Most definitely it’s sweet to know that you can depend on something once you retire—an amount that will be enough to cover your needs, including medical expenses, without having to work some more.
Singapore is one country that has been conscious about the elderly. They want to ensure that once you reach the age of your retirement, you can live comfortably and, in fact, pay off a lot of your huge bills, such as your mortgage.
They are able to achieve this by establishing CPF or Central Provident Fund. This fund is currently regulated and developed by the CPF Board. It offers plenty of great schemes and services to Singaporeans especially to those who are already in their retirement age.
What Is CPF?
CPF is a social security savings program established by the government. This way, those who are already old can enjoy long, healthy, and comfortable life once they’re already officially retired from their jobs.
Based on their studies, the life span of Singaporeans has dramatically increased. More than 67 percent of the sixty-five-year-olds would live for more than 80 years old, while 47 percent of them will add 5 more years into their life span.
However, as the year progresses, only a few active people will be able to financially support the needs of the elderly. Thus, the government has to step up by coming up with the said plan.
Every workings Singaporean is enrolled to the CPF. To start funding your own account, you and your employer will contribute. Your savings will earn 2.5 percent. This is fully guaranteed by the Singaporean government and totally risk free.
There are three types of accounts that will be sustained by your CPF. First you have the Medisave account, which takes care of all your health care needs, such as the medical insurance and hospitalization. Then you have the Special Account, which can be used if you wish to pursue investments such as annuities. There’s also the ordinary account, which you can make use to settle a mortgage, buy a property, or fund an investment or education. You can also use the money to pay off your CPF insurance.
CPF savings can also be withdrawn if you can no longer work because of disability or you’re moving out of the country or West Malaysia.
Besides the above-mentioned interest, you also earn interest from these specific accounts. For example, Medisave’s interest rate is at 4 percent. If you can maintain at most $20,000 in the ordinary account and $60,000 in your entire account, you will earn an additional 1 percent as interest.
CPF Minimum Sum Scheme
By the time you reach the age of 55, you will be allowed to start withdrawing from your CPF. However, to make sure that you don’t abuse the system, waste your money, and end up with nothing by the time you’re older, the government has set up the Minimum Sum Scheme (MSS).
This means only a portion of your CPF can be withdrawn when you reach 55, and that’s after you have fulfilled the requirement for the minimum sum. In 2003, the minimum sum was pegged at $80,000, but it is being increased, and by 2013, the minimum sum will already be $120,000. If you cannot reach the minimum amount, then your house will automatically be pledged up to 50 percent of your required minimum sum.
The requirement also doesn’t end there. Once you reach the required minimum sum, you then have to set aside a portion of your funds from CPF to meet the Medisave Required Amount, which is already at $22,500 by January 2010. It will go up to 25,000 by 2013.
If you cannot meet the required amount for your Medisave, then you have to use whatever is at your ordinary accounts after you have deducted your minimum sum.
This is in relation to the minimum sum scheme. If you’re earning more than your spouse, siblings, or even parents and grandparents, you can actually top up their own retirement account. In recognition of your efforts, you can request for at tax relief of no more than $7,000 every year.
However, there are some requirements. First, the salary of the siblings or spouse should be at most $4,000 the previous year or currently disabled. Moreover, the top-up amount should be paid in cash.
The topping-up scheme is also applicable to you, as well as to those who are below 55 years old through their Special Accounts.
There are more services and schemes you need to know about CPF. They will be extensively covered later.
Singapore does know how to take care of its people, provided you also do your best to contribute to its economy. By now, though, you have a good idea while a lot of expatriates would like to settle in the country for good and become citizens. AJAX ev