New workers' CPF enough for comfortable retirement

[Suv8]

No need to save cash from your monthly disposable income for retirement anymore...woohoo govt say wan

 

no need multiple income streams, investment etc life is so simple

 

i got it wrong all this while... better start spending since CPF can provide me 71% of my pre retirement income even after quote-paying for housing

 

 

All theory by academics, accountants and economist living in their ivory towers. This is the same minister who said this year that we can afford a flat and raise a family on $1,000 a month. Sigh.

 

 

 

 

 

 

YOUNG Singaporeans starting work today will have enough savings in their Central Provident Fund (CPF) accounts to retire comfortably in their golden years, says a study commissioned by the Manpower ministry.

 

They would have accumulated CPF savings that will give them a comfortable level of income in retirement - a level equal to a large part of their pre-retirement earnings, it says.

 

Deputy Prime Minister Tharman Shanmugaratnam, giving a preview of the findings, said, however, that the CPF balances of older workers will be inadequate, although most of these individuals would have gained from the rise in the value of their homes, courtesy of government subsidies, earlier withdrawal of CPF savings and economic growth.

 

"Our strategy is to help them monetise the values of their homes in retirement if they wish to," said Mr Tharman, who is also Finance minister.

 

He was delivering a keynote address at the opening of the Singapore Human Capital Summit conference.

 

The study he was referring to was done by National University of Singapore professors Chia Ngee Choon and Albert Tsui.

 

In their study into whether the CPF system adequately meets retirement needs, the professors computed what economists call the income replacement rate (IRR), which is the ratio of retirement income to pre-retirement earnings.

 

Using all CPF savings acccumulated by a worker up to the age of 65, including savings above the CPF Minimum Sum which the worker can withdraw at age 55, they found an IRR of 71 per cent for a median male worker who starts working today. The female median worker's IRR is 63 per cent.

 

These IRRs factor in only the cash savings in the CPF; they exclude the benefits the worker gets from owning a home.

 

"These IRRs are within the recommended range by the World Bank, which is between 53 per cent and 78 per cent," Mr Tharman said. "They are also comparable to those seen in pension systems in many developed countries."

 

The equivalent IRR in the median country in the OECD, the league of rich nations, is 66 per cent of pre-retirement earnings, while the average among the OECD countries is 72 per cent.

 

Mr Tharman pointed out that Singapore's IRR is even higher when its near-universal home ownership - under which homes are fully paid by the time workers hit retirement age - is taken into account.

 

"By not having to pay for rent, cash is freed up for other living expenses in (the workers') old age," he said.

 

With workers who are already older, however, he acknowledged that their CPF balances will be insufficient for three reasons: their wages were much lower in the past; they were required to set aside less in their CPF retirement account; and the fact they could use much of their CPF savings for housing.

 

The study found the IRR to be lower for higher-middle earners because, as Mr Tharman pointed out, the CPF system is designed to meet the retirement needs of workers in the middle- and lower-income groups.

 

High-income earners have private savings.

 

Workers in the lower income group, in fact, have an IRR of 81 per cent of pre-retirement income. If the supplements of their wages through the Workfare programme are included, the IRR is even higher - 93 per cent.

 

Mr Tharman said: "The results of the study are an important validation of the CPF system. The refinements we have made to it over the years have ensured that the vast majority of young Singaporeans will receive adequate payouts in retirement."

 

He pointed out, though, that it still falls to individuals to take responsibility and save, and for employers to take the responsibility of providing good jobs, sharing productivity gains fairly and keeping older workers employed.

 

The fifth edition of the Human Capital Summit is hosted by the Human Capital Leadership Institute, the Ministry of Manpower and the Singapore Workforce Development Agency.

 

At the conference yesterday, Acting Manpower Minister Tan Chuan-Jin presented this year's Asian Human Capital Award to digital-security specialist Gemalto and global supply chain manager for agricultural products Olam International for their people-management practices.

 

MTR Corporation, Tata Consultancy Services and Toyota Motor Philippines Corporation were named Special Commendation Prize Winners.

 

[Ruriimasu]

 

Q: How do you know when a politician is lying?

A: His lips are moving.

 

[Kyrios]

They meant their own million dollar cpf accounts lah..aka zorro

[Wt_know]

huat ah!

can i retire at 55 with my cpf?

opps ... based on my calculation ... after complete housing mortgage

cpf hardly meet minimum sum ... no need to talk about retire

Edited September 20, 2012 by Wt_know

[PorkChong]

confirm not for my case. need to pay house until 65. every month after CPF contribution still need to top up case (single ownership scheme). so when I reach 65, technically, my cpf is ZERO (O.A.)

 

 

at 65,you will have to sell off your house and live in a old folks home then.

cpf rich and cash rich.

so they are right to say you still have enough for retirement.

[Mockngbrd]

[Celicar]

In their study into whether the CPF system adequately meets retirement needs, the professors computed what economists call the income replacement rate (IRR), which is the ratio of retirement income to pre-retirement earnings.

 

Using all CPF savings acccumulated by a worker up to the age of 65, including savings above the CPF Minimum Sum which the worker can withdraw at age 55, they found an IRR of 71 per cent for a median male worker who starts working today. The female median worker's IRR is 63 per cent.

 

These IRRs factor in only the cash savings in the CPF; they exclude the benefits the worker gets from owning a home.

===========

The study found the IRR to be lower for higher-middle earners because, as Mr Tharman pointed out, the CPF system is designed to meet the retirement needs of workers in the middle- and lower-income groups.

===========

Workers in the lower income group, in fact, have an IRR of 81 per cent of pre-retirement income. If the supplements of their wages through the Workfare programme are included, the IRR is even higher - 93 per cent.

 

I wait to see the details of the report, but before that, it seems to me that what is being calculated is the all important determinant.

 

IRR is the ratio of retirement income to pre-retirement earnings.

 

I'm not a numbers person, but it seems to me that apart from high CPF savings, high IRR can also be achieved if pre-retirement earnings is low.

 

So there is nothing to be happy about that a "median male worker", whatever that means, has higher IRR of 71% as compared to a "female median worker". It may just mean that the median male worker's pre-retirement earnings is lower.

 

That's why the report says "Workers in the lower income group, in fact, have an IRR of 81 per cent of pre-retirement income.". They earn little, so the denominator is low. It just means that what they are expected to earn pre-retirement is 123% of their CPF (1 / 0.81 x 100%). And you wonder why the strong resistance to minimum wage.

 

I also want to know how "pre-retirement earnings" is calculated. What kind of income growth is assumed throughout the working years? For CPF retirement income, does it assume a constant percentage, or factor in the fluctuations that we have experienced before that may happen in future too, especially when there is a downturn?

 

As with all projections and calculations, the devil is in the details and assumptions.

[Metalbone]

Swee ah! So I can retire comfortably.

[Mahjong74]

they are talking about young singaporeans starting work today can achieve it....those started last yr or before, good luck to you. Work till u died washing dish with 3K/mth

 

Like this?

 

http://forums.asiaone.com/showthread.php?t=54099#1

 

80 year old Singaporean dishwasher dropped dead at workplace

 

If you are a 80 year old granny in China, Japan, South Korea, Taiwan or Hong Kong, you will probably either be practising Tai-Chi in the park in the morning, having 'Yam-Chia' in a tea-house in the afternoon or watching TV with your grandchildren in the comfort of your home at night.

 

However in Singapore, you will most likely be sweeping the floor, washing the dishes, scavenging for cardboard or begging for money outside temples.

 

One 80 year old Singaporean dishwasher Madam He Jinyu was found dead in the toilet of ABC hawker center in Redhill where she has been working for the last six years.

 

 

According to her supervisor, Madam He worked daily from morning till night and only had two days off a month.

 

"When I saw her yesterday, she was walking unsteadily and appeared pale. I heard she has been having diarrhoea for the past few days," she said.

 

It is not revealed how much Madam He is earning as a dishwasher. More importantly, why is she still working at 80 years old when she has children to support her?

[Nonpareil]

If you read the the comments, primarily,

 

"Our strategy is to help them monetise the values of their homes in retirement if they wish to," said Mr Tharman, who is also Finance minister.

 

This is what they factor in, sell your home then you have enough for retirement...

[Perseus76]

If you read the the comments, primarily,

 

"Our strategy is to help them monetise the values of their homes in retirement if they wish to," said Mr Tharman, who is also Finance minister.

 

This is what they factor in, sell your home then you have enough for retirement...

 

Exactly.

 

All of you pray hard that the property buble dont burst before you manage to sell your house after you retire.

Else, all go eat grass or die washing dish.

 

And I dont need a study to tell me that I need to downgrade to a one roomer, in order to retire.

I would need a study on what comfort level I can expect after retirement.

 

Like, can I still holiday oversea at least one/yr etc.

 

I think its really pathetic, having work hard the whole life to pay for a relatively "big" house, and just when you finish paying for all the loans, you have to sell it off for retirement. WHAT A JOKE.

[PorkChong]

recently there's quite a few construction for small hdb studio(seems like it's built for those eldery type) sprouting up in mature estate.seems like they have already prepared us for this.

[PorkChong]

Like this?

 

http://forums.asiaone.com/showthread.php?t=54099#1

 

80 year old Singaporean dishwasher dropped dead at workplace

 

It is not revealed how much Madam He is earning as a dishwasher. More importantly, why is she still working at 80 years old when she has children to support her?

 

no need to reveal,definitely not more than 1000.

[Dark]

Why they always like to use these studies to prove this prove that? To prove that their policies are the best??

 

I will remain skeptical until they release the full report and for someone to dissect the numbers to make sense of it and the assumptions made. Maybe they assume the salary when you retire is 50% of your peak and use that to calculate the IRR? Or that property prices will appreciate in a straight line to supplement your retirement income?

[Mockngbrd]

if it really is enough, they dun need to make such report

[Wt_know]

walao so many talking that cpf is enuff to retire if you sell your flat (move to jb la, thailand, batam la, etc) or downgrade to one room

actually hor, long long time ago ... since i understand the word "retirement" ... it's never factor in that you need to sell your flat that you live in

retirement plan = financial planning to have enough savings + investment + insurance

 

if retirement plan = you must sell your current flat and then downgrade to one room ... is this still considered a retirement plan?

sell or monetize existing flat = bonus and not a must

similarly, you ask a financial planner to come up with a retirement plan for you, will he/she factor in 20-30 years later you must sell your flat?

Edited September 20, 2012 by Wt_know

[Incidentalsingaporean]

so the report is a fabrication?

[Alpha78]

walao so many talking that cpf is enuff to retire if you sell your flat (move to jb la, thailand, batam la, etc) or downgrade to one room

actually hor, long long time ago ... since i understand the word "retirement" ... it's never factor in that you need to sell your flat that you live in

retirement plan = financial planning to have enough savings + investment + insurance

 

if retirement plan = you must sell your current flat and then downgrade to one room ... is this still considered a retirement plan?

sell or monetize existing flat = bonus and not a must

similarly, you ask a financial planner to come up with a retirement plan for you, will he/she factor in 20-30 years later you must sell your flat?

 

Be grateful, they haven't say you need to sell your flat and move to JB yet. At this rate, maybe next time need to monetize the flat and retire in Swaziland...