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How Much You Need In Your CPF Retirement Account (RA) At 65 To pay for The Average Retiree's Expenses With CPF LIFE Payouts?
The majority of us know that CPF LIFE will give you a lifelong payout in our retirement. While this is assuring, the question is whether we'll receive enough CPF LIFE payouts to fund our retirement.
This is a difficult question to answer because everyone leads different lifestyles and is in different life circumstances. The easiest method to estimate the amount we will need in retirement is to look at some of the studies completed in this area.
How Much Does A typical Retiree Need Each Month?
We looked at the average retiree household expenses within the most recent Household Expenditure Survey 2021/18 to find out how much retiree households were spending based on their type of home.
While it discovered that the average retiree household spent $1,154 per person a month, how much each household spend varied substantially between home types. Retirees living in condominiums and others spent over four times more than those in 1- to 2-room HDB flats. On average, retirees living in HDB flats spend about $867 compared to retirees living in condominiums and private properties who spend above $2,000.
| Flat Type | Monthly Expenses, Per Person, In Households Comprising Only Non-Working Persons Aged 65 And Over |
| HDB Flats (1- to 2-Room) | $687 |
| HDB Flats (3-Room) | $786 |
| HDB Flats (4-Room) | $980 |
| HDB Flats (5-Room and Executive) | $1,062 |
| Condominiums & Others | $2,680 |
| Landed Properties | $2,175 |
| Average | $1,154 |
While it's understandable that those living in larger homes spent more, we need to account for inflation as these statistics are from 2021/2021. Applying the 20-year average MAS core inflation rate of 1.7%, these figures will increase in 2021 to:
| Flat Type | Monthly Expenses, Per Person, In Households Comprising Only Non-Working Persons Aged 65 And Over |
| HDB Flats (1- to 2-Room) | $723 |
| HDB Flats (3-Room) | $827 |
| HDB Flats (4-Room) | $1,031 |
| HDB Flats (5-Room and Executive) | $1,117 |
| Condominiums & Others | $2,819 |
| Landed Properties | $2,288 |
| Average | $1,214 |
Using these figures, we figure out what retirees, aged 65 today, need within their CPF Retirement Account (RA) to be able to receive such amounts for their entire retirement needs. On average, a retiree living in an HDB flat will expect to spend an average of $912 monthly while a retiree living in private property will expect to invest more than double that amount.
How Much Will A 65-Year Old Today Need In the Retirement Account (RA) To Afford The typical Household Retirement Expenses?
Even though the figures above are segmented according to home types, there will be situations where individuals live different lifestyles and face different circumstances. At best, they are estimates for how much retirees in the respective households should be spending.
To find out how much retirees need in their Retirement Account (RA) to receive a payout worth the respective amounts, we can make use of the CPF LIFE Estimator tool.
| Flat Type | Monthly Expenses, Per Person, In Households Comprising Only Non-Working Persons Aged 65 And Over | How Much You Need In Your Retirement Account (RA) Aged 65 |
| HDB Flats (1- to 2-Room) | $723 | $135,600 (Basic Plan) $122,400 (Standard Plan) $157,700 (Escalating Plan) |
| HDB Flats (3-Room) | $827 | $157,300 (Basic Plan) $141,900 (Standard Plan) $182,600 (Escalating Plan) |
| HDB Flats (4-Room) | $1,031 | $199,800 (Basic Plan) $180,400 (Standard Plan) $231,400 (Escalating Plan) |
| HDB Flats (5-Room and Executive) | $1,117 | $217,800 (Basic Plan) $196,700 (Standard Plan) $252,000 (Escalating Plan) |
| Condominiums & Others | $2,819 | $572,600 (Basic Plan) $519,200 (Standard Plan) $659,600 (Escalating Plan) |
| Landed Properties | $2,288 | $461,900 (Basic Plan) $418,600 (Standard Plan) $532,500 (Escalating Plan) |
| Average | $1,214 | $238,000 (Basic Plan) $215,000 (Standard Plan) $275,200 (Escalating Plan) |
* Observe that these figures are simply according to computations on the CPF LIFE Estimator tool. When putting aside our retirement sum, we're capped by the Enhanced Retirement Sum, that is $279,000 in 2021.
As we can see from the table, retirees may need a substantial amount of money in their CPF account so that you can receive the average amount that they will spend in their retirement. In fact, the Basic Retirement Sum (BRS) required by CPF in 2021 is $93,000 that is much lower than what is required according to our computation, even for the smallest flat type at $135,600 for that Basic Plan for those aged 65 this season. Instead, if you are relying on CPF Life payouts for retirement, you need to aim to have at least the entire Retirement Sum (FRS) in your CPF at 65, which is $186,000 in 2021.
By living below our means and trying to contribute more to our CPF accounts when we can, we might be able to supercharge our CPF balances. This may allow us to pay our entire retirement expenses from CPF LIFE alone. If we are able to achieve that, it will give us peace of mind without worrying whether our other investments will deliver their expected returns.
For those living in HDBs, their Retirement Account figures do look more achievable compared to those living in more luxurious housing types. For those living in condominiums and landed properties, their numbers look unrealistic for them to accumulate more than $500,000 (and even up to $659,000) in their Retirement Account (RA) to achieve the average expenditure amount. This is not something we should be shocked to learn, as CPF LIFE has always stated that the intention is to provide payouts which are sufficient for a basic level of retirement.
Nevertheless, by accumulating or supercharging our CPF accounts if we are young, we will be able to achieve balances of above $500,000 as well as into the millions. Of course, those residing in more luxurious homes also tend to have other assets they rely on for their retirement income. In the end can contribute up to the Enhanced Retirement Sum (ERS) in our Retirement Account, and subsequently led to CPF LIFE, we can still withdraw the remainder of our CPF balances on a monthly basis.
Looking At The CPF LIFE Escalating Arrange for Payouts To Keep Up With Cost Of Living
Just such as the Full Retirement Sum (FRS) increases each year to account for the higher living costs in Singapore, we need to understand that this concern continues even after we retire.
On the fundamental Plan and Standard Plan, we receive fixed payouts throughout our lives. On the Escalating Plan, we stand to receive a payout that increases by about 2% per annum each year. This should keep up with the 20-year MAS core inflation rate – which comes in at 1.7%.
