You will build a CPF projection to retirement under three scenarios and a dated list of CPF actions.
This is the project the course has been building towards. You have a contribution worksheet, a housing model, a top-up plan, a hurdle rate decision, a map of your accounts at 55 and a CPF LIFE comparison. This project joins them into one projection to retirement under three scenarios, and turns what it shows into a dated list of actions for the next twelve months. Set aside about an hour, and longer if some of the earlier pieces aren't finished.
Build one spreadsheet that projects your OA, SA and MediSave from today to 55, forms your Retirement Account at 55, and carries it to your payout age, under the three scenarios you chose in lesson 8.1, Project your balances to retirement in three scenarios. Add the estimated CPF LIFE payout for each scenario. Finish with a chart and a dated action list.
Open a new workbook with one tab for inputs. Copy in your current balances, salary, the current rates and limits from cpf.gov.sg with the date you copied them, your housing figures from lesson 2.5, your top-up plan from lesson 3.5, and your inflation assumption if you are working at today's prices.
Kelvin's inputs, all examples: OA S$40,000, SA S$15,000 and MediSave S$25,000 at 32; yearly contributions from his lesson 1.4 worksheet; his share of the flat at S$30,000 from CPF this year plus S$900 a month; an example Basic Healthcare Sum of S$70,000 and Full Retirement Sum of S$240,000 at today's prices; and example rates of 0.5% for the OA and 2.5% for the SA, MediSave and RA, which are made-up rates of 3% and 5% less 2.5% inflation.
Make one row per year with the formulas from lesson 6.4, Map your accounts at 55 under three scenarios. Cap MediSave at the BHS and move the overflow on. Stop cash top-ups to the SA once it reaches the Full Retirement Sum, because the rules stop them there too. If the OA can't cover an instalment, set it to zero and record the shortfall in a cash column.
At 55, form the RA as lesson 6.1 described, and move any SA above the retirement sum to the OA. From 55 to your payout age, grow the RA at its rate. Kelvin assumes no contributions after 55, to keep it simple and on the cautious side.
Copy the rows into three blocks, one per scenario. Kelvin's results, at today's prices, were not what he expected.
In the base case, his SA reached the example FRS at 52 without any top-ups, and by 55 his SA and OA together held S$414,803.00. The RA took S$240,000, and the rest, S$174,803.00, ended up in his OA.
In the top-up case, his S$3,000 a year went in from 34 until his SA hit the FRS at 49, after which the limit stopped them. That was S$42,000 of top-ups in all. His RA at 55 was the same S$240,000, and the extra simply sat in his OA, where it would earn the lower OA rate: S$233,710.53 there instead of S$174,803.00.
In the stress case, the dearer flat and the career break emptied his OA at 40. From then until 55 he would have needed about S$25,359.57 of cash for instalments. His SA still reached the FRS, at 54, and S$30,021.85 was left over for his OA.
In all three, his RA would grow to about S$307,220.29 at today's prices by 65, with no further contributions.
Use the CPF LIFE estimator, as in lesson 7.4, with the RA balance for each scenario at your payout age. If you are working at today's prices, the payout ranges the CPF Board publishes for today's retirement sums are a fair stand-in for what each level would pay. Kelvin's three scenarios all formed the same RA, so all three pointed to the same payout. Then chart the three scenarios: total CPF by age, with a horizontal line at the retirement sum.
Read the results for what they tell you to do, then write each action with a month.
The projection changed two of Kelvin's decisions. His own SA top-ups added nothing to his payouts, because his SA would reach the FRS anyway, so he dropped them and kept the top-up for his mother. And the stress case showed that his real risk was cash for instalments during a career break, so he made an instalment reserve his next savings goal.
His list for the next twelve months:
October: new CPF nomination made and witnessed November: check his mother's eligibility for matching, and the IRAS relief limits December, third week: S$2,000 to his mother's Retirement Account January: yearly CPF check, and update this workbook with the new rates March: flat completion, confirm the CPF used and HPS cover on his statement June: start a cash instalment reserve, six months of his share, once the buffer is full September: review whether to aim for the Enhanced Retirement Sum later, and whether to invest any OA under his lesson 4.4 conditions
Yours is done when one workbook holds dated inputs, three projection blocks to your payout age with the RA formed at 55, a cash shortfall column, an estimated CPF LIFE payout for each scenario, a chart, and a twelve-month action list with a month on every line. Results that surprise you are useful. Kelvin's did, and two of his plans changed because of them.
Build the projection with your own figures, chart the three scenarios, and write your action list for the next twelve months.
Build the projection, chart the three scenarios, and write your CPF action list with dates for the next twelve months.
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