Will Raising CPF Contribution Rates For the Elderly Really Make It Easier For Them to “Retire?”

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The superficial answer to that question would be “yes.” But the truthful answer is well… you don’t need to me say it right? Recently, the Labor Movement, otherwise known as the National Trades Union Congress (NTUC), brought up the issue of raising the Central Provident Fund (CPF) contributions from 32.5 percent to 36 percent for workers above 50 to 55.

 

Right after we wrote about the top complaints Singaporeans had with their CPF account, NTUC coincidentally mooted the above proposal. There’s no confirmation as to who will pick up the tab on these contributions, but it’s looking like employers will shoulder most, if not all of the increase. Of course, that makes business owners nervous about their bottom line when it comes to hiring more elderly employees.

I completely agree that CPF contribution rates should be raised for elderly Singaporeans. But I think the Labor Movement’s proposal leaves out one VERY important group – Singaporeans past the age of 55 who are still working well into their “retirement” years.

What Does a Growing Elderly Workforce Say About CPF and Retirement?

While a contribution increase is a step in the right direction towards helping elderly Singaporeans achieve that illusive dream called “retirement,” it also brings up a troubling question – why has the number of Singaporeans working beyond the age of 65 doubled over the last 10 years according to Ministry of Manpower (MOM) statistics?

Take a moment to ponder the following data on the percentage of elderly Singaporeans still working well past the age 55:

Labor Force Participation Rate (Percentage) – By Age From 2003-2013

Age200320052007200920112013
55-5957.563.566.068.470.273.2
60-6434.243.946.750.654.759.7
65-6919.525.326.629.936.240.2

I’d like to think that the growing number of Singaporeans working past the age of 65 is because they enjoy their jobs and want to be active.

But my instincts tell me that many Singaporeans working past the drawdown age do so because they have to, not because they want tobut I could be wrong.

Either way, it’s hard to dispute the fact that more and more elderly Singaporeans have to keep working well past 55, which makes me think that MAYBE contributions should be extended to them too. After all, there’s a HUGE difference in CPF contributions from age 55 to 65+. I don’t know about you, but I think they should have their CPF contributions raised as well. What do you think?

For those of you not familiar with their contribution rates (Total Contribution), here they are:

  • Age 50-55: 32.5% (NTUC is proposing it be raised to 36%)
  • Age 55-60: 23.5%
  • Age 60-65: 14.5%
  • Age 65+: 11.5%

The reality is that many elderly Singaporeans reaching 55 are finding out too late that they don’t have enough to retire on. Unfortunately, if you don’t reach the 148K current minimum balance, all you get is 5K, a pat on the back, and a “come back in 7 to 10 years for the rest” response.

So maybe the “real” retirement age for Singaporeans should be 75 instead of 65, because that’s the portrait the statistics above are starting to paint. It breaks my heart to say this, but for the elderly Singaporeans who are already going through this situation, it’s really too late to start saving. A CPF contribution hike might ease the cost of living a bit, but it’s not a cure.

But for those of you still lucky enough to have the benefit of youth, you owe it to yourself to get up to speed on what you need to do to ensure you’re in a prime position to actually have the choice of working during your latter days.

Knowledge Is Your Best Weapon for Avoiding the Pitfalls of CPF

CPF, which is jokingly referred to as the “Coffin Protection Fund” by some, has never been an easy system to understand. That fact should trouble you – because it’s probably the most important scheme that you’re pumping money into (20% of your salary until age 50).

Yet, the reality is that most of us know very little about it, especially when it comes to the retirement aspects of the system. Then again, CPF is so complex – it makes Inception and Memento look like Sesame Street by comparison. No wonder people are frustrated with the system!

But I’ll tell you this, as painful as it is, you MUST make an effort to learn more about it. I’m not saying you need to read every insufferably complex page on CPF’s website – that’s Guantamo-like torture.

The best way to learn about your current CPF situation and plan for your future is to:

  • Make an e-appointment with a CPF customer service executive so they can help you make sense of your current CPF situation.
  • Attend CPF seminars on components like buying home, healthcare, etc. Bookmark the CPF Events page on your web browser!

So fill up EVERY appointment slot and FILL those auditoriums people, because the time to ask questions is NOW, not 20 or 30 years from now.

Of course, at MoneySmart, we’ll continue to inform you of the last happenings on not just CPF, but on everything personal finance-related! Follow us on Facebook to stay informed!

At MoneySmart, we have two questions for our readers:

  • Will raising the CPF contributions by employers for elderly employees up to age 65 make “retirement” an easier dream to attain?
  • If you’re at retirement age (65 or older), are you still working because you WANT to, or because you NEED to?

Share your thoughts with us on here!

Image Credits:
tallkev