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Building Your Dream Retirement with CPF Savings and More

Building Your Dream Retirement with CPF Savings and More

  • 25 November 2022
  • By OCBC
  • 3 mins read

Key Takeaways

  • While inflation is high today, it is unlikely to remain higher than the CPF Special Account’s interest rate over the longer-term. Hence, our CPF savings can keep pace with inflation.
  • CPF LIFE provides us with an attractive yield for monthly passive income in our retirement. However, CPF LIFE alone may not be enough to maintain an average middle-income lifestyle.
  • Be retirement-ready by using the OCBC Life Goals retirement calculator to calculate your retirement needs while taking CPF LIFE payouts into consideration.

CPF interest rates are keeping pace with inflation (for now)

Inflation in Singapore is currently high because of external shocks to the economy due to the COVID-19 pandemic, its resulting supply chain disruptions, and the ongoing Ukraine conflict. This has pushed the costs of commodities higher across the globe and has affected us in Singapore because most of our raw materials are imported.

While the era of low prices may be over, it remains to be seen how high inflation will settle over the long-term.

There will be a cause for concern if the average inflation over a longer period of time (e.g. 10 years) exceeds 2.5%. This means the value of our CPF Ordinary Account (CPF-OA) savings are at risk of being eroded by inflation over the long-term, although the CPF Special Account’s (CPF-SA) 4% interest rate means the CPF-SA balance is still growing above inflation.

There are ways for the Singapore government to alleviate inflation, such as allowing the Singapore dollar to appreciate (hence lowering the cost of importing from other countries), or by sourcing for new trading partners to import from.

Since Singapore’s independence in 1965, inflation has exceeded 2.5% (i.e. the prevailing CPF-OA interest rate) in 18 out of 56 years (till 2021), or about 1/3 of the time. Similarly, inflation has exceeded 4% (i.e. the prevailing CPF-SA interest rate) in only 8 out of 56 years (till 2021), which is only 14% of the time.1

Thus, while the latest inflation reading rose to 7.5% in September 2022, it is unlikely to persist at this level over the longer-term. The average annual inflation rate from 2012 to 2021 was 1.1%, hence an inflation spike in 2022 will not move the needle too much for now and the higher CPF interest rates that our CPF monies have been growing at can still absorb the impact of the recent inflation spike and should continue to do so for a while.

CPF & Inflation

The current CPF system already incorporates inflation into a number of factors.

Firstly, the CPF-SA ceiling is adjusted higher every year to account for inflation.

Secondly, CPF LIFE also offers an Escalating Plan, where the monthly payouts increase every year by 2% to account for inflation.

Thirdly, using CPF-OA funds to purchase property or fund your child’s tertiary education requires the amount to be paid back into your CPF-OA with interest later on.

CPF LIFE forms a base for retirement income but may not be enough

The CPF Scheme helps us to save for our retirement by providing a monthly payout in the form of CPF LIFE, an annuity programme run by the CPF Board. Depending on the retirement sum you can set aside at age 55, you can get a monthly payout of $350 to $2,300 from age 65.

What is sufficient really depends on your intended lifestyle after retirement. Those with simpler needs may need around $1,800 to get by, but those desiring to continue an average middle-income lifestyle may need $2,500 to $4,000 per month.

Despite the relatively high CPF interest rates, CPF LIFE payouts alone may not be sufficient to fund your desired lifestyle and you will need to supplement your retirement with your non-CPF savings and investments if you desire a middle-income lifestyle or better.

Building on top of CPF LIFE

The first step when determining the savings and investments needed to supplement CPF LIFE is to quantify your retirement needs and put together a financial plan to achieve your retirement goal.

  • OCBC Financial OneView allows you to view your CPF balances and more in one dashboard and get personalised insights. You can conveniently perform a cash top-up of your CPF Special Account through the OCBC Digital app.
  • Our online OCBC Life Goals retirement calculator can help you to do so while incorporating CPF LIFE payouts into the consideration.

If you are projected to have a surplus, you can rest easier but should still continue to maintain a strong savings habit and build a bigger nest egg.

If you are projected to have a shortfall, you will need to save and invest funds to close the gap. To start, consider having 6-9 months of expenses as emergency funds in your bank account and invest the rest in a portfolio aligned with your risk appetite.

You may also want to consider a monthly forced-savings plan such as an endowment plan, or monthly investment plan for unit trusts, to instil discipline in investing and to automate the process.

Along the way, you may also want to consider seeking advice from a financial advisor for your needs.


For most of us, CPF LIFE alone may not be a sufficient nest egg for our dream retirement but the good news is it provides a strong foundation to get there.

We will need to build on top of CPF LIFE with our own investments using the Supplementary Retirement Scheme (SRS) or cash. The OCBC Digital app offers a wide range of investment options for your consideration, including investments that can generate passive income. Here are some resources to get started:

If you would like a solution customised to your needs, please speak to one of our Personal Financial Consultants.

Additional Information

Important notices

1Source: Singapore Department of Statistics, retrieved September 2022
2Source: Singapore Central Provident Fund Board, retrieved October 2022

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