Monday, October 15, 2012

CPF contribution rates from Sep 2012

Earlier in Feb this year, I posted on some changes in CPF contribution rates for the elderly. The new rates are effective from 1st September 2012.

The updated rates are as follows:

Even though the rates may not be affecting you now, but you should have an idea of how 
1) CPF contribution amount drops as you age
Do not assume the employer + employee CPF contibution will always stay the same. From the table above, the contribution amount will start dropping after the age of 50. At an age of above 65, the CPF contribution rates are less than 1/3 than one who is of age below 50.

2) CPF allocation to Ordinary Account (OA), Special Account (SA) and Medisave Account (MA) changes as you age.
CPF OA, SA, MA allocation changes as you age. This is important as you need to take the changes in allocations into consideration when buying a HDB. Most couples take up 30 year loans to finance their HDB flats. If the couple gets married at the age of 30, the loan needs to be repaid till the age of 60. How many couples are even aware that only 3.5% of their wages goes to the OA at the age of 60? If there is insufficient balances in the CPF OA for loan repayment, the couple will need to fork out cash for that. All these needs to be planned and accounted for.

Even though the contribution rates and their allocation are likely to change again in the future, the current figures can help us to have an idea of how the much additional savings you need to set aside. When the figures are changed again, one should relook at their finances to assess if they are still on track to their loan repayments and retirement.

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