Is your a retirement fund or CPF savings adequate to provide you a decent lifetime income?

By Kelvin Tan

From 1st July 2006, the Medisave Contribution would increase from $90,000 to $94,600. The new amount will apply to CPF members who turn 55 from 1 July 2006 to 30 June 2007.

For existing CPF members who just turned 55, they should have close to S$95,000 in their accounts.

For a person born May 1951, The CPF Minimum Sum applicable to you is $90,000.The projected monthly payout (retirement income) from age 62 is $711 and is estimated to last for 20 years. (Taken from the CPF calculator)

This assumes that you set aside the Minimum Sum fully in cash when you are age 55. The current retirement account interest rate is currently 4% pa, and is subject to change.

Hopefully this person would have more than the minimum sum, with the likelihood of GST hitting 7% middle of the year, essentials are going to cost more.

Assuming if this person just spends $18 for three meals a day, his monthly needs will be about $558, for food alone. This leaves him $153 from the monthly retirement income from CPF payout to handle all the other necessities? There are some necessities to be considered like medical insurance, utilities etc.

Another important point to note is that this CPF retirement income amount will be paid up to 20 years only! i.e. up to the person’s 82nd birthday. What if this person lives beyond this age what then? That is why annuities were introduced, what are annuities? It’s function is basically similar to that of the CPF retirement income, the main difference is that income from annuities will be paid through out the person’s life! Additional benefits in terms of cash are paid out if the person is unable to do 2 of the 6 activities of daily living (ADL).

For the majority of Singaporeans who just meet the minimum sum, retirement is not going to be a very rosy. Those who have less than the minimum sum, I can’t imagine how they are making ends meet? Is that why many Singaporeans who reach retirement age of 62 are still working?

That’s why it’s important for you to have a proper financial planning as early as possible all the way to retirement, in order for you to enjoy the fruits of the your labor.

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Ricky Ng and Associates are Professional financial planners with expertise in life, medical, financial, retirement, estate and investment planning. Representing Great Eastern Life, one of the largest insurance company in Singapore.