The government just announced that the CPF minimum sum will be raised to $155K this year. Back in 2003 the min. sum was $80K.
Minimum sum will be $600K by 2037
Looking at this chart I came up with a very conservative 6% compound per annum, the min. sum will be almost $600K by the time I’m 55!
I (personally) wouldn’t have met the min. sum
Provided that I continue working till I’m 55 and am paying off my flat with CPF, I would have only accumulated approximately $370K by the time I’m 55 (including CPF interests). I’m no where near the minimum sum projection.
The $5K max contribution limit will be raised very soon
I strongly believe that the current max of $5K will be increased very soon because the sums just do not work out. Here’s a fictitious example of a highly paid young and energetic local graduate drawing a salary of $5K/mth so he can make the maximum possible CPF contribution from day one.
Edit: I made some mistakes in the calculations earlier, this is an updated sheet.
(I’m having trouble uploading graphics, will do so later.)
He would have around $807K in his OA + SA by the time he’s 55, but check out his minimum sum! That’s provided if he doesn’t buy a property.
But I’m sure he wants to get married and buy a flat… and have kids… the government strongly encourages that!
He’ll have no money left in CPF if he bought a condo
So after working for 30 years and paying for a flat together with his spouse, it is fair assumption that this bloke would have $300K less in his CPF for a decent HDB flat at current prices ($600K for a flat including interests divided equally between husband and wife).
If the couple buys a million dollar, they will have nothing left in their OA.
If his wife gets pregnant and stops working we may find another dead body in Bedok Reservoir/Singapore River.
Singapore tax rate is effectively >36.5%
Given that our current CPF rate is 36.5% (20% employee + 16.5% employer) our income tax rates can be considered to exceed 36.5%. Just as an example, the highly-paid graduate above would pay about 3% income tax for a salary of $60K/yr. This would add up to around 39.5% in taxes. This is higher than many developed countries. Even in US the highest tax bracket in the most expensive state is around 40%.
What the hell are we still contributing to CPF? We should be contributing as little as possible.
On hindsight, maybe it is a good idea to spend all your CPF money on a property since you’re never ever going to get it back.
The other question would be why are we even buying older and shorter tenure properties for more money?