Do not depend on your CPF

CPF, a uniquely "Singaporean" savings plan for use in our elderly years.

CPF is "useful" but its usage is complicated. It is getting more complicated due to recent changes:

• Minimum Sum Draw-Down Age (DDA) will be raised to 65 by the year 2018, meaning you can only withdraw your CPF money from age 65 onwards
• Compulsory purchase of longevity insurance, in other words, forced buying of a life annuity
• Medisave Minimum Sum (MMS) raised to $28,500
• CPF Minimum Sum (CMS) will be raised to $120,000 in 2013, meaning you can only withdraw the balance of your Ordinary Account (OA) and Special Account (SA) less CMS and MMS when you reach age 55.

CPF is mainly used for retirement when we have retired. It can also be used for housing and education loans. Because the use of CPF is subjected to rules, meaning you do not have much control over it, thus it is a good idea to "forget" about CPF when you are doing your investment and retirement planning. Take it that whatever CPF gives is a bonus.

To "forget" your CPF means that your actual take home pay (salary minus CPF contribution) every month is your actual salary (AS), so save and plan using this figure. For example, you need to set aside at least 20% of AS for your savings (you have your own private CPF!)

If you intend to purchase a house or use the money for education for your kids, set aside a bit more from AS to save up to buy a house or education. Do not depend on your CPF for housing and education.

However, do not completely ignore the money in your CPF. You still need to make the money in your OA and SA "work". Invest the balances in your OA and SA in investments which give higher returns than the default returns. That is, more than 2.5% for OA and more than 4.0% for SA.