The Central Provident Fund (CPF) is a central piece of the puzzle for my FIRE journey and it is no surprise that it will continue to feature prominently on my blog. I have been posting CPF updates (you can mouse-over the Reports tab on the header menu bar) on my blog for the longest time because to me, that’s accountability and 100% transparency in terms of tracking my journey.
In this new format, I will be posting CPF-related updates every January (full-year) and July (mid-year).
Obviously, this series of posts isn’t a pissing contest. At the time of writing for the original blog post in 2015, my combined balance in CPF-OA and CPF-SA was a modest total of $56,000 Singapore dollars. By the end of that year, it had grown to $65,748 – hardly worth flexing at all.
No CPF top-up was done
My charts below will paint an accurate, realistic and full picture – one that did not contain a single cent of CPF top-up.
What does this mean, exactly?
To give a little context, I am currently 37 years old, owns a HDB 4-room (1LR and 3BR) apartment and married with no kids. I bought my Build-to-Order (BTO) apartment in 2008 and emptied my CPF Ordinary Account (CPF-OA) in 2011. For the balance payment of the $169,200, my wife and I took up a 30-year HDB loan.
I was prudent and kept my housing loans extremely low ($680 split between my wife and I), even as my income grew over time. This meant that CPF is protected and on its own, the system on its own takes care of my retirement and by the time I’m 35 or 40 years old and really needed to sit down and start looking at retirement planning, my CPF would actually be quite healthy.
- You must have a fully paid house.
- You must have a good medical expense insurance.
- You must have a lifelong stream of income.
Our CPF can be the cornerstone that provides a strong foundation to all three pillars of retirement I have listed above. Alright then, let’s dive straight into the update!
Basic Healthcare Sum 2020 = $60,000
People have given this many different names such as MediSave Limit, MediSave Cap or MediSave Ceiling – because it gels easily with how it is commonly understood to be.
In its previous iteration, its name was Medisave Contribution Ceiling (MCC) but on 1st January 2016, MCC has been renamed as Basic Healthcare Sum (BHS) which remains as the official name till now.
The Basic Healthcare Sum is the estimated savings required for basic subsidised healthcare needs in old age. The Basic Healthcare Sum is adjusted yearly for members below age 65 to keep pace with the expected growth in MediSave use. Once members reach age 65, their Basic Healthcare Sum will be fixed for the rest of their lives.
At the end of 2019, the Basic Healthcare Sum amount was updated to $60,000 as part of the annual increase. Let’s take a look a the past nine years and how much the Basic Healthcare Sum has increased.
|Year||BHS||Incr. (Amt)||Incr. (%)|
As stated on CPF website, the yearly adjusted in intended to keep pace with MediSave use. I have met the Basic Healthcare Sum in 2018.
For the past two years, I have been easily keeping pace with the increase in Basic Healthcare Sum since there is no longer a need for me to play catch-up. This is what I have repeatedly mentioned.
Playing catch-up is the tough part, but once that is done, keeping up is way easier.
It is important to realize that the base interest rate of the CPF MediSave Account (CPF-MA) is 4%. For now, let’s disregard the bonus interest earned on it. While it is substantial, it is not quite sufficient to keep up entirely with the annual increase based on the numbers from recent years.
For example, 4% of $60,000 works out to $2,400. Nevertheless, the idea is that once we have managed to hit the Basic Healthcare Sum, interest-earned on CPF-MA alone would largely be able to account for the annual increase and become self-fulfilling.
Beyond the Basic Healthcare Sum amount, further contributions will be funneled into the CPF Special Account (CPF-SA) which will give it a much needed boost towards Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS).
I guess we’d just have to make the best out of what we have.
Full Retirement Sum 2020 = $181,000 < $192,596
In Singapore Budget 2020, it was revealed that that the Full Retirement Sum for 2021 is $186,000 and for 2022, it would be $192,000. With that information, we can update the Full Retirement Sum table to include the two new rows.
The latest numbers can be seen in the table below.
|Year||FRS||Incr. (Amt)||Incr. (%)|
On the last day of 2019, after taking into consideration the interest that was earned on my CPF accounts, I reached CPF Full Retirement Sum with $208 to spare.
Eight days later, I made a Retirement Sum Top-up (RSTU) of $40,000 from my CPF-OA account into my mum’s CPF-RA account.
Pointless milestones are meaningless. The whole idea of financial literacy is having these options at our disposal and using them to improve the financial security of ourselves and our loved ones.
I used $40,000 in my CPF-OA to exchange for a lifetime stream of $300 monthly income for my mum. Chances are, I might do the same for my dad next year if things go according to plan.
I had touched on my rationale for this in my FIRE Gone Wrong post, which basically stemmed from my desire to make sure that my parents have a worry-free retirement even if I’m not around.
Likewise, I have also managed to broach the subject of transferring excess funds from CPF-OA into Retirement Account (CPF-RA) for my in-laws after performing a simple audit of their CPF accounts.
While I have left it to my wife’s family to decide whether they wished to take up CPF-LIFE (they are still on Retirement Sum Scheme), it is never a bad idea to farm the high interest rate provided by CPF Retirement Account.
As of 1st July 2020, I’m glad to report that my combined balance at $192,596 from the following accounts has exceeded the Full Retirement Sum amount for 2020, 2021 and 2022.
- CPF Ordinary Account
- CPF Ordinary Account – Endowus
- CPF Special Account
- CPF Retirement Account – Mum
The peculiar inclusion of my mum’s CPF-RA is because the unique strategy of parking my CPF-OA (2.5% interest) money in my mum’s CPF-RA (up to 6% interest) for cash withdrawals has specific rules governing its handling.
CPF transfer is not considered a gift. For all CPF transfers, any remaining transferred monies will be returned to the givers’ originating CPF account(s) after the recipient passes away. The refund amount is capped at the principal top-up amount.
Even though the transfer was made, I still tracked my mum’s CPF RA as a virtual account and simulate a flat $150 monthly outflow (using CPF calculator as a basis) for simplicity’s sake.
Pain is weakness leaving the body
It has been a tough first half of 2020 and there is simply nothing we can do about it but to hunker down and grind our teeth. We will get through this stronger – physically, mentally and hopefully with more financial resilience as well.
Stay strong, and stay safe.
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Hello! I’m Kevin, Turtle Investor
At the age of 30, I am the personal finance blogger who laid claim to a negative net worth of minus $25,755.
Seven years later in 2019, I hit CPF Full Retirement Sum (FRS) of $176,000 without making a single cent of CPF top-up. More tidbits about myself here if you’re curious. My blueprint for financial independence can help give you a headstart in your own FIRE journey.
I am married to a lovely wife and that means dual income with no kids. In my free time, I chase miles so that we can fly in business class. My hobby is making pocket change off this blog and sharing everything I know with you!
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