Tan Chei Huey

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2018 CPF Minimum Sum – What It Means For You

I like to monitor the CPF Minimum Sum amount. This is because to me – it is an indicator of the “true” inflation rate. 

In January 2018, I checked out the CPF website and saw the new updated CPF Minimum Sum’s updated tables – it has been updated all the way till 2020!

I created my own table using the numbers provided. Here is the screenshot below:

My own table I created myself – please credit back to Ensurist.com.sg if you decide to use this

So for this table, I added another 2 more columns – the amount it increased by and the percentage increase.

I see the percentage increase as my own indication of Singapore’s inflation rate.

The Significance of the Full Retirement Sum

On the year you turn 55, your CPF accounts (both the funds from the Ordinary Account and the Special Account) will be converted to a Retirement Account.

This means whatever is the Full Retirement Sum for that year you turn 55 – it will be deducted to form your Retirement Account.

If you have remaining cash balances in your OA / SA – you can choose to withdraw those or continue to keep them in CPF.

The Retirement Account will then become part of CPF Life – which will start to give you monthly payouts once you turn 65.

What this means – you are unable to touch your Full Retirement Sum till you turn 65.

The Known Unknowns In Your Retirement Planning

If you are currently aged 30 years old, you might be thinking this is more than 25 years away. But the earlier you plan, the better you are prepared for any potential disruptions to your retirement planning.

The question is:
Will I have enough in my CPF funds to hit the Full Retirement Sum for that year?

Let’s list through the Known Unknowns:

  • A Minimum Retirement Sum that is destined to increase every year
  • Usage of my CPF funds to pay for my HDB / property purchase – which could reduce my available funds
  • Changes in CPF interest rates (although we can assume it will remain consistent)
  • Changes in my own CPF contribution rates (salary increments or job loss)

Any of these can easily derail our retirement plans – especially if we intend to depend on CPF Life for our retirement.

That’s why we will need to be able to have contingency plans in place.

3 Simple Strategies To Cope With These Known Unknowns

Strategy 1:
Do not change your lifestyle habits – even when your income starts to increase significantly.

Please do not fall into this trap. I have seen so many people ramping up their spending – just because they are earning more. By keeping to the same lifestyle you had when you first started work, you will be able to build up some savings that can act as padding in case of emergencies.

Especially if there is job loss involved – you might be in the job market longer to find that new replacement job.

Strategy 2:
Build up your skill sets or start a side-hustle to bring in more income. 

Remember to always make yourself valuable to the eyes of potential employers. Use up your Skillsfuture funds and enroll in courses that can help you build up new skills – like learning how to sell.

Selling is the most valuable skill anyone can have – it helps not just in your career but in your relationships.

Strategy 3:
Start planning for alternative choices to CPF Life

I believe we should always have a diversified investment portfolio. This means starting early and seeking alternative paths to build up that retirement nest egg.

This includes strategies like stocks, property or trading.

If you are looking for an experienced financial planner who can help you get started, please feel free to contact me to arrange an appointment.

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Tan Chei Huey

Tan Chei Huey is a Singapore-based financial advisor who has been helping clients to build up their retirement nest egg and securing financial protection for their health.

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