Each person earns $3000 starting pay and starts working at age 25
- 4% salary increment every year
- Housing loan of $550 per person every month paid from CPF OA account (assuming cost of house is $280,000 and taking a loan of $252,000 for 25 years)
- Husband and wife shares 50-50 of the cost

**Young person earning $2000 starting salary**

The rest of his CPF savings until age 55 is shown below:

**Will CPF minimum sum increase to $500,000?**

We know that CPF minimum sum has been increasing yearly from 2003. During the CPF protest last week, it was said that the CPF minimum sum will increase to $500,000 and most young people would never get to see their money again. Is this possible?

The current CPF minimum sum is $155,000. Based on this, one can expect to receive about $1200 per month under the CPF life scheme. If the minimum sum increases to $500,000, all else remaining equal, one can expect to receive at least >$3600 monthly. This is quite a decent sum of money. However, we will not be able to predict the standard of living at that time. Prices of food may have doubled or tripled with your normal chicken rice at $8-$9 instead of the $3 we have now.

**The CPF minimum sum is increased for the same purpose of catering for a higher standard of living.**

**Singaporeans can't meet minimum sum?**

**If Singaporeans can't meet minimum sum, it's not because the minimum sum is too high. Rather, we should look at whether these people have enough to retire on? They may only be getting a few hundred dollars per month if their CPF savings is low. If they only depend on CPF savings to retire, then it'll surely not be enough. The sad truth is they may have to continue to work to an old age in order to just survive unless they have their children to take care of them. Many people suggest to let those people who don't meet the minimum sum to draw out more at age 55 instead of the current $5000 only. But however, if they are allowed to draw out more now, they will have lesser in the future. They may be able to retire now, enjoy for a few years then be forced to go back to work in their 60s again.**

**$2000 salary can retire comfortably?**

The person in the above example with $2000 starting salary and 3% yearly salary increment can afford to retire with $340,000+. This doesn't seem like a lot of money especially when its 30 years from now. If this person knows that the CPF may not be adequate for him to retire on, he can start to have an alternative retirement plan for himself through his own private savings or even voluntary contributing cash into his CPF account. He can also consider transferring some amount from his CPF OA to SA to earn the higher interest rate of 4%. If he has investment knowledge, he can also invest his CPF money prudently under the CPF investment scheme(CPFIS).

**CPF is a first line safety net. However, it may not be enough for some to retire on**

**Even with the CPF system, some people may still not be able to retire as seen in some of the cases in Singapore currently. The problem is people may rely too heavily on a system and leave retirement entirely to the CPF. They continue to spend all the money they earn without having any personal savings. If the government wants everyone to retire comfortably, they can raise the CPF contribution rates but they will not be able to do it easily. Even with the current low contribution rates, people are already making noise and protesting on it. I would think even the minimum sum is on the low side as with $1200 a month, it's not a lot of money.**

**Create your own CPF system**

**It is always prudent for us to plan for our own retirement aside from the CPF. If you want to retire earlier than 55 or 65, then plan it yourself. Create your own CPF system: "Personal Savings, Personal investment portfolio and personal passive income". This is the financial freedom system. A system we can all strive to achieve.**

Lastly, curious to know how my excel spreadsheet looks like after all the calculations? Here's a sneak peek: