Try putting whatever you know about CPF aside before reading this post
Disclaimer; CPF is a mandatory thing for all Singaporeans/PR so knowing it is as important as maintaining your financial health
There are 3 Accounts in your CPF before you turn 55:
- Ordinary Account (OA)
- Special Account (SA)
- Medisave Account (MA)
When you turn 55:
- OA + SA = RA (Retirement Account)
- MA = Acts like your health insurance
At this current point of our life, how much do we have for retirement (Cash/Savings) not including property, because we would want to be living comfortably like now (*assuming) ??
The average Joe and Jane most probably only have their money soaked in endowment plans and some weird insurance products. The question to you is when have you last counted the GUARENTEED (remember not the projected) return on these products?
If so, would it beat money accumulated in your CPF if the same premiums are put inside?
– Assuming that you only need the money for retirement and not now (Insurance policy plans that are signed up for are normally 15-25 years) –
So how is CPF good for our retirement?
Interest rate on each account (Before 55)
- OA (2.5 – 3%)
- SA (4 – 5%)
- MA (4% – 5%)
- Interest on (RA+MA)
- 6% on the first 30k, 5% on the subsequent 30k [Within the first 60k bracket]
- 4% for the next 60k and above
You earn $30k Annually, (Your) CPF contribution $6k, (Employer) CPF contribution $5.1k, Total contribution 11,100. Started working at age 25, currently age 35, retiring at age 55. Total CPF amount in your RA would at least have $749,224.54 and MA would be maxed.
Something you must know from this example
None of your CPF money is touched (pay HDB loan). Some money were transferred to your SA, to maximized the 6%,5% and 4% interest. This figure has bare the CPF allocation rate and no volunteer contributions have been made. No investment made.
THE NUMBER PROVIDED IS AN ESTIMATED NUMBER
Does your insurance beat it?
I’d not know, but I do believe you would likely get more from investing in your CPF than in any financial product your bancassurance/financial planner would advise you to buy.
If any mistakes were made in this post please help in commenting on them 🙂