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Wednesday, May 28, 2014

Cannot Count on CPF to Retire On

CPF is Our Money, No?
All of a sudden there is this big hoo ha about CPF money. The first whisper of unhappiness that I encountered about CPF was when I sold our previous home to a Singaporean lady married to a French man. She was trying to calculate how much of the CPF she could use. Interest rates at that time were low. She reasoned that the cost of borrowing from the bank would be lower than the cost of using her CPF.

I didn't quite understand, so I asked.

She explained that if she were to sell the apartment, she would have return the money to CPF with the interest those funds would have earned if they had sat inside the CPF. The interest accruing in CPF was MORE than the interest charged by bank lending.

I still didn't understand because CPF is her money. I shrugged and then forgot.

Growing Old With Dignity
Whatever it is, whispers I heard 3 years ago became rumbles. Recently, it has fairly exploded into a pyroclastic surge, like a constipated Mt Vesuvius suddenly letting loose. To me, the case is compelling for increasing the Minimum Sum. Life expectancy is getting longer. Inflation is scary. The pioneer generation certainly did not expect that inflation would destroy their buying power. They have withdrawn their CPF money years ago and the money is gone.

Since the money is gone, the government has to dip into its coffers to help the Pioneer Generation. The Pioneer Generation does not feel good either to be subsisting on government handouts. Theirs was a proud generation. I guess raising the Minimum Sum and delaying CPF draw down would help later generations stave off an old age fraught with the indignity of accepting handouts.

Hmmmm...there are worrisome rumours about Ponzi schemes and GIC losing our money. I wish there were clearer visibility into those numbers if only to put a stop to these rumours. A rumour that has not been addressed with facts will only cause more panic and even people like me, who have always had the rock solid belief that my CPF is my money... would begin to worry a little.

Not Everyone Can Manage Money
I was in secondary school when a classmate said to me, "We are spending $70,000 to renovate our house because my Dad just got out his CPF money." Back then, at the tender age of 16, I was already puzzled. Shouldn't you save that money in the bank so that you can use it when you are sick or need to buy food? Even then, it occurred to me that this respected elder, the Father of my friend, was not a wise steward of his wealth.

I even know people my age who manage wealth poorly. They end the month with nothing left over. Meanwhile, their grocery shopping comprises foie gras, sashimi grade salmon and abalone. I know a guy who drives a BMW but lives in a rented HDB room. Plenty enough people cannot manage money.

The Minimum Sum will be their lifeline eventually.

Cannot Count on CPF
There was a time when I felt good that I was accruing money in CPF for my retirement. One felt some sense of security. Even then, from the day I started work, I had explicit savings targets aimed at retirement. At that time, a colleague 10 years older than I, commented that I was over kiasu.

Presently, I am even MORE kiasu about the CPF. Looking at the minimum sum, I know it is not enough to see me through to age 80. I am also not sure whether what we have accumulated will be enough to fund a peaceful, stress free and dignified retirement. At the rate inflation is going, I have every intention to keep on working until I can really no longer work. I have no intention to rely on the CPF to fund my retirement. It really is sort of a useless scheme, come to think of it.

The Minimum Sum simply is not enough.

Maybe I am just insecure about money. My insecurity about bread and butter has always far outweighed any vanity I might have. I was so insecure about money that I did not dare to buy branded bags and shoes, no matter how much I wanted them. Now that I am old and fat, those vanities are gone. I don't want them anymore.

I want to retire in dignity, with a roof to stay under, enough food to eat and books to read. To achieve that, I am guessing that I have to rely on me... not the forced CPF savings. On top of that, I intend to pass on this sense of insecurity to my children by showing them THIS.

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