In our earlier article (click here to refer), we looked at the projected CPF savings of a new joiner to the workforce with plans to get his own place after 5 years. In this article, we will look at a middle-aged profile looking at upgrading their property.

Profile 2: Susan and her husband own a 5-room HDB and are thinking of upgrading to a condominium which costs $1 million. She would like to know the impact of such a decision on her retirement plans.

Age: 40 years old

Salary: $7,000/month

Annual Bonus: 2 months

Avg annual increment: 2%

CPF Balances: OA = $50,000, Special Account (SA) = $80,000, MediSave Account (MA) = $40,000

Additional Information

If they keep their current 5-room flat, she will continue to pay $900* per month from her OA for her share of the monthly mortgage for the next 15 years until age 55.

If they upgrade to a condominium, she will pay $1,700** per month for her share of the monthly mortgage for the next 25 years until age 65. She will use all her OA savings of $150,000 for the upfront payments. This is made up of her current OA balance of $50,000 and $100,000 refunded to her OA from the sale of her HDB.

For the purpose of retirement planning, we will examine the inflows and outflows of the OA and SA until she turns 55 years old in the table below.


Susan asks,

How will upgrading affect my retirement income from CPF LIFE?

  Opt 1: Keep 5-room HDB Opt 2: Upgrade to condo
Current OA + SA Balance in 2019 $130,000 $80,000
Total OA + SA Contributions $462,706 $462,706
Total OA + SA Interest Earned $180,196 $133,935
Total OA + SA Withdrawals (for mortgage & DPS) ($164,280) ($286,905)
OA + SA Balance at 55 years old (A) $608,622 $389,736
Retirement Sum set aside (B) $411,000 $389,736
Withdrawable CPF Balances at 55 years old (A – B) $197,622 $0
Estimated CPF LIFE Payout $2,966/month $2,817/month

Clearly the decision to upgrade to a condominium would affect her retirement planning and cashflows in several ways compared to staying with the current house.

  1. As the monthly instalment of $1,700 per month is more than her maximum OA monthly contribution, she will need to pay the difference each month in cash which totals up to about $46,000 over the entire loan tenure.
  2. Her combined CPF OA and SA balances at age 55 will be about $220,000 lesser. This impacts how much she can set aside in her Retirement Account and consequently getting a lower CPF LIFE payout. In addition, after setting aside the retirement sum, there are no withdrawable balances available for her from age 55.
  3. Her loan will only be fully paid up when she turns 65 years old which could have bearing on plans for early retirement. If the couple would like to retire by 55 years old, they will need to use cash to pay off the outstanding loan of $360,000.    

If we think about it, upgrading their property essentially sets them back by 10 years in their retirement plans. Nonetheless, this analysis does not explore the potential upside she may get from the property upgrade which is for another discussion altogether. However, it does highlight how a mid-life housing purchase can have adversely impact one’s retirement planning if not properly managed.  

* Based on 25-year HDB loan (@ 2.6% p.a.) of $400,000

** Based on 25-year bank loan (@2.6% p.a.) of $750,000

The author, Lena Teng, is Lead, Solutions at MoneyOwl Pte Ltd.