Many of my girlfriends are in their 40s and like many Singaporeans we love to chat over whatsapp over anything (yes, women can really CHAT for hours…)
This morning, two of my girfriends and myself were casually chatting on CPF OA/SA. Given the increasing ceiling of BRS/FRS/ERS for CPF, we wonder if we have enough basic safety net when we reach age 65. BTW we are average income earners…
The 3 of us have different usage of our OA :-
- Miss S, age 46 has paid up her BTO housing and have sufficient RA (SA+OA combined) projected at age 55, so that is one stone off her shoulder.
- Miss H, age 40 one has a 2nd home mortgage to pay off which is not a big worry as she has a 1st property (private property) fully paid up and have backup plans to service the 2nd property if anything goes wrong.
- For myself, just one property to service (19 years mortgage *ouch* *sob*) with mister, and the worst case is to service the outstanding in cash via dividend/equity/savings (which is silly).
We concluded (it is no brainer actually) these are the important parameters to ensure at least some form of BRS or even better, meeting the FRS :
- Housing – Buying an affordable home to ensure that sufficient money is left in OA to compound and supplement RA when one is 55. One can consider transferring the OA in later years if there is no intention to purchase property again or fund your children’s local education through CPF. Also if your home loan is less than OA interest, it makes more sense to stretch the loan period.
- Continuing to work as long as possible.
- Earn more income.
- Top up SA to enjoy income tax relief.
As you can see, the power of compounding $ over time cannot be neglected.
However, I personally think BRS is not sufficient for retirement expenses unless coupled with some substantial portfolio equity, dividend stocks, bonds or inheritance to rely on. Moreover the access to CPF life payout is starting at age 65, and to be honestly it’s a long wait it seems for most.