Below is a government press release announcing the changes in the CPF Minimum Sum and Medisave Minimum Sum. The increase in the CPF MS represented a 6.5% increase and the Medisave MS represented a 5.1% increase from 2012. Note that both rates are much higher than the core inflation rates in Singapore 2012.
Whilst I understand that the adjustments are necessary to help Singaporeans meet their retirement and healthcare needs, I question the need to peg the adjustments at a rate higher than the inflation rate.
Why is there a need to set aside so much money in our CPF Retirement and Medisave accounts? Does it really help and benefit Singaporeans? If so, why set so many restrictions for medical claims from our Medisave accounts?
The money in our Medisave Account belongs to us, so why restrict us from using it for medical costs? Obviously I am concerned as I am in my early thirties and at the rate it is going, the Minimum Sums could be half a million by the time I retire. I really hate to think that after slogging for decades, I cannot even touch or smell my hard-earned CPF monies.
CPF Minimum Sum
CPF members who turn 55 between 1 July 2013 and 30 June 2014 will need to set aside a Minimum Sum (MS) of $148,000 in their Retirement Account (RA). The MS for 2012 was $139,000. The MS has been adjusted over the years to account for inflation, longer life expectancies and Singaporeans’ rising expectations of their quality of life post-retirement. The MS is targeted to reach $120,000 (2003$1) in 2015.
Medisave Minimum Sum and Medisave Contribution Ceiling
The Medisave Minimum Sum (MMS) is the amount that a person turning 55 needs to set aside in his old age for his own or his dependants’ healthcare expenses and basic MediShield and ElderShield premiums. Regular MMS adjustments are necessary to help Singaporeans meet their long-term healthcare needs. From 1 July 2013,
a. The Medisave Minimum Sum (MMS) will be raised to $40,500 from $38,500. Members will be able to withdraw their Medisave savings in excess of the MMS at or after age 55.
b. The maximum balance a member may have in his Medisave Account, known as the Medisave Contribution Ceiling (MCC), is set at $5,000 above MMS and this would be increased correspondingly to $45,500, from $43,500.
Any Medisave contribution in excess of the current MCC will be transferred to the member’s Special Account if he is below age 55 or to his RA if he is above age 55 and has a MS shortfall.
We all want to achieve financial freedom when we reach retirement age. But do you want to be held ransom by your CPF savings? While the goal of the CPF scheme is to provide a form of national saving framework for Singaporeans, it is important to develop a wealth portfolio so that you are not entirely dependent on your CPF payouts in your twilight years.
To achieve financial freedom take years to accumulate wealth and there is also a need to learn how to create and build wealth. As a matter of fact, the art of managing wealth is not taught in school, so we have to learn it as we enter the work-force.
Start learning the merits of buying gold bullion, investing in the stock market and how bonds work. It is never too late to learn how to invest. Better late than never. In life, it is important to have a growth mindset and keep learning so that our brain can keep growing. Do not let fear of failures defeat you.
In my point of view, you set yourself for failure if you assume that your CPF savings would be sufficient to provide for your retirement needs. Start to develop investing skills or create passive income streams. Do not be held ransom by your CPF savings. Start learning and living the dream.
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SG Wealth Builder