Just yesterday, we were awakened with the increase in the Minimum Sum Scheme(MSS). The previous MSS of $123000 to be set aside for Retirement Account upon reaching 55 has been raised to $131000. This sum will continually increase year on year.
Moving forward, the MSS on any given year would be to reflect $120000(in 2003 dollars). CPF Board said that the increase in minimum sum, which includes an adjustment for inflation is to ensure that Singaporeans set sufficient savings for their retirement.
As for the Medisave account, the ceiling will be increased correspondingly to $41000 from $39500. This is to ensure that Singaporeans have sufficient savings to meet their healthcare expenses.
Why CPF planning should be the number one priority for all Singaporeans is because it involves your own retirement. Retirement money has been an issue amongst Singaporeans of late. The increasing Minimum Sum imposed by the CPF have forced those reaching 55 years old to continue working. As the possibility of the retirement age be increased gradually, Singaporeans may find it hard to keep up with the changes.
The only way that one could overcome this system is to prepare and plan their retirement savings well. As of now, the interest for both the Special and Medisave accounts are at 4%. Ordinary account on the other hand sits at 2.5% annually.
Therefore in order for someone to have sufficient CPF savings for retirement is to invest prudently into investments that yield more than the given interest by CPF. If one could attain at least 5% on CPF investment annually, they could potentially double their CPF savings every 14 years.
This can be done by carefully constructing a well designed investment portfolio which is suited to every investor's risk profile. A risk profile indicates the amount of risk an individual investor is willing to take. Regular portfolio rebalancing is also essetial in producing positive returns over the long run. Portfolio rebalancing is the act of re-analysing an investor's exposure to a particular investment. Hence, the allocation of funds will either be switched to a better investment or the percentage allocation of assets could be increased or reduced so as to take advantage of current investment opportunities.
All these could be done by having a competent investment advisor who understand your needs. Let us be clear, purchasing investments should not have an insurance element to it. This is to ensure that your money is put to good use and not to pay for commission costs.
Investment advisors are few and far between. They can be found through personal bankers in banks and also investment consultants with brokerage firms across Singapore. Your money is your responsibility. Hence there shouldn't be a time that you mix your insurance needs with your investment needs.
At the end of the day, you want someone that takes care of your money while you are out there working. If you take a passive stance towards planning your CPF savings, in the future you might face difficulty in retiring smoothly.
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