Over the years, there have been many efforts to improve the retirement plans in Singapore. As such, retirement planning today may immensely differ from planning for your retirement, say, twenty years ago.
The cost of living in Singapore is higher.
According to a survey, 58 percent of Singaporeans regularly contribute for retirement. While this is higher than the global average, there are still 32 percent who do not save consistently. Almost half of those who do not save blame the high cost of living in Singapore for their inability to contribute. All of their money is spent on day-to-day living expenses, and none is left for their retirement plan.
The average lifespan is higher.
Singaporeans are now enjoying a higher average life expectancy. In 2013, women at the age of 65 can expect to live until the age of 87, while men can expect to reach the age of 84. This means that your money needs to last longer than in the past.
The CPF savings can only be taken out later.
At the age of 55, a minimum sum from the Ordinary Account and Special Account savings are transferred to a Retirement Account. Singaporeans may then take out the portion of their savings that is not allocated for their retirement needs.
If members need to withdraw their savings in excess of the basic retirement sum, they can do so with a property pledge. This is because the CPF recognises that Singaporeans who have their own properties will not have to pay rent.
At the age of 65, CPF members will start receiving their monthly payouts. They can also withdraw 20% of their Retirement Account savings.
The CPF retirement sum is higher but more flexible.
Over the past few years, the basic retirement sum has been increased in order to take account for the rising standards of living as well as the inflation. For example, the increases in the minimum sum between 2013 and 2015 range from 3.9 percent to 10.4 percent. Between 2017 and 2020, the basic retirement sum will still go up by three percent each year.
Today, CPF offers three different recommendations for the amount of minimum sum. The basic retirement sum amounts to $80,500, with monthly payouts of SGD650 to 700 for life. The full retirement sum amounts to $161,000, with monthly payouts of SGD1200 to 1300. The enhanced retirement sum amounts to $241,500, with monthly payouts of SGD1750 to 1900.
The CPF retirement payouts can be delayed.
As aforementioned, CPF members start receiving monthly payouts at the age of 65. However, they can also choose to start receiving their payouts at the age of 70. Doing so will yield 7 percent more payout every year.
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