Friday, January 27, 2017

How to do financial planning with CPF

The CPF is now in a mess. The employees are confused with the money that goes into their account - and don't understand how much goes into each sub-account. They leave it to CPF to sort out.

They also don't know how much interest is earned on each account. It used to be 2.5% p.a. on the ordinary account and 4% for the other medisave and the special accounts. Now there is a complicated formula to calcuate the bonus. Anyway, the employees leave it to the CPF to sort out.

They also don't know how much contribution should go into their account. The contribution depends on several factors, such as age and citizenship. Permanent residents also contribute but a different formula applies to them.

Civil servants also contribute to the CPF but at different rates from private sector employees.

If you really want to know, there are several booklets totalling more than 100 pages (perhaps).

There is also the complication of using the ordinary account to pay for the purchase of HDB flats or private housing. There are complicated formulas to determine how much can be used. We leave leave it to the CPF to tell us, right?

When the employee reaches age 55, some money is transferred into some accounts. Don't ask me how it works - it is extremely complex. We just leave it to the CPF, okay?

No need to worry. Just let CPF figure out all the compications and tell us what we can or cannot do, and how much we can withdraw when the time comes. If they want to keep the money longer, what can we do?

With this kind of convoluted system, the government ask the workers to plan for their retirement. How? They cannot do any planning, if they don't understand how the CPF works, right?

This government, under Lee HL, gets top marks for designing a very complicated system. Maybe, it is the most complicated in the world?

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