I'm a Singaporean millennial: How much CPF do I need to retire?

I was recently looking through my parents’ finances as part of their year-end finances review.

Being the one who is oddly interested in numbers and all things finance, I was the appointed kid to advise on their upcoming retirement plans.

Which led us to look through the CPF Retirement Schemes.

We were considering the options between the different retirement sums.

And we came across the current retirement sum figures which looked like this…

I can’t help but wonder how it would be like when it is my turn to turn 55-years-old.

TL;DR: How much do I need in my CPF as a millennial when I turn 55 years old?

Long story short, as a 27-year-old in 2020, you need about $414,115 for the Full Retirement Sum before you can withdraw the excess money.

Or about $207,057 for the Basic Retirement Sum if you own a property in Singapore, before withdrawing from you Retirement Account savings.

ALSO READ: Millennials more prepared for retirement than their middle-aged counterparts: Survey

How has the CPF Retirement Sums increased over the years?

The Minimum Sum Scheme (MSS) was first introduced in 1987, in a bid to ensure that Singaporeans would not squander their savings and would still have money for their retirement.

This scheme specified that there is a minimum amount in the CPF account when members reach their retirement age.

Back then, the minimum sum required was $30,000 and monthly payouts were around $230 once the member turned 60-years-old, and would last for about 20 years.

Due to longer life expectancy these days, the old MSS has been replaced by CPF LIFE to cater to these retirement needs.

Here’s a quick view of how the minimum sum has changed over the years:

Year	Retirement Sum
1986	Minimum sum scheme announced by Lee Yoke Suan
1987	$30,000 - Could be fully covered by a property pledge
1989	$30,900 - Minimum sum starts to be adjusted yearly for inflation (Minister Lee Yoke Suan, in reply to MP Charles Chong)
1994	Minister Lee Boon Yang announces changes to CPF, Minimum Sum to be raised to $40,000 in 1995 and by $5000 each year up to $80,000 in 2003. After 2003, increase will be pegged to inflation).
1995	$40,000 - Now only 50 per cent can be covered by property pledge (announced in 1994, Lee Boon Yang)
1996	$45,000
1997	$50,000
1998	$55,000
1999	$60,000
2000	$65,000
2001	$70,000
2002	$75,000 (Minister Lee Hsien Loong announces that Minimum Sum will be raised beyond 80k in 2004, by an amount yet to be decided)
2003	$80,000
2004	$84,500 (+$4,500)
2005	$90,000 (+$5,500)
2006	$94,600 (+$4,600)
2007	$99,600 (+$5,000)
2008	$106,000 (+$6,400)
2009	$117,000 (+$11,000)
2010	$123,000 (+$6,000)
2011	$131,​000 (+$8,000)
2012	$139,000 (+$8,000)
2013	$148,000 (+$9,000)
2014	$155,000 (+$7,000)
2015	$161,000 (+$6,000)
2016	$161,000 (no change because date of change of minimum sum changed from July to January)
2017	$166,000 (+$5,000)
2018	$171,000 (+$5,000)
2019	$176,000 (+$5,000)
2020	$181,000 (+$5,000)
2021	$186,000 (+$5,000)
2022	$192,000 (+$6,000)

In order to cater to long-term inflation and improvements in the standard of living, the minimum sum is expected to increase by about three per cent from the cohort in the previous year.

The payout eligibility age was also adjusted along the years in view of the increase in life expectancy as well.

1987	Monthly payouts can start from 60
1999	Raised to 62
2012	Raised to 63
2015	Raised to 64
2018	Raised to 65

From Jan 2018, CPF members could ‘opt-in’ for retirement payouts to begin at 65.

If there were no application submitted, he/she will receive payouts at 70-years-old instead.

If a later payout age is chosen (e.g. at 70-years-old), these CPF savings will continue to enjoy six per cent per annum interest in the account.

How would the CPF minimum sums be like for us millennials?

For the uninitiated, the CPF Full Retirement Sum (FRS) is set at two times of the Basic Retirement Sum (BRS).

And the Enhanced Retirement Sum (ERS) is three times of the BRS.

Based on a projected three per cent increase per annum, here’s how much we might potentially need in our CPF accounts before we can withdraw the excess funds when we turn 55-years-old.

55th Birthday in	Basic Retirement Sum (BRS)	Percentage Increase	Full Retirement Sum (FRS)	Percentage Increase	Enhanced Retirement Sum (3 x BRS)
2017	$83,000	3.11 per cent	$166,000	3.11 per cent	$249,000
2018	$85,500	3.01 per cent	$171,000	3.01 per cent	$256,500
2019	$88,000	2.92 per cent	$176,000	2.92 per cent	$264,000
2020	$90,500	2.84 per cent	$181,000	2.84 per cent	$271,500
2021	$93,000	2.76 per cent	$186,000	2.76 per cent	$279,000
2022	$96,000	3.22 per cent	$192,000	3.22 per cent	$288,000
2023	$98,880	Projected 3 per cent Increase p.a.	$197,760	Projected 3 per cent Increase p.a.	$296,640
2024	$101,859		$203,717		$305,576
2025	$104,914		$209,829		$314,743
2026	$108,062		$216,123		$324,185
2027	$111,304		$222,607		$333,911
2028	$114,643		$229,285		$343,928
2029	$118,082		$236,164		$354,246
2030	$121,624		$243,249		$364,873
2031	$125,273		$250,546		$375,819
2032	$129,031		$258,063		$387,094
2033	$132,902		$265,805		$398,707
2034	$136,889		$273,779		$410,668
2035	$140,996		$281,992		$422,988
2036	$145,226		$290,452		$435,678
2037	$149,583		$299,165		$448,748
2038	$154,070		$308,140		$462,211
2039	$158,692		$317,385		$476,077
2040	$163,453		$326,906		$490,359
2041	$168,357		$336,713		$505,070
2042	$173,407		$346,815		$520,222
2043	$178,610		$357,219		$535,829
2044	$183,968		$367,936		$551,904
2045	$189,487		$378,974		$568,461
2046	$195,172		$390,343		$585,515
2047	$201,027		$402,053		$603,080
2048	$207,057		$414,115		$621,172
2049	$213,269		$426,538		$639,807

This means that if you were 27-years-old in 2021, you would need approximately $426,538 to hit the FRS.

ALSO READ: Got $50? Here are 3 easy investments to start growing your money and 1 to avoid

Will we ever get there?

Now, this sum doesn’t seem small at all.

It’s almost half a million.

While it seems like a lot of money now, fret not.

During the Budget 2020 announcement, it was mentioned that about 70 per cent of those turning 55 in 2021 and 2022 are expected to be able to set aside their BRS.

This is a huge increase as compared to about 40 per cent of those who turned 55 in 2010.

If you’re able to start early and maximise your CPF account at the earlier stage, there’s a high possibility that this amount can be attained through the wonders of compound interest.

What can i do now?

While our CPF accounts are great as a part of our retirement nest egg, I personally would not prefer solely depending on it as my retirement fund.

With the intimidating amounts required for retirement along with the rising costs of living, it’s always good to have more as our retirement buffer.

Especially if you would like to look into early retirement, and how we could only start withdrawing it as a monthly payout from 65-years-old onwards.

Since CPF is an involuntary savings scheme that would provide us with our basic retirement income, I would still aim to maximise it to form my retirement safety net.

Meanwhile, I would aim to increase my income streams and focus on areas like investing and growing my own savings.

And of course, learn as much as I can from the real pros while I am still (relatively) young.

This article was first published in Seedly.