Increase in CPF Contribution rates from January 2023

[abbby]

Mainly applies to ages 55-70 years old

https://www.cpf.gov.sg/employer/infohub ... tributions

[Lisafuller]

I guess it’s just to try and beef up their retirement funds in their last few years of employment.

[PNGMK]

It's long long overdue. The gahmen slashed the rates back in the recession before the last one and it's taken decades to have these rates come up. It had really hit the retiring boomer generation.

[sundaymorningstaple]

Yep! That's for damned sure! Kept waiting for it to go back to 20:20 and it never did. As I got older and older they raised the rates in dribbles and drips and always for the ages groups below where ever I happened to be. Being a senior here is funny, on the one hand gahmen like to 'look like' they are helping but actually, it's only for show with nothing serious to go with.

[Lisafuller]

It's long long overdue. The gahmen slashed the rates back in the recession before the last one and it's taken decades to have these rates come up. It had really hit the retiring boomer generation.

Can imagine that over time the loss of contributions would really add up (and come back to bite their old a*ses in the future).

[Lisafuller]

Yep! That's for damned sure! Kept waiting for it to go back to 20:20 and it never did. As I got older and older they raised the rates in dribbles and drips and always for the ages groups below where ever I happened to be. Being a senior here is funny, on the one hand gahmen like to 'look like' they are helping but actually, it's only for show with nothing serious to go with.

To me I think it is most important for contribution rates to be highest when one is at the prime of their careers, force them to save more when they are making the most and they will have a lot to fall back on when they are older. But I do see the value in increasing contributions during the last lap of one’s career.

[malcontent]

It actually makes a lot more sense to have smaller CPF contributions at younger ages and larger contributions when older.

In the US, those under 50 can contribute a maximum of $20,500 to a 401(k) in 2022. Those age 50 and older can add an extra $6,500 per year in "catch-up" contributions, bringing total 401(k) contributions for 2022 to $27,000. These contributions are usually matched by the employer to various extents.

On top of that, each working adult can contribute up to $6,000 ($7,000 if over 50) to an IRA. Both the 401(k) and IRA have far better investment options than you could ever dream of compared to CPFIS or SRS.

This is one thing I’ve really missed out on versus my US counterparts.

[NYY1]

It actually makes a lot more sense to have smaller CPF contributions at younger ages and larger contributions when older.

#1. That assumes everyone continues on an upward earnings trajectory for 30-40 years but unfortunately not everyone does. Further, once you have some type of lifestyle set (mortgage, etc) it is difficult to change so much. Hence, earning less in the later years often equates to saving less as some costs are viewed as "fixed" (even though they aren't truly fixed). If people don't save or don't save enough when they can, then either directly or indirectly they become a public liability.

#2. The CPF contributions are %, not fixed dollar amounts. Hence, for the first decade or two most will be saving more over time just as the wage base increases (if not already at the cap). In the outer years, if you are fortunate, the declining % will be counterbalanced by an increasing wage base. If you are not as fortunate, I guess you are still putting something aside while having a bit more breathing room to try and make everything tie out at the end of the month.

[PNGMK]

NYY1 - most of here earn well above the cap on CPF (if not in salary then from investments and businesses). It's very annoying. I'd happily put in 100k a year into CPF if I could.

Lisa... how could refer to our old asses? Man I am so offended

[therat]

when get older, more commitment which need more cash on hand if % increase on the older age

I think same % across all age might be the best

[NYY1]

NYY1 - most of here earn well above the cap on CPF (if not in salary then from investments and businesses). It's very annoying. I'd happily put in 100k a year into CPF if I could.

I see. I thought based on the median household income there would likely be a reasonable number of people below the cap. But yes, if well educated and in some professional field or have your own business it is not that difficult to exceed the cap relatively early in one's working career.

I guess my general point was the increasing $ contributions work well as long as one continues on an upward tend with no bumps. But that isn't such a safe path these days.

[malcontent]

S$37,740 combined employee and employer contribution limit is just way too little and is not keeping up with inflation.

The combined employee and employer contribution to a 401(k) is US$61,000 (below 50) in 2022 and increases annually with inflation.

On top of 401(k), Social Security paid an average $1657 (S$2300) per month in 2022, substantially higher than CPF LIFE, and it’s adjusted for inflation each year.

[NYY1]

I would suggest you take a look at what portion of the population can save (and does save) those amounts. If you are above those levels you don't have a problem; just save/invest in any account.

[PNGMK]

I would suggest you take a look at what portion of the population can save (and does save) those amounts. If you are above those levels you don't have a problem; just save/invest in any account.

It's enforced savings. By not adjusting it upwards regularly against inflation the entire country goes into risk.

[PNGMK]

NYY1 - most of here earn well above the cap on CPF (if not in salary then from investments and businesses). It's very annoying. I'd happily put in 100k a year into CPF if I could.

I see. I thought based on the median household income there would likely be a reasonable number of people below the cap. But yes, if well educated and in some professional field or have your own business it is not that difficult to exceed the cap relatively early in one's working career.

I guess my general point was the increasing $ contributions work well as long as one continues on an upward tend with no bumps. But that isn't such a safe path these days.

You hit the contribution limits at 6k per month. That's the salary a young engineer makes after a few years. It is WAY too low.