Making the most of Singapore’s Budget 2024
Making the most of Singapore’s Budget 2024
While Singapore’s Budget 2024 came with some surprises, here are some ways how you can make the most of what was announced.
No more “shielding” of CPF Special Account
Top of the list, the biggest news to many is the removal of the option to “shield” your CPF Special Account when you turn 55.
With the closure of the Special Account at age 55 going forward, there will be no benefits of investing the money from the Special Account and then liquidating it afterward to prevent Special Account savings from being transferred to the Retirement Account.
Instead, the Government is encouraging Singaporeans to contribute more towards building your CPF LIFE payout by increasing the top-ups for the Retirement Account up to four times the Basic Retirement Sum (BRS), or S$426,000 in 20251, to get an estimated S$3,3301,2, of CPF LIFE payout per month or S$39,960 per year, from age 65 for as long as you live. This works out to an attractive estimated yield of 9.4%3 per annum for life in your retirement, which is hard to match! Having a higher yield means your CPF savings is working harder for you. Many Singaporeans will need a combination of CPF and cash savings to fund our retirement, thus having our CPF savings work harder can free up more cash savings for other purposes such as leaving a legacy for your loved ones.
Set aside more savings
Amid the slew of goodies announced are many ways for Singaporeans to save on certain taxes and receive more handouts to offset our expenses.
This comes in the form of potentially lower property taxes from 20251, a rebate of additional buyer’s stamp duty (ABSD) if you had sold your first property within six months of buying your second property1, Community Development Council (CDC) and Goods and Services Tax (GST) vouchers1 and so on.
This does not give you the excuse to go and splurge. It is a reminder that things are getting more expensive due to inflation and we should try to save more when we can.
So when you receive these handouts, do not use it to book your next holiday but check whether you have set aside at least three to six months’ worth of expenses as an emergency fund4. If you do, then consider investing the savings to build towards your financial goal of buying a home or reaching your retirement nest egg.
Invest in yourself
Career coaches will tell you that the best investment is to invest in yourself by acquiring new skills. You can do so with the additional S$4,000 SkillsFuture credit1, paving the way to deepen your skillset to keep yourself relevant in today’s fast-changing landscape, or pick up new skills to facilitate a career transition that can increase your income. Graduates from the Institute of Technical Education (ITE) who go on to complete a diploma will get a one-time S$10,000 top-up to their CPF Ordinary Account1.
Either way, pursuing lifelong learning not only keeps your mind active and stay relevant in the workforce, it can also help you to increase your income over the long-term and thus increase your savings, enabling you to achieve your financial goals sooner.
Supporting retirement adequacy
We have had the Pioneer Generation and Merdeka Packages, here comes the Majulah Package1. With a combination of one-off and annual top-ups to your CPF accounts, the Government is helping Singaporeans born in 1973 or earlier to be better prepared for retirement through increased CPF savings. Lower-income elderly will also get additional support through top-ups to the Silver Support Scheme1. While this is a pro-active gesture from the Government to boost our retirement savings, the reality is that the limited top-ups mean most Singaporeans will still need to set aside some cash savings of our own to supplement CPF LIFE for our retirement.
To find out whether CPF LIFE alone is enough for your retirement, begin an OCBC Life Goals journey in our OCBC Digital app (Menu > Invest > Goal planning) or speak to one of our Personal Financial Consultants today.
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Information presented as at 1 January 2024.
Sources
1Source: Singapore Ministry of Finance Budget Statement 2024, 16 February 2024
2The S$3,330 estimated monthly payout is based on the payouts of a male CPF member who sets aside the ERS of S$426,000 at age 55 in 2025 and starts payouts under the CPF LIFE Standard Plan at age 65.
3The estimated yield of 9.4% per annum is calculated from [(S$3,300 x 12 months) ÷ S$426,000] = 9.4%
4Source: Basic Financial Planning Guide, developed by the Monetary Authority of Singapore and MoneySense, together with the CPF Board, Association of Banks in Singapore, Association of Financial Advisers (Singapore) and Life Insurance Association
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