CPF & Medisave minimum sums
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Dora1:
A pension is a pension. This is the most basic minimal amount for subsistence living. If one has been savvy through his life and accumulated enough savings and investments, the $148,000 minimum sum does not mean a whole lot.But is it fair to lock up every citizen's money just because of the minority who doesn't know how to do their own financial planning?
If one struggles to even make minimum sum, and CPF is all the savings he has after 35 years of working life, how safe is it to let him take CPF out in one lump sum at age 55?
Have some consideration for those folk who are likely to do damage to themselves. If you are a savvy investor, $148K should not be a really big deal. -
Dora1:
I do not think that you need to be very well off to have savings or investments. My mum started her job with a low pay of $90. She worked hard for the 10 years of her life before getting married to my dad. Together with my dad, they paid off the housing loan (4 room flat valued at $87,000 in 1988) within 5 years. I was born in 1982. We stayed with my maternal grandparents for the first 6 years of my life. From a young age, I was taught to live within my means. If you earn $1, spend $0.30 and save the rest. Savings should be allocated first even before you think of spending.3Boys:
Thanks. I've always scratched my head about this negativity towards CPF, and the perception that it somehow 'benefits' the well-off more than the less well off.
Well, the thing is, for the very well off, they will definitely have other savings/investment/passive income for retirement. So they totally don't care if their $149K is returned to them or not.
For the man on the street who struggle to save maybe $100 per month, how much non CPF savings would they have when they retire? Especially that same $100 per month is also dipped into for own medical bills, parent's medical bills, children medical bills, etc. That $149K is important for them when they retire. Medisave doesn't take care of all medical bills.
Now the prices of housing have increased, so has our pay. It's impossible to find a full time working adult who earns $90 per month now.
The younger generation now often spend beyond what they can afford. There are too many luxuries that we do not need but we want. In that case, will we even have enough money in old age? How much is enough?
When a person has been broke all their life, when they get a lump sum, will they even have self control? Will they even remain rational?
Think about it... -
So, at age 55 we can withdraw whatever amount that exceeds $148,000 and we can withdraw the $148,000 after age 65? Or, is the $148,000 is put under annuity so we will get a small amount every month until the $148,000 is depleted?
Sorry for the stupid question. -
TheAnswer:
Theoretically and in a ideal world, yes.If you earn $1, spend $0.30 and save the rest. Savings should be allocated first even before you think of spending.
However, having grown up in a hand to mouth family, the real situation is that the low earnings is only sufficient to pay off their expenses. There is no/ minimal savings to talk about.... As my mum said, only those in that situation will be able to fully understand. Sometimes it's not that they don't want to save but rather just not possible due to unforeseen circumstances....
We are lucky not to be in such situations. Today, we are surrounded by peers whose annual income is easily 6 figures and we start to think that kind of income is the norm. But I still believe there are alot of hand to mouth family around in our little red dot. That's why they have ST pocketmoney, etc.... people who are poor that they cannot even afford to give their kids pocket money. -
MMM:
The poor are certainly around....
We are lucky not to be in such situations. Today, we are surrounded by peers whose annual income is easily 6 figures and we start to think that kind of income is the norm. But I still believe there are alot of hand to mouth family around in our little red dot. That's why they have ST pocketmoney, etc.... people who are poor that they cannot even afford to give their kids pocket money.
....do we expect them to retire at 55 and draw down all their savings, and then suddenly start making great returns on their money? 10% return on $148,000 is only 15K per year = 1.3K per month.
How does releasing their CPF early in life (yes 55 is young) in one lump sum help these people in their golden years? -
3Boys:
....do we expect them to retire at 55 and draw down all their savings, and then suddenly start making great returns on their money? 10% return on $148,000 is only 15K per year = 1.3K per month.
It is back to Dora1's earlier point. Given that they have to pay for housing and their CPF contribution is low due to the income level, will their CPF = or > minimum sum when they retire??? If not, these folks probably cannot even encash their CPF when they reach that age? They just got to continue slogging till the day they hand in their IC like another forumner mentioned. -
MMM:
I think one needs to take a non-emotional view on this issue and deal with the practical.3Boys:
....do we expect them to retire at 55 and draw down all their savings, and then suddenly start making great returns on their money? 10% return on $148,000 is only 15K per year = 1.3K per month.
It is back to Dora1's earlier point. Given that they have to pay for housing and their CPF contribution is low due to the income level, will their CPF = or > minimum sum when they retire??? If not, these folks probably cannot even encash their CPF when they reach that age? They just got to continue slogging till the day they hand in their IC like another forumner mentioned.
It is clear that for the lower income with low CPF savings, that the person is far more likely to outlive the CPF monies than the CPF outlive the person.
So all this talk about slogging till one hands in the IC is an emotional smokescreen.
If one has low CPF savings, then whether or not one receives the CPF at 55 or at 65, there is a likelihood that in both cases he will still have to slog until he returns his IC.
Next, what is this aversion to working beyond 55? My Dad and FIL do it, my ex-boss did it. All for economic reasons.
Is it shameful? Is it disgusting that one has to work at that age for financial reasons and not out of 'love of the job'?
I don't see why it's such a psychological problem for people to accept this.
If one has low CPF savings, why shouldn't one continue to work between to ages of 55 and 65, and defer drawing down on the CPF until one is at an age where perhaps it really becomes more challenging to be employed?
Why all this emotional response? Makes no sense..... -
MUST live longer, be saner and healthier...MUST live longer, be saner and healthier...MUST live longer, be saner and healthier...MUST live longer, be saner and healthier...
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3Boys:
I think if most can find a desk-bound job, it will not be a problem. Can we create so many jobs to keep those beyond 55?
Next, what is this aversion to working beyond 55? My Dad and FIL do it, my ex-boss did it. All for economic reasons. -
Just some perspective on this whole notion of not living to see the CPF. Here is a link to US data on expected longevity. Fully 90% of people live to age 55 and 80% of people can expect to live to age 65.
http://www.census.gov/prod/1/pop/p23-190/p23190-g.pdf (fig 3-1)
Singapore's life expectancy is greater than the US so one would expect that the curve is pulled even further to the right.
http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy
Apart from other things, we ought to stop kidding ourselves about this.
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