Turning 65 is a milestone age for most Singaporeans as it marks the payout eligibility age when we are eligible to start receiving our monthly CPF Life payouts. This is different from the statutory retirement age which is currently 62 and set to increase to 63 by 1 July 2022, which determines the minimum age our employers can ask us to retire.
#1 We Can Start Or Defer CPF LIFE Payout
Possibly the most important decision we need to make regarding our CPF account when we reach 65 is whether we wish to start or defer our CPF Life payout.
While the age where we are eligible to start our CPF LIFE payouts is 65, we actually have a choice to start our payouts anytime from 65 to 70 years old. By delaying the start of our payouts, we allow our CPF monies to compound further and increase our eventual payouts. This deferment can increase our payouts by up to 7% for each year deferred. If we are working or do not require the funds for our daily needs, this is a good option to compound our savings.
#2 Monies in Our Ordinary Account (OA) And Special Account (SA) Will Be Transferred Over To Our Retirement Account (RA) For A Second Time
At age 55, our Retirement Account (RA) is created and savings from our SA and OA, up to the Full Retirement Sum (FRS), will be transferred to our RA.
If we are born in 1958 or after, by the time we turn 65 and are eligible for payouts, there would be another transfer from our SA and OA to our RA, if our RA savings is less than our FRS. This transfer would be up to the amount of our cohort’s FRS and would enable us to receive higher monthly CPF payouts.
For members turning 65 from 2023, this second transfer of OA and SA savings to RA, will happen when we start our monthly payouts instead of when we are eligible to start payouts at 65. So if we choose to defer our payouts, the transfer will also be deferred until the start of payouts.
#3 Monies In Our Retirement Account Is Used To Pay Our CPF LIFE Premium
When we start our CPF Life payouts, be it at 65 or after, the monies in our RA would be used to pay for our CPF premium.
For those of us who choose to join CPF Life on the Standard or Escalating Plan, the full amount in our RA would be used as our CPF Life premium. Under the Standard or Escalating Plan, our CPF LIFE monthly payouts will first be paid from our CPF LIFE premium. When our CPF LIFE premium is used up, we would continue to receive monthly payouts, no matter how long we live. This is possible because of risk-pooling where the interest accumulated by all CPF Life members is sufficient to sustain the monthly payouts for those who live beyond their premiums paid.
For those of us who choose to join CPF Life on the Basic Plan, about 10 to 20% of our RA savings will be deducted as CPF LIFE premium. Under the Basic Plan, our monthly payout will first be paid from our RA and is estimated to last until 90. After our RA is depleted, monthly payouts will be paid from our CPF LIFE premium. Thereafter, like those who joined under the Standard or Escalating Plan, we will continue to receive monthly payouts no matter how long we live, even when our CPF Life premium is depleted.
#4 We Continue To Earn Interest On Our CPF LIFE Premium
Unlike most other insurance policies, our CPF Life premium continues to earn us interest on top of providing us with our monthly CPF Life payouts.
Not only do we earn the base 4% p.a. interest on our CPF Life premium (the same rate as our Retirement Account savings), our CPF LIFE premium also counts towards the extra 1% p.a. interest on the first $60,000 of our combined CPF balances as well as the additional 1% p.a. interest on the first $30,000 of our combined CPF balances.
This means if we grow our RA savings (and eventual CPF Life premium) by either topping up or deferring our payout, we not only stand to gain from the higher monthly payouts but also earn additional interest.
#5 We Can Withdraw Up To 20% Of Our Retirement Account Savings At 65
Finally, regardless of whether we choose to defer our CPF Life payout or not, we have the option to withdraw up to 20% of our Retirement Account (RA) savings at age 65. This includes the first $5,000 that can be withdrawn from age 55. This applies for all members who are born in 1958 or after.
If we are born in 1957, which means we turned 55 in 2012 and will turn 65 in 2022, we can only withdraw a further 10% of the savings in our Retirement Account. This is because such members already had the option to withdraw up to 10% of their Ordinary Account and Special Account balances when they turned 55.
If we are born in 1956 or earlier, which means we turned 55 before 2012, we cannot withdraw any additional CPF savings when we turn 65. This is because such members already had the option to withdraw up to 20% of their Ordinary Account and Special Account balances when they turned 55.
However, we don’t have to take the option to withdraw. If we choose to let our RA savings remain and continue to accumulate interest and be used as our CPF Life premium, we would enjoy a higher CPF Life payout that continues for life.
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