Singapore has a system that allows your money go to your retirement plan soon after you start work. It just like Malaysia EPF but the rate is much higher. This CPF issue has almost heated up Malaysia-Singapore relation sometime ago. As a fresh graduate, face it, we don't know about CPF. For me, I also just started to read some online statement on CPF rate. I will post the rate here but if I am wrong I will correct it later.
From CPF Contribution: (Graduated rate)
I am choosing >$750 because lesser than that it will be a problem for us and I will also choose age 50 years old and below.
Exceeding $750 (1st year after obtaining PR status)
Contributions payable by the employer for the calendar month:
a) 9% of the employee’s Ordinary Wages for the month up to $450; and
b) 9% of the Additional Wages payable to the employee in the month
Amount recoverable from the employee's wages for the calendar month:
a) 5% of the employee’s Ordinary Wages for the month up to $250; and
b) 5% of the Additional Wages payable up the employee in the month.
Exceeding $750 (2nd year after obtaining PR status)
Contributions payable by the employer for the calendar month:
a) 24% of the employee’s Ordinary Wages for the month up to $1,200; and
b) 24% of the Additional Wages payable to the employee in the month
Amount recoverable from the employee's wages for the calendar month:
a) 15% of the employee’s Ordinary Wages for the month up to $750; and
b) 15% of the Additional Wages payable up the employee in the month.
Focus on the percentage and not the max because you can't get $5,000 job after graduate. (The highest salary I know is $4,500). Let say your salary is $2,000, easy to say you need to put 5% of $2000 (excluded allowance) into CPF which is $100.
You think it is high? Think when you pay full rate which is 33% (employer) and 20% (employee). That is why Singapore government is so rich and the retired Singapore worker is so rich too. The system here is designed to which you can't get rich and you can't starve to die. It is a great system for those who don't know how to save money. But for those who wants to get rich, your cashflow maybe obstructed a little (I think it is not a problem).
One thing about CPF is something like long-long-long-term fixed deposit with high-high interest. You put your money into a box and you will not able to open it for long long time. One thinks that if you didn't put these money into this box, you can do extra investment which may resulting higher returns. But it is for high disciplined people to do that and you need good economic with good planning (luck). If your money is inside CPF, it is still your money. So decide on your own way to manage it.
That day I was chatting with m|ng and we are discussing about CPF contribution. m|ng suggested to put full amount into the CPF because it is not taxable. Since it is not taxable you can save your money from going to government and putting more money into CPF means you started early on your retirement plan. Remember the keyword "Start Early", it is never too early for investment or saving. It is just an excuse to tell yourself you are poor so you won't be saving for these few years (I used this excuse too). If you try to tight your budget, you may have extra few hundred for saving.
Again, I have friends who wanted to put lesser and he/she can use the money for greater purposes. Maybe in the future when we look at the latest Singapore bond/investment plan we will look back that this CPF issue. Until then, I shut my mouth.
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