Why Should I Care About How Much Money is in My CPF Account?

After speaking with some of my clients, I've found that many Singaporeans aren't concerned about their CPF accounts.

In fact, an alarming number don't even know how much money they have saved or have a "target" amount. This is a huge mistake!

CPF is an integral part of our personal finance, and we should put money into it, not just for retirement purposes.

In this short article, I want to convince you why you should care more about your CPF account!

Question: Is CPF Necessary in Singapore?

Let's address the elephant in the room first... Yes, it's restrictive.

You can't draw out the money any time you want. And there are other financial instruments with possibly better returns.

It's no surprise then that most people I spoke to aren't in favour of CPF.

Some even feel it is unnecessary and that the money inside is THEIR money. They should have the right to do whatever they want with it.

I get where they are coming from. But I have to disagree, and it's not just because I'm a financial consultant.

While it's true that CPF has its flaws, no system is perfect. I believe most Singaporeans benefit more from having this system in place.

Here's why:

• It's a retirement savings plan: The primary purpose of CPF is to help us save for our retirement.

• It gives us peace of mind: Unlike other financial instruments, we don't have to worry about losing our money in CPF.

• We can enjoy tax relief with voluntary contributions: By voluntarily contributing to our CPF accounts, we can enjoy tax relief of up to $14,000 per year.

• Plan for your children's education: With the CPF Board's Education Scheme, you can use your CPF savings to pay for your children's education.

• Help with our housing needs: The CPF Board's Housing Scheme also allows us to use our CPF savings for housing purposes.

Most importantly, it is a forced savings scheme which means we contribute a portion of our salary every month.

This is good because it forces us to be disciplined with our finances and save for the future.

Should I put money into CPF?

You've probably heard that CPF locks up members' money and prevents them from withdrawing it until retirement. I assumed so at first as well. I later figured out that CPF transactions are so smooth that we don't realise how much it has integrated into our lives.

Here are some common uses of CPF in our daily lives:

• Housing Loan: The most popular use of CPF is to pay for our housing loans. In fact, most of us use CPF to finance our flats.

• Medical Expenses: MediSave is a fantastic scheme to help us offset huge hospital bills.

• Insurance: We can pay off certain insurance premiums using our MediSave accounts.

• Education Fees: If needed, our CPF can pay for our children's tertiary education.

• Retirement Income: Best of all, when we reach retirement age, a portion of our CPF savings will be used to provide us with a regular income.

So you see, CPF is not just some retirement scheme. It's a scheme that helps us in our daily lives and one that we should all be contributing to.

How much savings should I have in my CPF account?

Ideally, you should aim to have enough savings in your CPF account to cover at least 20 years of retirement expenses. This includes food, housing, healthcare, and other essential costs.

Of course, how much you need to save will depend on your lifestyle, spending habits and retirement goals. But a good rule of thumb is to try and reach the Full Retirement Sum (FRS) by the time you're 55 years old to qualify for a higher CPF Life payout.

For those turning 55 in 2022, the FRS amount today is $192,000.

But if you're not on track to reach the FRS, don't worry! There's still time to catch up. The best way is naturally to make voluntary contributions to your CPF account.

You can make these contributions via the CPF Board's website. Just make sure it is in line with your long-term financial plan.

Conclusion

And there you have it… my thoughts on why every Singaporean should care about their CPF account.

I hope this article has given you some food for thought and that you will start taking steps to ensure that your CPF savings are on track.

After all, our retirement is something we should all be planning for!

What are your thoughts on CPF? Drop me a message or let me know in the comments below.

P.S. For more information on making voluntary contributions, you can visit the CPF Board's website or speak to a financial consultant.

(*ahem, I wonder where can you find one, like maybe the owner of this website you're on?)