Is CPF adequate for young people to retire?
Lucky Tan ask for this matter to be studied carefully.
http://singaporemind.blogspot.sg/2012/09/why-minister-tharmans-claim-needs-to-be.html
Lucky Tan ask for this matter to be studied carefully.
http://singaporemind.blogspot.sg/2012/09/why-minister-tharmans-claim-needs-to-be.html
4 comments:
I disagree with the Financial Minister. CPF is not adequate in itself, as a large part is used to purchase a HDB flat. It has to be supplemented by an additional saving of 15% of earnings, and has to be invested to earn 2% higher than inflation. The worker must buy a HDB flat costing not more than 5 year of earnings. All of these points are explained in my talk on Financial Planning which is given to over 1,000 people. The Finance Minister should come and attend my talk or at least send his staff to attend.
Right, sir!
Am poor in my Pure Maths, but can sure tell intuitively, that the Minister's men are using their outlandish remuneration and blessed occupation as the basis for a very dangerous pronouncement that may fool some poor chaps into taking things too easy.
I believe the minister that someone who draws a median monthly income of about $2,500 will achieve an IRR of 63-71% of his/her CPF savings. I await the assumptions and parameters used in deriving the above figures. Then we will realise that such cases are a rarity and apply probably to only 10% of who draws a median monthly income. Good luck to 50% of the population who warns less than the monthly income.
CPF is definitely not enough for retirement needs especially if one has wiped out his CPF savings to buy a property. The usual thinking will be to liquidate whatever assets (e.g. property) at retirement to free up cash for retirement needs. But, then again, it may not be that easy as one still need to find a place to stay and even with a downgrade in property such as shifting from 5 room HDB to 3 room HDB upon retirement, the future price of HDB flats will most likely all rise in tandem and a smaller flat may not be that much cheaper from a larger flat in future value. So, is there really that much cash that can be freed up from the liquidation of one's assets?
Also, consider that inflation over the decades of one's life will make living cost rise up substantially and even with cash freed up upon retirement, one has to be careful whether the amount of cash will be enough to answer retirement needs with future higher living and medical cost especially pertinent to old age retirees in future?
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