Do you know that though CPF members’ total balance has increased from roughly S$125 billion in 2006 to S$474 billion in March 2021, only 63.6% of active CPF members who turned 55 could set aside their Full Retirement Sum (FRS) or Basic Retirement Sum last year?
Hence, to better understand Singaporeans’ attitudes towards retirement, Endowus has worked with YouGov Singapore to develop the Endowus Singapore Retirement Report 2021. The survey took place in May this year with a sample size of 1099 adults, reflecting our tiny red dot’s adult profile population.
Here are its findings.
39% of Singaporeans are worried about retirement inadequacy
The survey revealed that about 1 in 3 Singaporeans are worried about retirement inadequacy. However, the results varied between the genders. Twice as many men than women confidently agreed that they hold sufficient money for retirement.
Almost 50% of people have not started planning for retirement
While 53% of Singaporeans are planning to use or are currently using CPF to fund their retirement, almost 50% of people have not started retirement planning. This is especially true for the younger age group under 35.
Lower-incomers are less likely to plan for their retirement with CPF
Image Credits: The Jakarta Post
Another worrying factor is that those earning below S$3,000 are less likely to plan for their retirement with CPF when compared to those with incomes above S$6,000 per month. This thus also means that lower-incomers are not making full use of their CPF. It also lowers their chances of achieving the FRS for financial stability at retirement.
Only 25% are currently investing their CPF
The report also showed that close to 70% lack confidence in investing their own CPF monies. That is why only 25% are currently investing their CPF. However, most Singaporeans seek higher returns and ranked it as the most critical criteria for CPF investing.
30% are asking for tools on CPF investing knowledge
There seems to be a gap in using CPF around financial decisions; as such, a third of Singaporeans are requesting tools to help them understand the impact of their financial decisions around their CPF. Some are also appealing for resources to aid them in estimating retirement income from their CPF.
To that, Samuel Rhee, Chairman and Chief Investment Officer of Endowus, agrees. He said, “Considering these shifting time horizons and other uncertainties, more education may be needed to help Singaporeans make better use of their CPF, especially earlier in life, when savers have more time to take advantage of asset growth.”
The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement. Unlike the Central Provident Fund (CPF), it is not compulsory to participate in the SRS scheme. A key benefit of SRS is that members can enjoy dollar for dollar tax relief, capped at $15,300 per annum for Singaporeans while saving towards their retirement goals. As a tax deferral scheme, when you subsequently withdraw from your SRS after the statutory retirement age, only 50% of the amounts withdrawn will be subject to tax. Individuals who would like to open an SRS account can do so with either DBS, UOB or OCBC bank.
Don’t leave your funds in SRS un-utilised
After transferring funds into your SRS account, don’t leave it un-utilised! According to Ministry of Finance (2019), over 28% of SRS contributions sit idle as cash balances, earning a low interest rate return of only 0.05% p.a.
There are many ways that you can utilitse your SRS contributions to grow your retirement funds, such as investing in unit trusts, ETFs, stocks, bonds (including Singapore Saving Bonds and Singapore Government Securities) and single premium insurance. A particular affordable and convenient way is to invest your SRS funds with MoneyOwl to boost your future retirement fund. Here’s why you should do so.
Invest your SRS with MoneyOwl
Investing your SRS funds with MoneyOwl starts from as little as S$50/month or $100 as a lump sum. This means that it is possible to start early without waiting for your SRS funds to accumulate to a substantial level. Besides, there is no platform fee so that more wealth is generated for the you in the long run. With MoneyOwl, you gain access to a globally diversified portfolio of companies with good growth potential at value prices.
This promotion is only valid from 9 November to 31 December 2020.
This promotion is only open to the first 500 people who successfully invest their SRS funds with MoneyOwl.
Promotion is valid for one-time top ups using SRS funds only. Regular savings plans/ monthly SRS investments are not eligible.
Promotion is not valid for cash investments and investments in WiseSaver portfolio.
You need to stay invested and not withdraw your funds for at least 2 months after the promotion period is over (i.e. till end-February 2021). Vouchers will be sent to you in March 2021.
Only new MoneyOwl clients are eligible for S$50 voucher redemptions.
Both existing and new MoneyOwl clients are eligible for the $100 or $200 voucher redemption.
MoneyOwl reserves the right to change these terms and conditions from time to time.
About MoneyOwl
MoneyOwl empowers and fulfils lives by helping people make wise decisions to achieve their financial goals. With one of the lowest fees in the market, invest your SRS funds with MoneyOwl today to boost your future retirement income.
Despite the economic headwinds, the retirement age will begin to shoot up in 2022. Manpower Minister Josephine Teo highlighted they “did not arrive at this date lightly even though towards the later part of our deliberations, it was clear to us that the economic conditions have changed quite considerably.” All that is left for us to do is to adapt to the recent changes in the retirement age and CPF contributions.
INCREASED MOM RETIREMENT AGE
Foresee a gradual increase in Ministry of Manpower’s retirement age. Currently, the official retirement age is 62 years old. This number will increase to 63 years old in 2022 and to 65 years old in 2030. Do you think a higher retirement age is desirable?
Nonetheless, Prime Minister Lee Hsien Loong greatly emphasized that there is no change to the CPF payout ages and withdrawal. You may withdraw money from your CPF RA upon reaching 55 years old and start receiving CPF LIFE payouts from age 65. All these were discussed during the National Day Rally.
ALTERED EMPLOYMENT PROCESS
Possibly one of the most affected with the changes in the retirement and re-employment age is your employer. It is completely legitimate to work up to the MOM re-employment age. Your employer cannot deny you that.
At the moment, the re-employment age is 67. It will increase to 68 years old by 2022 and eventually become 70 years old by 2030. It is highly encourage that employers equip these employees with necessary training and skills to help them tackle the contemporary positions.
In light of the aging workforce, the Tripartite Workgroup on Older Workers made several other suggestions to restructure the work environment in Singapore.
RAISED CPF CONTRIBUTION RATES
Aside from the changes in retirement and re-employment age, the CPF contributions for workers beyond age 55 will be raised. This will be felt from January 1, 2021 onwards. The extra CPF contributions will go straight to your CPF Special Account.
When the CPF contributions for the 55-60 years old age group increases by 2021, the allocation for your CPF (SA) will jump from 3.5% to 5.5%. The rest will remain the same.
Image Credits: unsplash.com
May these guidelines and significant changes help you decide for a better future ahead!
Have you ever wondered how much money do we need in our silver years to be able to afford our desired lifestyles? Most adults would be relying solely on their CPF funds to finance their retirement. Asset-rich but cash poor retirees could be thinking of renting their HDB flats out to supplement their retirement funds. There are indeed several ways to build up our retirement income. However, we must be mindful of avoiding some of the dangerous assumptions when planning for our retirement.
Oversight To Account For Inflation
Inflation can have a big impact on retirees even if they have been historically low. According to Monetary Authority of Singapore, Singapore’s historical core inflation averaged an annual 1.7% since 1990. While 1.7% per annum may not appear alarming, it will compound to a staggering 66% over a span of 30 years! If you are a retiree receiving a fixed amount of stipend, the value of your money will decrease with each passing year. Hence, your retirement funds will be eroded by inflation if they are not carefully managed. Unfortunately, inflation does not stop just because you have stopped working. Therefore, it becomes important that your investment grow at rates that are at least equal or better than the rate of inflation to protect the value of your retirement funds. How do we then continue to enjoy the taste of life at our retirement years without feeling the pinch of inflation, especially when we have stopped working and receiving salaries?
Reliance on Rental Income From Property
Some adults plan to rely on rental income from investment properties to supplement their retirement funds. However, with the recent cooling measures announced in July 2018, investing in a second residential property is increasingly out of reach for most working adults.
Some retirees might be thinking of renting out the vacant rooms in their HDB flat especially as their children gradually might have left the home that they grew up in. However, this option comes with its own set of inconveniences. It could take a couple of months before a tenant can be found. There is also the administrative hassle of providing tenant’s details to HDB for record-keeping. Of course, all these pale in comparison to stories of horror tenants who damage the HDB flat or are tardy in their rental payments. In such circumstances, renting out their HDB flats may not be the best option to supplement your retirement income.
CPF LIFE Alone Might Be Insufficient
For a retiree who sets aside the maximum Enhanced Retirement Sum (S$271,500), the monthly payout from CPF LIFE is expected to be about $2,000 per month. If this amount is sufficient to pay for your daily expenses during your retirement, then this is definitely a good safety net for you to rely upon. However, it is not true that all Singaporeans and Singapore Permanent Residents can depend on their CPF funds to finance their retirement entirely. In fact, it is widely reported that almost 4 in 10 CPF Accounts do not even have enough funds to meet the Basic Retirement Sum. For the group of retirees who do not generate enough funds from their CPF LIFE payouts, it is necessary to generate extra income from alternative sources such as investments.
Future-proof Your Retirement Funds With The AIA Retirement Saver (III)
Given that young professionals lead hectic lifestyles, they may not have the time and energy to plan for their eventual retirement. Yet, planning ahead to future proof our retirement is essential and the AIA Retirement Saver (III) is one of the ways to do that. The AIA Retirement Saver (III) is a simple and hassle-free retirement solution which provides a guaranteed stream of retirement income for 15 years. Your hard-earned savings is safely secured since the capital is guaranteed; you will get back every dollar that you contributed at your desired retirement age. On top of that, you will receive potential monthly dividends which could help to cushion the impact of inflation. Premium payment duration is also flexible; single lump sum, 5 years, 10 years or simply pay till your desired retirement age – 55, 60, 65 or 70. It is easy to get started because no medical underwriting and check-up is required. In essence, the AIA Retirement Saver (III) is truly an easy and stress-free solution tailored to any individual retirement plan.
Conquer The Uncertainty & Plan For Your Desired Retirement
With the AIA Retirement Saver (III) solution, individuals can cast aside their retirement worries as their savings will be in the good hands of professionals. The AIA Retirement Saver (III) can be an additional pillar to supplement your retirement funds. As it can be tailored to maintain the purchasing power of your retirement funds, you can be assured that you will still be able to enjoy your desired lifestyle during your twilight years. Don’t leave your retirement to uncertainty. You can certainly plan for the uncertainty by taking action now.
Some Chinese parents that are steeped in Confucian values often see their children as the main source of retirement funds. This can be a stressful burden to carry, especially if you are a young adult struggling with multiple financial commitments. Therefore, I have devoted a considerable amount of time learning how to grow my parents’ retirement funds and minimise household expenses. So here are 4 ways that your parents can also grow their retirement savings.
Minimise Expenses Via Various Senior Citizen Perks
Image Credit: NTUC FairPrice
For a start, I examined how my parents can reduce their household expenditure. For instance, I recently learnt that NTUC FairPrice offers 3% discount to Pioneer Generation members every Monday. If your parents are not Pioneer Generation members, fret not as those over 60 years old enjoy a 2% discount every Tuesday as well. Similarly, if your parents are over 60 years old, they can also apply for senior citizen concession travel cards. This will entitle them to significant discounts on public transport compared to a usual adult fare card. These are all schemes that my mother can tap on from next year onwards.
For Singaporeans aged over 65, do not overlook the outstanding benefits that come with the Pioneer Generation Package. Amongst the various benefits, it provides subsidised medical and dental services at CHAS participating clinics. These subsidies should help to alleviate healthcare costs. If your parents are not aware of these schemes, you may like to inform and even assist them in the application of these concession cards. A little savings here and there will ultimately add up and go a long way to reduce the household’s daily expenses.
Grow Their Retirement Funds By Leaving Monies in their CPF Accounts
Ask any Singaporean or Permanent Resident and they will tell you that age 55 is a significant milestone in their lives. It is not so much about celebrating yet another year in their lives, but rather, it marks the day where they can dip their hands into the pot of gold that they have painstakingly built up during their working years. Yes, I am referring to the CPF. At age 55, CPF members can withdraw:
up to $5,000, or any balance in their Ordinary and Special Account savings above the Full Retirement Sum[1] (‘FRS’), whichever is higher; and
any Retirement Account savings (excludes any top-up monies, government grants, and interest earned) above the Basic Retirement Sum (‘BRS’) if accompanied by a sufficient property charge or For more information, please refer to CPF’s website.
The temptation is indeed great, but do pause for a second and have your parents assess whether they truly need the money at that juncture.
If your parents are over age 55, choosing to leave their monies in CPF ensures that:
They enjoy an additional 1% interest on the first $30,000 in their combined CPF balances. This is on top of the prevailing Retirement Account interest rate of 4% and the additional 1% interest on the first $60,000 of combined CPF balances applicable to all CPF members. This easily beats any existing interest rate offered by commercial banks. Moreover, the principal and interest are guaranteed by the government, a rock solid triple AAA rated institution.
Even if they do not withdraw any amount at 55 years old, they can still do so anytime later. Therefore, there is no hurry to decide on the withdrawal of excess funds.
Furthermore, your parents also have the option to start their CPF LIFE payouts later, up to age 70[2]. For each year deferred, their CPF LIFE monthly payouts may increase up to 7%,guaranteeing them a larger monthly payout thereafter. Therefore, if your parents are gainfully employed at that juncture, it may be a superior proposition to leave their monies with the CPF.
A good example would be my father- in-law. He turned 55 recently but chose not to withdraw the excess sum after setting aside the FRS. He realised that he would earn an interest rate that is higher than if he were to leave the excess sum under the fixed deposit schemes offered by commercial banks. This is a very prudent decision that will add to his retirement funds.
Grow Their Retirement Funds With Silver Housing Bonus
Some retiring parents face the problem of being cash-poor but asset-rich. They have insufficient retirement funds but may own a property that has appreciated substantially in capital value. The government has introduced the Silver Housing Bonus to incentivise this group of people to unlock the value of their property and to ensure members have a lifelong income. It was introduced to help lower-income elderly households supplement their retirement funds when they “right-size” their flats. Eligible households can receive up to $20,000 cash bonus when the net sales proceeds are used to top up the CPF Retirement Account.
This policy is an attractive option for parents whose children have all left the nest and gone on to set up their respective homes. The need for a big house no longer exists. Therefore, it may be a practical option to downgrade to a smaller house in order to receive the $20,000 cash bonus from Silver Housing Bonus, as well as save on utilities, maintenance and conservancy fees at the same time.
For those who are not keen to “right-size” their flats out of sentimental value, there is another way to unlock the value of their property. By participating in the Lease Buyback Scheme, your parents can receive a stream of income to add to their retirement funds while continuing to stay in the property.
Claim Tax Relief Via The Retirement Sum Topping-Up Scheme (‘RSTU’)
For young adults who have been giving their parents a monthly cash stipend, do consider utilising the CPF Retirement Sum Topping-Up Scheme (‘RSTU’) instead. That is because you may be eligible to receive tax relief and reduce your income tax expense. Do note that the amount of tax relief that you enjoy is the amount of cash that you have contributed to your parents’ Special Accounts or Retirement Accounts (for parents above 55 year old), capped at S$7,000 per annum. This tax relief is applicable only if your recipient’s Retirement Account has not exceeded the current FRS. Cash top-ups beyond the current Full Retirement Sum will not be eligible for tax relief.
Therefore, by depositing cash into your parents’ CPF accounts via the RSTU, you fulfill your duty as a filial child and also receive tax relief! That is killing 2 birds with one stone.
In all honesty, I confess that this is a difficult suggestion to broach. Most parents of that generation still prefer to see cold hard cash as part of their retirement funds. To bridge this gap, you may try to argue that:
If they have no urgent need for the monthly stipend that you are giving, contributing directly into their CPF accounts earns higher interest rates than what commercial banks give.
They can still withdraw up to S$5,000 from their CPF accounts from age 55.
They will be getting higher lifelong monthly income once they start their CPF LIFE payouts.
While the aforementioned all appear to be very objective advantages, my parents remain unconvinced till this day. That is because emotions often play a stronger role in their perspectives of money. For instance, my father sleeps more soundly if his pillow, rather than his CPF, is padded with his retirement funds. But I will continue to nag and hopefully my parents will switch sides one day. Talk about role reversal!
Conclusion
Despite the various ways to grow the retirement funds and minimise household expenses, you may have come to notice that my family and my wife’s family are at different ends of the spectrum. My father-in-law uses his financial literacy to take advantage of the various schemes available in CPF to grow the household’s retirement funds. On the other hand, I am doing my utmost to help my parents play “catch-up” in terms of retirement readiness. But as they say, better late than never.
