One of the most searched about finance topic in Singapore is CPF. This comes as no surprise, since CPF matters affect most Singaporeans one way or another.
As with all widely discussed topics, people have all sorts of questions about it. In this article, we will identify some of the most common questions that people asked about CPF, and our response to these questions.
#1 Can I Use My CPF Money To Pay For My Home After I Turn 55?
There is a misconception going around that CPF members are not able to use their CPFOA monies to pay for their home after they turn 55. This is not true.
When CPF members turn 55, a Retirement Account (RA) will be created for them. This RA account will use savings from their Special and Ordinary Account. This forms the bulk of their retirement sum that will be used to provide them with a monthly payout from age 65 onwards under CPF LIFE.
To fund this Retirement Account, savings from CPF Members Special and Ordinary Account will be transferred to the RA at age 55, up to the Full Retirement Sum of $166,000. CPF members can opt to withdraw their RA savings above their the Basic Retirement Sum of $83,000 if they have a property and choose to pledge it.
Any remaining amount from one’s Ordinary Account can continue to be used to pay for one’s home. You can read up more about this from the CPF website.
#2 Can I Still Withdraw Money From My CPF Account When I Turn 55?
Yes you can. The remaining savings in your Special and Ordinary Accounts, after setting aside the retirement sum in your Retirement Account, can be withdrawn once you turn 55.
For example, if the combined total of your Special and Ordinary Account is $200,000. You will be able to withdraw a total of $34,000, after setting aside the Full Retirement Sum of $166,000.
If you would like to withdraw more money and to set aside a lesser amount for your Retirement Account, you can opt instead for the Basic Retirement Sum of $83,000. In order to withdraw money above the Basic Retirement Sum, CPF members will have to pledge their property.
#3 What Happens To The Money In My CPF Account After I Pass On?
If you pass on, any remaining money in your CPF account (including your Medisave Account) will be given to your CPF nominees.
The next question that would be on most people’s mind is who are your CPF nominees, and if its actually necessary to make a CPF nomination?
The simple answer to this question above is no – making a CPF nomination is not necessary.
If a person does not have a will, their assets (inclusive of their CPF monies) will be automatically distributed in accordance with the intestate succession rules. In other words, unless you have a separate will written, there is no need for you to make a CPF Nomination.
If you do have a separate will prepared, then it’s worth noting that a will does not cover the distribution of your CPF savings after death. You will need to do a CPF nomination in order to ensure that your CPF money is distributed based on your preference, rather than in accordance to the intestacy law.
#4 How Old Do I Have To Be To Start A CPF Account?
Most people start receiving CPF contribution when they begin working. This gives the impression that you need to be of a certain adult age before you can open your CPF Account.
However, you can set up a CPF Account for your children the moment they are born. If you make a voluntary contribution to their account, any amount in their CPF Special Account will get an interest of between 4-5% per annum, risk-free, and cost-free, until they are 55. This makes it an exceptionally good retirement plan.
There is no minimum age for people to have a CPF Account. If you start working part-time during your teenage years, your employer should already be contributing CPF to your account, regardless of your age.
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