You will project your balances to 55 and map what moves where under three scenarios.
In lesson 6.1 Linda used round, supposed figures to see how the Retirement Account is formed. Now she wants the real version: starting from her actual balances, what will she have at 55, and does it depend on choices she makes in the next three years? This exercise projects your accounts to 55 under three scenarios and maps what moves where in each. It takes about half an hour.
You need your current balances, your contribution worksheet from lesson 1.4, the current interest rates, and your cohort's retirement sums or the latest published figures from cpf.gov.sg. The rates and sums in the worked example are made up.
Make one row per year from now to the year you turn 55, with columns for your OA, SA and MediSave balances. For each year, the formulas are the same.
For the OA: last year's balance plus a year's interest, plus the year's OA contributions, minus anything paid out for housing. For the SA: last year's balance plus interest, plus SA contributions, plus any top-ups. For MediSave: the same, but capped at the Basic Healthcare Sum, with anything above it moved to the SA, as lesson 1.3 explained.
Adding each year's contributions and payments at the end of the year keeps the formulas simple. It slightly understates interest, which is fine for planning.
Linda's starting figures, all made up: OA S$70,000, SA S$120,000 and MediSave at the BHS. She still owes S$40,000 on her HDB loan and pays S$700 a month, S$8,400 a year, from her OA. Her yearly contributions are S$9,000 to the OA and S$6,000 to the SA, including MediSave overflow. She uses example rates of 3% for the OA and 5% for the SA, which are not the current rates.
If you are many years from 55, work at today's prices: keep your salary and the retirement sums at today's figures, and take an assumed inflation rate off each interest rate. Lesson 8.1 explains why. Note your assumption beside the input.
Copy the projection into three blocks and change one thing in each.
Scenario A is no top-ups: your current plan, with housing payments as they are. Scenario B adds regular top-ups, for example a cash top-up to your SA every year. Scenario C uses CPF heavily for housing: a bigger loan, an upgrade, or using your OA to pay off a loan early.
Linda's versions: A carries on as now. B adds a S$7,000 cash top-up to her SA each year. C uses S$40,000 from her OA now to pay off the loan in full.
At the year you turn 55, apply the rules from lesson 6.1 to each block. SA goes into the RA first, then OA makes up any shortfall, up to the Full Retirement Sum. If the SA is above it, the excess moves to the OA. Write down for each scenario how much goes into the RA, how much is left in the OA, and how far above or below the retirement sum you are.
Using an example Full Retirement Sum of S$240,000, Linda's three blocks come out like this.
In scenario A, she reaches 55 with about S$157,830 in her SA and S$78,345.43 in her OA, S$236,175.43 in total. All of it goes into her RA, which ends up about S$3,824.57 short of the FRS. Her OA is empty, and she still owes S$14,800 on the loan, so she pays the next instalments in cash until new contributions refill her OA.
In scenario B, the top-ups lift her SA to about S$179,897.50. With her OA at S$78,345.43, her total is S$258,242.93. Her RA reaches S$240,000, using S$60,102.50 from her OA, and S$18,242.93 is left in her OA for the remaining instalments.
In scenario C, her SA is again about S$157,830, but her OA is only S$60,599.91, because S$40,000 went into the flat. Her total is S$218,429.91, and her RA is about S$21,570.09 short of the FRS. She has no loan left.
Note which scenario reaches the Full Retirement Sum without a property pledge. For Linda, only B does. The top-ups cost her S$21,000 of cash over three years, and they also left her OA with enough to finish the loan without dipping into cash.
Scenario C surprised her. Paying off the loan felt prudent, but it pushed her RA furthest below the FRS, which would mean lower payouts for life unless she pledged her flat or topped up later. Scenario A was close enough to the FRS that a smaller top-up might close the gap.
Yours is done when it has three projection blocks with labelled inputs and today's rates, a row for your 55th year in each showing the RA, the OA left over and the gap to the retirement sum, and one sentence saying which scenario you are on track for. Add a second sentence naming the single change that would move you to a better one.
Build the map with your own balances and scenarios, then write which scenario you are on track for and what would change it.
Build the three-scenario map and write which scenario you are on track for and what would change it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).