Your journey to retirement Where are you headed?

50% Only 50% of active CPF members meet the CPF Minimum Sum that will qualify them for the CPF Life scheme.
50% Those earning median wages or more cannot rely on the CPF LIFE scheme to provide them with an adequate retirement income rate of 50%.
Individuals cannot rely on the fixed payments from CPF LIFE which are not protected against changes in inflation.

How much do you need to retire?

Meeting the CPF Minimum Sum

The CPF Minimum Sum currently stands at S$161,000. It is the figure that the Government believes is needed to deliver an adequate income at retirement. As of 2013, only 50% of active CPF members met the CPF Minimum Sum.

the figures to read more
CPF Minimum Sum is set at $161,000
1 in 2 Singaporeans do not have the Minimum Sum, with median at $126,000
Only 32% of monthly wages represent retirement income from those that meet the Minimum Sum, compared to global average of 68%

Your ideal retirement income

An individual needs around 7-8 times their annual salary in order to fund a ‘comfortable’ lifestyle. Factors such as lifestyle choices, health and family support all have a part to play. Circumstances can also change over time, unforeseen illness, unexpected unemployment, or the need to take care of a family member, all of which can affect decisions. There is no one-size-fits-all solution.

Retirement income replacement rate benchmarks

Average OECD replacement rate is 68-73%

For all 34 OECD countries, the average replacement rate is 68%. For 15 of these OECD countries where the calculations cover only public pensions, the replacement rate for an average earner is higher, standing at 73%.

ASFA Retirement Standard 7-8x annual salary to fund a “comfortable” lifestyle

You need around 7-8 times your annual salary in order to fund a ‘comfortable’ lifestyle. You also have to factor in lifestyle choices and unforeseen circumstances such as illness and unexpected unemployment.

Work out your ideal retirement income

How much additional cash savings will you need at retirement, on top of your CPF Minimum Sum?


Are your CPF contributions sufficient?

How are your CPF funds used?

Singaporean workers have some flexibility to use CPF for other financial needs. Healthcare, housing and education are some examples. To the extent that CPF is used for non-retirement purposes, it constitutes ‘leakage’ that reduces the available pool of savings for the Retirement Sum.

Singaporeans’ CPF savings can be eroded when used for other purposes.

Accidents or chronic illness

An accident or regular treatment for a chronic illness will erode your savings.

Cost of housing

With the high cost of housing in Singapore, much of your savings will be tied up in property.

Cost of education

As the cost of education increases, so will be the amount you need to draw from your savings.

Only 6% of your 37% CPF contribution is ring-fenced into the Special Account for retirement.

Impact of withdrawals on your Ordinary Account balance at retirement

The CPF withdrawal for mortgage payments represents the single largest ‘leakage’ that reduces the pool of available funds at retirement. Another significant form of leakage stems from the fact that individuals do not stay in the workforce till the official retirement age.

Work out how your mortgage repayments impact your CPF Ordinary Account balance by the time you retire at age 65

With mortgage withdrawals No withdrawals
Your monthly CPF OA account contribution (combined Employee & Employer) is
Your estimated OA balance at retirement age 65 (with mortgage withdrawals)
Your estimated OA balance at retirement age 65 (NO mortgage withdrawals)

How can you achieve your replacement rate?

Figure 1 estimates the size of the retirement sum required to meet various replacement rates for a ‘Median Earner’ with a final monthly wage of S$3,949. Calculations are based on whether the worker reaches the Basic Retirement Sum (“BRS”) of S$80,500 or the Minimum Sum of S$161,000, also known as Full Retirement Sum (“FRS”). The percentages shown on the chart illustrate the replacement rate achieved for the sum available at retirement.

Figure 1: Comparing replacement rates for a Median Earner for different retirement sums

Basic Retirement Sum Full Retirement Sum 50% replacement 66% replacement
Median Earner wage of S$3,949 per month taken from Ministry of Manpower, as at end of 2015. Additional capital amount required for 50% and 66% replacement rates calculated as the monthly annuity needed in excess of the amount provided by the Full Retirement Sum over 20.8 years, the average life expectancy in 2014 from age 65 (according to Complete Life Tables 2013-2014 for Singapore Resident Population, Singapore Department of Statistics) from the Ministry of Health website. Source: Schroders. For illustration only.

To receive 50% of your last drawn salary when you retire, you must

Have an investment vehicle that gives you a return of 4.7% per annum after taking inflation into account

A Median Earner would need a real (inflation-adjusted) return of 6.1% p.a., which is much higher than what CPF has been paying.


Make voluntary contributions into your Special Account from your savings

A Median Earner would need to be contributing between 15-20% of their monthly salary regularly into their SA and without drawing from it, which is much higher than the ring-fenced 6%. This effectively means digging into their personal cash savings.

Creating a retirement income

Key risks for you to consider

Maximising the sum at retirement is one part of the retirement income equation. The second is what that sum will deliver throughout retirement period. The key risks that individuals face are:

  • LONGEVITY The risk of outliving one’s savings by living longer than expected.
  • CONSUMPTION The risk of underestimating the cost of goods and services needed in retirement.
  • INFLATION The risk of unforeseen price increases of those goods and services.
  • INVESTMENT The risk of earning less than expected from the investment account.

CPF Savings may prove inadequate

When building up a retirement account, an individual will face different challenges and risks. These risks include return shortfall, capital market volatility, inflation and longevity. These all vary over the individual’s working life.

Your CPF savings may prove inadequate upon retirement because of several factors

Usage of CPF funds for other purposes
Inflation will erode your spending power
The CPFIS has not given investors the desired results
Chances are you will live longer

How inflation works

The value of your money today is less than the value of your money tomorrow

Your savings today
Factor in inflation at
How many more years till you retire?
Your savings in today's value when you retire at 65

Earning and Saving

In the next three papers, we will look more closely at a worker’s lifetime in both the pre- and post-retirement stages. In paper two, we cover the Earning and Saving stage. Using case studies to illustrate the specific risks facing workers in the earlier stages of their working life, we showcase some ‘good practice principles’ – including Dollar Cost Averaging, Stable Real Growth and Diversification.

Schroders RetireSmart 60 seconds series

Our in-house experts share their insights on retirement planning.