A Central Provident Fund member is required to set aside a Minimum Sum of $99,600 on reaching age 55. This Minimum Sum will be adjusted yearly to allow for inflation. The CPF now uses an adjustment of 2% per year.
We can use the real rate of interest of 2% to compute the drawdown of the Minimum Sum.
At present, the CPF member can draw down the Minimum Sum for age 62. The Government is giving a Deferment Bonus to encourage people to delay the draw down to age 65.
If I use the real rate of 2% to calculate the accumulation of the Minimum Sum to age 65 and draws down this sum over 25 years, the drawdown is $6,200 a year or $518 a month. This reflects the value of money today. The “nominal” amount will be higher, due to inflation.
Many people consider $518 a month to be inadequate. I estimate that a retiree should have two times of the Minimum Sum to achieve a more comfortable standard of living. This can be achieved by keeping a larger portion of the CPF savings in the special account or by having personal savings to supplement the CPF savings.
Most people don't have any idea what thier retirement will be. They just invest here and there and don't know what is required .Arriving at their retirement is luck.There is no systematic planning. The insurance agents are no help. They don't know how to.
ReplyDeleteIn US there are specialists, designated as Retirement Planner, to help clients plan.
In Singapore, some of these "specialists" are found in FA firms.