2016 changes to the CPF and SRS for a better retirement.

I was reading the papers on changes to the CPF and SRS which took effect on 1 Jan 2016 and thought to myself that working Singaporeans are a lucky bunch.

If you are a middle income worker, rejoice because mandatory CPF contributions by both employer and employee per month are now based on a higher salary ceiling of $6,000 a month instead of $5,000 a month. Your CPF savings will grow at a faster clip.

If you are a worker between 50 to 65 in age, your employer will now contribute an additional 0.5% to 1% based on your monthly wage into your Special Account (SA). 

If you are 55 years old or older, you will also receive an additional 1% interest on your first $30,000 in CPF savings which means you get 6% interest per annum, risk free!

It would be a good idea for younger readers to communicate this change to their parents. If at all possible, consider topping up your parents' CPF SA or MA if they do not have that first $30,000 in their accounts. 

We really should not pass on a 6% annual return from a AAA rated sovereign bond!

A comfortable retirement need not be a dream.

As for the SRS, the ceiling is raised to $15,300 for Singaporeans and PRs. It is $35,700 for foreigners. So, if you pay plenty of taxes each year, this is another tool to help pay less in income tax.

I think it is important to count our blessings and not keep complaining. Probably, there is more than a handful of people who think that the changes are not good enough. Fion Lau, 41, said that the changes do not go far to provide retirement adequacy.

Well, I would like to remind Fion that the CPF is, like I always say, a cornerstone in our retirement adequacy strategy. It is not the entire foundation.

Related posts:
1. SRS: A brief analysis.
2. Retiring before 60 is not a dream.
3. Retirement: Buy a AAA rated bond.

Filial son working hard towards financial security in 2016.

Young people often feel invincible. I am not saying that it is a bad thing but it is important to realise that we are not really invincible and that life will throw problems our way.

So, what to do?

Have measures in place so that the feeling of invincibility has some genuine substance beneath it. Then, the only thing that could destroy us would be Kryptonite...

Sorry, couldn't resist that.

Here is a recent conversation with a very sensible young person:

Hi AK, 

I'm 26 this year. been working 2 years plus all due to due to NS. 

I have been reading your blog for one whole week and i realise you share alot of impt details.

I start to feel very stress when i login to both my parents singpass to check their cpf. both of them are self employed. my dad 58yo, oa and sa is less than 1 k. his ma is have 40k. my mum 56yo, oa,sa,ma all less than 500. they always claim that they have insurance. but after checking from moh site, they doesnt have any H&S insurance at all.

As i earn only 2300 each month. for myself i already brought dps and h&s already. this week i have been meeting AIA, Prud and going to meet NTUC agent next week. i read alot of advise from your blog.

I have transfer all my oa to sa and using excel to calculate how much i gain from SA in the next 25 years. For now, i doesnt have much savings, but i plan to pay insurance for my parents using my MA and giro as well as i plan to apply UOB one card or OCBC frank card to gain more interest. (tips in your blog) however their age is expensive to buy insurance now. but i will check out the enhance income shield for them and buy the maximum age so at least the price is maintain rather than increase if they need to renew.

I just paid 20k for my part time degree. my saving only have 2k now. i did my planning on expense and saving. once i settle my parents H&S and term plan. I aim to save up 5k and start doing s-reits first, then follow by stock to get 4-6% yield each year. but i will also ensure i do my Emergency fund to least me at least 6 mth first.

I am going to finish my studies in jun 16 and i plan to change job, hope to pinch a better pay. I also learn from you, i do freelance designer to earn extra money, recontact iphone and sell yearly to gain extra cash to pay my mobile bills and expense,

I hope you can continue to share more knowledge in stocks and reits. i will spend time to read TA and FA first, and save up money first. Meanwhile waiting for MR market to give us the opportunity to enter a good price when he is depress.

Lastly, i just wish you good health and thank you so much once again. i hope to have the chance to meet the session with you next time. And also i start to share with my frens about oa transfer to sa. but like you said. most of them doesnt bother and feel lazy. so I just ignore them and let them regret in the future. Last of all. wishing you and your family stay healthy and happiness.

Thanks AK. you change my life.

AK's reply:

Hi S,

Welcome to my blog.

I can appreciate your anxiety but you are taking steps to rectify the issues you have discovered. That is a good thing. Of course, it will take time.
Rome was not built in a day.

For your parents' H&S needs, I would like to make a small suggestion that could help you save some money.

If your parents do not mind staying in Class C or B2 wards in government hospitals, there is no need for you to buy H&S policies from any of the private insurers as they only need Medishield Life. It will be less of a burden on your pocket.

I shall look forward to more updates on your journey towards greater financial security. In the meantime, gambatte!


Time is a dwindling resource for all of us. All young people have one big advantage and that is time is on their side.

With the new year upon us, I hope this blog will nudge younger readers to consider their own situations and what action they might want to take to achieve financial security.

Wishing one and all a financially more secure and happier year in 2016!

Related posts:
1. Graduating soon? Think financial security.
2. How much to have in emergency fund?
3. Beef up and achieve financial freedom.
4. Do the right things and transform our lives.
5. Medishield Life and hospitalisation.
(Read related posts too.)