On CPF contribution and personal taxes

I just thought about this, while checking up on CPF and personal tax.

Imagine you are earning 3,000 a month, so that’s about 36,000 per annum.

You have to make a contribution of 600 per month to CPF, 7200 annually. At 2.5% interest rate (the bank rate for Singapore), at the end of the year, your balance is about 7380.

Then, you have to pay your taxes. First 30,000 is taxed at a gross rate of $350. The next 6,000 is taxed at 5.5%, which means your personal tax expense is $680 per annum. So that’s roughly about 1.89% of your income.

Considering that you have no other savings, your CPF contribution yields roughly… 0.61%? That’s quite miserable isn’t it? In case you cannot see the percentage figure in decimals, it’s 0.0061.

I admit that this reasoning has many flaws and loopholes. For example, you can actually get a higher return of 4.5% if you lock your money into your SA account, instead of OA. (Capped at the first $60,000, i think. Need to research more.) But If your money is in SA account, it’ll be locked and you can’t use it for property.

The point is… this makes me realise how important it is to invest your money and get a decent amount of return.

What do you think? I’m on my way to getting more opinions from fellow friends that I respect