You may not believe this. I'll share this little snippet with you anyway. Do whatever you want with the information or just treat it as a fairy tale if you think it's a load of bullshit. It doesn't bother me anyway, because my mind was made up to leave after I did my analysis (be it right or wrong) and I have been standing by my decision since without regret.
The first spark in my mind about migration occurred in 2006. That was the year started my first job in Singapore. My friend Tucky started work earlier than me, so he was much sharper towards any changes in our financial environment than me. In 2003, one major change was made to our CPF, the sole retirement fund of many Singaporeans. Back then, there wasn't much talk about it, especially among my peers who just started their careers. By 2006, we realised something was amiss and sat down one evening to discuss about it. The CPF minimum sum had already risen $14,000, or 17.5% since its inception 3 years before. Still, most of my peers were not bothered by it at the slightest. Not Tucky and I though. We knew something was brewing and eventually ordinary Singaporeans would be in hot soup in regards to this policy change.
In 2006, migration was never on my mind. It was never an option. The thought of leaving Singapore to work and live elsewhere was simply too overwhelming for someone who planned to live and die in Singapore. I mean, who doesn't? Still, the first discomfort the CPF change continued to lingered in my mind, like a plague that refused to go away. By 2008, my worst fears were confirmed after I continued to monitor the progress of the new Minimum Sum scheme. It was the year I decided I had to do something drastic in my life because I knew I would be heading into financial hardship if I were to continue doing what I had been doing. There was only an obvious choice as a money minded Singaporean - to make more money. I was heading nowhere in achieving that goal be it in employment or self employment. Then the idea of migration was brought up by my ex-girlfriend Jen and the rest was history.
The purpose of this is not to share my migration story. It has been done to death. Instead, I'm going to share what I saw in 2006 that got me panicking. As a matter of fact, by now I believe many more Singaporeans have already woken up to the fact that the Minimum Sum policy is going to have a much larger impact on themselves than they initially thought. An elaboration may not be necessary after all. Still, I thought it is a good time to do so, since we finally have 10 years of data to refer to.
In 2006, I realised the inflation rate used by the CPF was close to 6% per annum since the Minimum Sum scheme was introduced in 2003. I used that rate to forecast the amount I would be dealing with at the year I turn 55 and I didn't like what I saw (if things continue to go on the same way). Sadly, a decade of data reaffirms that the Minimum Sum has been increasing around 6.3% year-on-year, worse in the 6% rate I used to project in fact. I would update my calculations today:
If you are 50 years old today, your Minimum Sum by your 55th birthday is likely to be $207,000
If you are 40 years old today, your Minimum Sum by your 55th birthday is likely to be $371,000
If you are 30 years old today, your Minimum Sum by your 55th birthday is likely to be $665,000
If you are 20 years old today, your Minimum Sum by your 55th birthday is likely to be $1,119,000
* feel free to audit and correct me if I am wrong.
The above doesn't defer much from my original forecast in 2006. Back then I knew that amount of Minimum sum I had to deal with (for my case) was about half a million dollars. That was a great deal of money for any ordinary employee like me. I made an unrealistic projection of myself working for 30 straight years without a window of unemployment nonetheless.
500,000/30 (years) / 12 (months) = $1,388,
is the amount of money I have to had to put into the CPF on average per month, if circumstances remain the same. So how much monthly salary do I require for me to deposit $1,388 into my CPF account without topping up with cash? On current rates (36%), my salary has to be at least $3,850.
That was a nightmare of a finding to me because of 3 factors that make this totally unrealistic. Obviously, my entry level job during those years was never going to pay me $3,850 or anywhere close to it. In fact, many of my seniors who had worked for a few years did not hit this level of salary range. Even if I did better later on and manage to enjoy a $3,850 monthly wage or higher, how could I possibly make up enough for the deficient years? The second factor was that my assumption of 30 working years would have taken me to 60 years of age at the end of the projection. Many Singaporeans are still unaware that our employer's contribution to our CPF will drop from (the current) 16% to 14% (at 50 - 55 years old) and to 10.5% (at 55 - 60 years old). That will make a huge difference for 10 years worth of working wages. Lastly, of course, it is never realistic to expect employment for the full 30 years without a hiatus.
A possible purchase of a HDB flat was not even considered for this equation.
In short, I knew I was screwed.
I knew I would not be able to withdraw a single cent from my CPF account at age 55. Don't get me wrong, I'm not implying that I would be able to withdraw a healthy pension fund elsewhere at the same age. Let's not go there and stick to the topic. What was truly disappointing was that I knew I would not even hit my Minimum Sum if I took an average career path. I might have a chance if I burst a gut (I tried for a few years and got bladder cancer as the prize) but even if I worked that hard, did better than the average and made it, what about the rest of the Singaporeans? Is there any meaning to this if the majority of the population will not be able to make it?
Now for the worse news, even if you hit the Minimum Sum, you will still withdraw nothing at 55 years old because the CPF board only allows you to withdraw anything beyond your Minimum Sum. So yeah, you burst your gut and made it at the last minute. Well done, thank you here is $16.88 for your effort. The rest of your money had been used for purchase an annuity whether you agree to it or not. You will be paid $600 a month for your effort thereafter. Thank you for your participation.
In my opinion, no one should be penalised for failing to amass a certain amount of money in their working career. Singaporeans grow up being guided to a selection of schools (because the rest are deemed shit), channeled to certain units during National Service (whether they like it or not), herded to take up a selection of jobs (because the rest could not pay enough to fulfill your Minimum Sum) and when we finally exhausted all our life capital to head towards the final chapters of life, we cannot even decide the way we want to die. Is that what life is about as a Singaporean?
A Singaporean Son
*The writer blogs at http://asingaporeanson.blogspot.sg/