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By and large, seniors in Singapore are doing well. Many have savings and investments,
some are happily working, others are getting good support from their children and we have
good schemes to provide assurance in retirement. And the Central Provident Fund (CPF) scheme
and Home Ownership are the twin pillars of our retirement adequacy. Home Ownership is
critical, the Government has worked hard to help Singaporeans own their homes, therefore
Singapore is not just a place to live but a home, but just as importantly, this home,
your home, is a valuable nest egg when you retire. Singaporeans may not fully appreciate
this, but many have significant savings in their flats. So if you look at the typical
retiree's household, living in a three room flat, he's got $300,000 worth of savings in
his flat. A four room flat retiree household typically has $400,000 worth of savings in
his flat. It's a valuable little pot of gold to draw on, if they need to. That's home ownership.
The CPF has also served us well, and there are three good things about the CPF. Firstly,
there's personal responsibility, because with the CPF scheme, the more you work, the longer
you work, the more you save and the more you have in retirement. Secondly, the CPF scheme
is fair. Your savings are for your own retirement, not for someone else's. Thirdly, with CPF
Life, this is for life because CPF Life will pay you a stream of income as long as you
live. This is the CPF logo, you've all seen it but if you look carefully, you'll see it's
got three keys inside it and the three keys represent the three parties who have come
together in order to make the CPF system, and to provide this social security for you.
Who are the three parties? One, is yourself because when you work, you earn salary, from
the salary, you pay your employee CPF. The second key is your employer, because the employer
pays into the CPF, into your CPF, the employer CPF contribution over and above your wages
because the Government required them, by law, to do it. So the third key is
the Government. The Government made this system, the Government set the rules, the Government
also tops up directly into the CPF of many Singaporeans. How do we do that? We give you
housing grants, when you buy a Housing Development Board (HDB) flat, many people will get a housing
grant. We give you Medisave top-ups, when you get your Goods and Services Tax (GST)
voucher, there is a Medisave top-up in there, when the finances are good and the Minister
for Finance has a good budget, you may get the Medisave top-up. You get Workfare, because
if you are a low-income worker, in your Workfare, a big contribution goes automatically into
your CPF every month to help you save for your retirement. So together, the three of
these; You, your Employer, your Government have saved, have set up the CPF for a common
purpose and that common purpose is to set up a nest egg for you for your retirement.
What is this nest egg for? It's not for you to take out the whole lump sum at once. It
is for you to be able to draw out a steady stream of income from the CPF in old age, it's to
give you old age security. So the question is, well okay, how much money do we need to
keep in the CPF to get this income stream? And the answer is, the Minimum Sum (MS). And
for the group which is turning 55 this year, the MS is $155,000. Seems like a big sum,
it's far from excessive and let me show you through an example why I don't think that
it is excessive. Last year, I was your real estate agent, this year, the real estate market
is no good, I've upgraded myself, I've become a financial planner.
As a financial planner, I was sitting in my office, Mr and Mrs Tan came to consult me. They are reaching
55, they have to make decisions on their CPF and their retirement plans so they came to
ask me, to talk through their options. Let me show you, here's Mr Tan, he's 54 plus years
old, he's a senior technician and he earns $4,500 per month. His wife, Mrs Tan, is a
housewife, about the same age. I didn't ask the wife's age but it's about the same. They
have two kids, the son has finished National Service (NS), going to university now, daughter
still in school. So the household income is not bad, $4,500 per month and they are living
in a four room flat in Ang Mo Kio. You can see their flat there, they are, I think on
the fifth floor, fully paid up $450,000 worth of a flat. So, this is the Tan family now.
Now, I said to Mr Tan, think about it, in ten years time, your children would have grown
up, finished studying, working, perhaps married, you will still be working, you could be on
the point of retiring but your expenses will be less in retirement, so you won't need the
same income as now. So, I asked Mr Tan, how much do you think you will need in retirement
every month? What will we need? So he thought about it, while he thinks about it, let me
ask you what you think he needs. What do you think? $3,000 per month? That's about two-thirds
of what he's getting now. $2,000 per month? Half, less than half of what he's getting
now. Or $1,000 per month, which is less than a quarter of the current income. Let's have
a show of hands, we'll decide for Mr Tan. Who says he needs $3,000 per month?
Upstairs, nobody is putting their hands up. Okay, who says he needs $2,000 a month, enough? Oh,
this is more. Okay, who says $1,000 is enough, old people don't spend much money. Nobody.
Okay, so I take it that you think he needs about $2,000 a month, right? Which is what
Mr Tan said too, after thinking it over. Just as well.
So, let me ask you this. Which is what Mr Tan asked me.
To get $2,000 a month from the age of 65 for the rest of his life,
how much money do you think he must put into the CPF now and lock up so that at 65 he can
start drawing $2,000 per month? So, Mr Tan didn't know the answer, but I had a calculator,
CPF has these things and they did the sums. So, I looked up the answer and the answer
is, he needs $250,000 now when he's 55 years old, in order to get what he wants if it is
all to come from the CPF, $2,000 a month. And, I don't have to tell you that this is
more than the MS. Which is only $155,000. So, I told Mr Tan this. He looked a bit disappointed,
he says 'I don't have $155,000.' So I said, well you own a house right? He said yes. So
So I said, the CPF lets you count your house in the MS, so your house can make up half
the MS and then you only need to put $77,500 of cash in the CPF. If you want, you can take
the rest out and then you would have made up your full MS, half property, half cash.
So he brightened up, he says ah $77,500 is not a problem, I can take some money out now
and go on a holiday with my wife. Then I said, I haven't finished the sum. Quarter million,
you get $2,000. $77,500, if you only leave $77,500 in the CPF, you will get out of the
CPF, how much do you think? $600 per month. So if you need $2,000, this is not going to
be enough and you have to think of some other sources of income, when you reach 65.
So he stopped planning his holiday, he asked me 'So what can I do?' I said, well you have
several options. First, you could continue working because ten years time, most likely
we're working with National Trades Union Congress (NTUC), we should have raised the re-employment
age beyond 65 and if you're still healthy, I would strongly encourage you to continue
working. Secondly, your children will be working and they may help to support you, I hope so
because we teach them that in school. Thirdly, you can draw on your personal savings, you
told me you had some POSB account savings, so that's for a rainy day and for old age.
Or, you can get some money out of your house. So, Mr Tan says, now, okay, how do I do that?
So I said, well, there are several ways you can take money out of your house. You could
rent out one room, you post an ad on PropertyGuru. One room in Ang Mo Kio, how much do you think?
A $1,000? Well, I told him, conservatively you could get $700 a month, that's per month,
steady income. Or, if you're going to move in with your children, your children have
married, you can move in with them, you can rent out the whole flat. And how much do you
think he can get, renting out the whole flat? In fact, you can check out the answer in The
Straits Times because HDB publishes the data. Ang Mo Kio, four-room flat is currently $2,500 per month.
Not bad. The third thing you could do, is you could Right-size. What does Right-sizing
mean? Right-sizing means you sell this flat, you buy a smaller flat. Lets say you buy a
studio apartment, you move into the studio apartment and then in the process, you can
enjoy a Silver Housing Bonus from the government which is $20,000. And, if you do this, we
can do the sums, you'll get quite a lot of money. $210,000 plus $800 per month. $800
a month is an additional income, on top of what CPF Life is going to pay you. So, Mr
Tan says 'Wow, sounds good.' Then, he got a bit carried away, he says 'If I'm going to
live with my daughter, why don't I just sell my flat outright, I'll get even more money.'
So I said, well I encourage you to stay with your children but I would advise you to think
very very carefully before you sell your flat because I've seen so many sad cases, seniors
cashed out unwisely, cheated of all their money, sometimes even turfed out by their
children. Got in a quarrel with their children, quarrel with the in-laws, so it's better if
you keep your property, even if you rent out the whole flat, it doesn't matter, it's yours,
you can fall back on it, for your old age, just in case anything happens. So, he paused
again, then he asked me a new question, he says 'My neighbour (has a) three-room (flat), he just turned
65, he's a bit older than me. He did a Lease Buyback with HDB, how does that work?' So I
said, sorry Lease Buyback is not for you. Lease Buyback is for three room, yours is
a four-room, cannot. So he says never mind, assuming can, then how? So I said, okay if
you really want to know, let me explain to you but remember, cannot. So, here's how it
works. You bought this flat when you got married, and it came with a 99 year lease, looks very
long. So this line is a 99 year lease on your flat, you've lived in it since then, now quarter
century. In ten years time, you'll be 65 years old and you'll still have this long lease
left. In fact, the long lease left is about 65 years, so I think when you are 65, you're
probably not going to live in this house for another 65 years, right? So, he said okay.
So I said, well let's say you live in this house for another 30 years, then you really
don't need the rest of the lease, beyond that. You only need this 30 years, so this part,
you can sell to HDB and HDB will buy back from you, that's why it's called a Lease Buyback.
And when they buy back from you, then they'll shorten your lease and they'll give you a
sum of money. So he says how much? So we did the sums, assuming he can get it, well he
gets $27,500 plus $900 per month and again, this is on top of what he gets from CPF. It's
not quite as much cash as if he's right-sizing, but that's because he can continue to stay
in the same flat and he can even rent out the room in the flat, if he wants. But I said,
sorry yours is a four-room, so no Lease Buyback. So Mr Tan says 'Oh what a pity, can I see my
Member of Parliament (MP) or not? To appeal for a lease buyback?' So I told him, sure,
your MP, I think this is Lee Hsien Loong, Block 322 Avenue 3, every Wednesday night
at 8pm. And that's how my Advisory session ended and next thing I knew, I saw Mr Tan
at my Member of Parliament Session (MPS). So, actually, what Mr Tan wanted, was just
to have the Lease Buyback for four-room flats which many other Singaporeans also want. Last
year, we held the Our Singapore Conversation, and there were many seniors who were living
in larger flats, asking for Lease Buyback because they felt that Right-sizing, moving
to a studio apartment, taking the Silver Housing Bonus, they're all attractive options but
they still preferred to grow old in the comfort of their own homes and I can fully understand
that. The surroundings are familiar, your old friends are around you, your neighbours,
you've known them for so long. You don't want to uproot yourself, move somewhere else unfamiliar,
set up and then have to establish your network and your links all over again. So HDB has
studied this carefully and I'm happy to tell you as well as Mr and Mrs Tan, if they're
still watching, that we will extend the Lease Buyback Scheme to four-room flats.