HDB Prices and Retirement
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Let me paint a scenario to all of you:
Let's assume that Person 1 and Person 2 collectively earn $4,500/mth. (Median household income for 2006)
http://www.singstat.gov.sg/papers/op/op-s12.pdf
Table 2 (pg 5 of 15)
They decide to buy a 4 room flat valued at $280,000. They have $50,000 in their CPF - OA. As they are first time buyers, they shall enjoy the concessionary rate of 2.6% p.a and settle on a loan tenure of 30 years.
CPF Home Affordability Calculator
Housing Loan and Use of CPF for Housing
Based on the inputs and the assumptions adopted, the total payments for your housing loan and other housing payments are estimated to be:
Estimated housing loan is : $ 224,000
Estimated interest on the loan is : $ 98,920
CPF Balances
Based on the inputs and the assumptions adopted, your CPF balances on reaching 55 years old and the CPF Minimum Sum you might be able to set aside are:
------------------------------------------------------------- Person 1 Person 2
Ordinary Account balance : ----------------------- $103,768 $103,768
Special Account balance : -------------------------$81,073 $81,073
CPF Minimum Sum set aside : --------------------$158,100 $158,100
CPF balance (after set aside Minimum Sum) : $26,741 $26,741
Based on the inputs and the assumptions adopted, the Minimum Sum that you might have at 55 and the monthly retirement income that you might receive from age 62 are:
-------------------------------------------------------------------- Person 1 Person 2
Applicable CPF Minimum Sum at 55 : ------------------ $158,100 $158,100
Projected Minimum Sum set aside in cash at 55 : -- $158,100 $158,100
which is equal to (% of applicable Minimum Sum) : 100 % 100 %
Estimated monthly income from 62 : ----------------- $1,249 $1,249
Estimated duration of monthly income (years) : ---------20 20
http://www.cpf.gov.sg/cpf_trans/ssl/financial_model/NewHAC/Home_Afford_calc.asp
The amount of $26,471 is the lump sum that Person 1 and 2 shall each receive once the minimum sum of $158,100 has been set aside at age 55.
Amount of $1,249/mth is the money that Person 1 and 2 shall each receive from age 62 till age 82.
Are the above enough for retirement from year 2039 till 2059? -
Housing loans eating up funds for retirement
As of December, over 25,000 people above 55 were using CPF to pay off debt
The Straits Times July 3, 2006
By Tan Hui Yee
THOUSANDS of older Singaporeans risk running low on retirement savings because they have spent too much on housing.
As of December last year, more than 25,000 people above the age of 55 were still paying off their housing loans with Central Provident Fund (CPF) savings.
Of the active CPF members - that is, those most likely to be working - 22,300 were paying loan instalment amounts that were larger than their monthly CPF contributions.
And 12,800 of them stood to deplete their CPF Ordinary Accounts in less than six months if they lost their jobs and could not make new contributions.
The Ordinary Account is the account into which is paid the bulk of a worker's CPF contribution.
Money in this account can be used to service housing loans.
These figures mean that of the 140,000 active CPF members over the age of 55 in December, one-fifth had yet to pay off their home loans.
This is a worrying statistic, given that financial advisers say by that stage of life, people should be paring down on their financial commitments.
Mr Leong Sze Hian, president of the Society of Financial Service Professionals, explained: 'The older you get, the easier it is to get retrenched and the harder it is to get re-employed.'
The CPF Board, which released the figures in response to queries from The Straits Times, cited the example of a 55-year-old woman who bought a four-room resale flat three years ago.
She has wiped out her CPF Ordinary Account and her monthly contribution amounts to just $171.
Yet, she needs to pay $780 a month in home loan instalments.
And she needs to do so for the next 10 years to repay her outstanding loan of $99,000.
Another CPF member who has nothing left in his Ordinary Account is Mr B.G. Siriniwas, 56.
The former security officer bought an executive flat six years ago and was retrenched in 2004.
Unable to keep up his home loan payments, he has sold it off and is downgrading to a smaller flat.
Dr Amy Khor, mayor of Southwest Community Development Council, said she thought many of the older people still servicing their home loans bought bigger homes in the 1990s as they thought that property would keep appreciating in value.
But prices plunged after the 1997 Asian financial crisis and have inched up only recently.
The CPF Board said some home owners made the mistake of using their entire monthly CPF Ordinary Account contributions to pay for housing, leaving no buffer to see them through contingencies, such as a period of joblessness.
Some also failed to factor in possible hikes in mortgage rates.
Others were caught out by recent policy changes to lower CPF contribution rates for older workers.
As a result of CPF cuts announced in 2003, only 27 per cent of the income of someone above 50 to 55, will go into his CPF account, compared to 33 per cent for someone under 50.
The figure drops for those even older.
Housing agent Albert Lu, who runs C&H Realty, advised: 'Don't always stretch it to the limit. Always keep some money as a reserve.'
Mr Leong suggested that financially strapped home owners try to use their other assets to pay off as much of their housing loans as possible, if the returns from those assets were lower than their mortgage rate.
The CPF Board, which has been organising roadshows on retirement planning over the past few years, said it will be taking part in a property seminar organised by Singapore Press Holdings and the Institute of Estate Agents in August, where it will urge people to be more prudent on their housing purchases. -
I'd rather have cheaper public housing and spare cash to use for retirement, rather than have all your money in the house. You can't really sell the house, because you need a roof over your head.
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the idea of allowing singaporeans to own a flat is a lousy one.
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The idea of letting Singaporeans own flat is a good one, but the idea of letting Singaporeans own flat by paying through their noses is a bad one.Originally posted by dragg:the idea of allowing singaporeans to own a flat is a lousy one. -
The ministers have no hesitation to build cheap dormitories for foreign workers because this will justify their report books to look good.
It is all a matter of pursuing the self-interest of the party in power, self-centredness and face.
When the government passed the Housing and Development Act and Land Acquisition Act, taxpayers' monies were used to acquire lands to provide low cost housing.
Basically the government has no right to build low cost housing and half-way charge the citizens for such flats at market price because it is right under the HDB Act or Land Acquisition Act to make profits out of such scheme.
Yet the ministers in charge after Mah Bow Tan came in decided to change the public low cost housing basis of charging - from recovering of costs of construction and development to profit-making selling flats at market price less a discount wrongfully called subsidy.
Our MPs and ministers have totally failed to understand the HDB Act and LAA or was it a case of knowing but not willing or daring enough to point out such fundamental policy mistakes or errors.
The public has exposed such HDB profiteering scheme in the forum pages of the Straits Times which allowed the HDB to give some official denial without publishing the further rebuttals by many concerned citizens on this issue.
It is fundamentally wrongful or immoral for HDB to use taxpayers' monies to buy lands and yet sell them supposedly low cost public housing without taking into accounts that lands were acquired by them using the laws for public housing at cheap costs and were paid for by the taxpayers' own monies.
But once a decision of such impact like this has been exposed as wrong it will be losing face by the Ministers and PM and MM to change it as it will look bad.
Same thing has happened to other mistake like the NKF or Shin Corp.
Mistakes made and not being man enough to admit them by sheer use of political power to persist in those mistakes. -
Prices of everything up except Singaporeans' wages.
Haiz.
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not enough de.
by then duno GST increase by how much liao..
sekali oil, sugar, milk and those neccessities all increase.
then $1.2k a mth eat wat?
dun say future.. $1.2k/mth for me now is barely enough. -
I don't even want to think about inflation. That will rise considerably, and I am not even sure if oil prices will rise even further than what it is now.
And if the oil taps run dry in the next 50 years, I will indulge in a good laugh. -
Everyone thinks it's insufficient, no one thinks otherwise?
Where's Gazelle, OM, January and Citymax? -
1) What is the age of Person 1 and 2
2) As a first time buyer, I do believe they should qualify the $20 to 40K grant for first time HDB buyer?
3) CPF are not meant to be the only source of income for retirement, hence should we assume the person 1 and 2 will save 30% of this take home income?
4) Have you factor in the accumulated interest of the CPF monies
5) Are they married? is he the sole bread winner? if he is single can he rent out his spare bed rooms in his 4 room HDB flat? -
Finally responding, albeit with a taunt.Originally posted by Gazelle:1) What is the age of Person 1 and 2
Both are 30.
2) As a first time buyer, I do believe they should qualify the $20 to 40K grant for first time HDB buyer?
Yes, included.
3) CPF are not meant to be the only source of income for retirement, hence should we assume the person 1 and 2 will save 30% of this take home income?
I'm not sure about that.
4) Have you factor in the accumulated interest of the CPF monies
Yes, this is done from CPF's calculator.
5) Are they married? is he the sole bread winner? if he is single can he rent out his spare bed rooms in his 4 room HDB flat?
Married.