National Day Rally 2014 - Assurance in Retirement?

PM Lee in the recent concluded National Day Rally spoke at length on a few key points - 1) Honoring our Pioneers (especially our first President Yusof Ishak), 2) Education (is not just the academic route), 3) A new Municipal Services Office (a single point-of-contact to sort out municipal issues), 4) Announced the Redevelopment of Jurong Lake District, and lastly 5) Assurance in Retirement (the most awaited topic).

PM Lee outlines CPF options for retirement

PM Lee explained the CPF minimum sum and other retirement related issues as a 'financial planner' in this year's National Day Rally (see attached YouTube video below).

The info-graphics (below) sum up the 4 key points:

1. CPF and home ownership go hand-in-hand in providing for your retirement.

2. The current Minimum Sum is not too much.

3. If you own a house, you only need to set aside half of the Minimum Sum - or S$77,500 - for those who turned 55 this July.

4. You have many options to get money from your house.

Key Changes that will aid your Retirement Plan

1. Silver Support Scheme. PM Lee announced a new scheme, called Silver Support, that will be setup to give lower-income Singaporeans with little or no CPF saving an annual bonus from the Government. More details will be announced at a later date.

2. Flexibility for Lump Sum Withdrawal. There will be more flexibility for CPF members, who are retired (65 and over), as they will be allowed to take part of their savings as a lump sum during retirement. However, it is subjected to limits. Again, details will be announced at a later date.

3. Leased Buyback Scheme extended to 4-room flats.  PM Lee also announced that Leased Buyback scheme will now allow 4-room flat owners to sell part of their 99-year lease to the Government in return for a regular income.

4. Minimum Sum will be raised to S$161,000 in 2015. PM Lee revealed that the Minimum Sum will be raised to S$161,000 for those turning 55 next July. He also said that he did not see a need for further major increases and stressed that the Minimum Sum will stay.

5. Government to set up an advisory panel to study the CPF changes, including how CPF savings can be invested more widely.

CPF and Home Ownership go hand-in-hand in providing for your Retirement - Enough?

The question is how much do you need when you retire? You have to decide.

Let us use PM Lee's example of Mr and Mrs Tan's retirement plan. 

We know that the Minimum Sum will stay. How much will it be in 20-30 years time? No one knows. How much will the payout be? Should be more than S$1,200 if we are able to have at least S$155,000 in our CPF Accounts. 

A hypothetical scenario: 

1) We are able to pledge the required Minimum Sum in our CPF retirement account without pledging our property. The Minimum Sum will be S$161,000 in year 2015. To simplify the scenario, the payout will be S$1,200.

2) We are also able to fully pay for our 4-room flat and was able to rent the whole flat out for S$2,500. There are many 'ifs' here - if we are able to rent it out for the long term, if we are able to stay with our children etc.

In this hypothetical scenario, we are actually in a better position. The monthly and regular income will be S$3,700. A decent amount for retirement.

As PM Lee said, if the Tan Family has both CPF and Home Ownership, they will be a happy couple. True to a certain extend. There are adjustments that you have to make, like renting out your home. What if we cannot monetized the flat? What if the regular payout from CPF Life is all we got - S$1,200 monthly? 

I believe...