In Singapore, our CPF follows us throughout our lives. From the day we are born, our CPF accounts are opened to help us pay for our own MediShield Life premiums (via a $4,000 MediSave grant), right up to our retirement years (via a lifelong monthly payout with CPF LIFE), and everything else in between.
While the CPF system can be a complicated beast, at its very core lies its function to provide for our retirement needs. Its solution – CPF LIFE, a national lifelong annuity scheme.
On CPF LIFE, we can only start receiving monthly payouts from our payout eligibility age (PEA), which is currently set at 65 years-old. The amount we receive each month from CPF LIFE is largely dependent on the initial amount we contribute to our Retirement Account when we turn 55.
What Happens When You Turn 55 In Singapore?
Our CPF undergoes several changes when we turn 55. First of all, we’ll get a birthday present from CPF in the form of a “Reaching 55” information pack. Here are five other important retirement-related things we should take note of after turning 55.
#1 A Retirement Account Is Opened For You
When we turn 55, CPF opens a fourth account – Retirement Account (RA) – for us. Our combined balances from our Ordinary Account and our Special Account is transferred into this Retirement Account (RA).
These funds are then set aside, and compounded, for the next 10 years, for the purpose of joining the CPF LIFE scheme when we turn 65.
#2 Choose Your Retirement Sum – The Minimum Amount That You Need To Keep In Your CPF At 55
When we turn 55, we also have to choose the retirement sum we want to keep. There is the Full Retirement Sum (FRS), Basic Retirement Sum (BRS) and Enhanced Retirement Sum (ERS).
|Retirement Sum||Full Retirement Sum (FRS)||Basic Retirement Sum (BRS)
(0.5 X FRS)
|Enhanced Retirement Sum (ERS)
(1.5 X FRS)
The Full Retirement Sum is the standard plan. Choosing to go on the Basic Retirement Sum will require us to have sufficient property charge and/or pledge our property. The Enhanced Retirement Sum is not actually a third option. This just allows us to save more than the base level set by the Full Retirement Sum, but places a maximum cap on the amount we can top-up our Retirement Account to after we turn 55.
We can withdraw anything above our chosen retirement sum.
#3 Topping Up Our Retirement Account
Before 55, we can top up our Special Account up to a maximum set by Full Retirement Sum. Once we turn 55, and our Retirement Account is opened, we can now top up our Retirement Account up to a maximum set by the Enhanced Retirement Sum.
#4 How Much Can I Withdraw From CPF At 55?
As mentioned above, there are three retirement sums we can choose to save in our Retirement Account at 55, and we can withdraw anything above it. Even if we cannot meet the retirement sums, we can still withdraw up to $5,000 regardless of how much CPF balances we have.
#5 Decide If We Need Our Ordinary Account Balances To Continue Paying For Our Home Mortgage
Also mentioned above, both our Ordinary Account and Special Account balances are transferred to create our Retirement Account balance. What many of us may not realise is that we can choose to stop our Ordinary Account balances from flowing into this account.
While we should have tried to pay off our home loans before hitting the home stretch before retirement, it is not uncommon to require our Ordinary Account balances to continue servicing home loans past 55. Read this article below to understand more about how to do this, and find out other little-known things about our CPF.
What Actually Happens To Your Funds In Your Retirement Account?
Once your funds are transferred to your Retirement Account, it is set aside for the next 10 years to compound before you can enter the CPF LIFE scheme. While your funds are sitting in your Retirement Account, it continues to earn an annual interest return.
Our funds will also compound at a slightly higher rate to boost our CPF LIFE monthly payouts once we are eligible. Interest returns on our Retirement Account are as follows:
|Retirement Account Balances||Interest Returns (per annum)|
Technically, we may not receive this interest returns on the actual funds in our Retirement Account. However, both the extra interest and additional extra interest earned on our combined CPF balances will flow into our Retirement Account, hence it would be accurate to think of it this way.
It is important to note that after choosing the retirement sum we want to go on at 55, our CPF funds are not contributed to CPF LIFE. Instead, it continues to compound for a minimum of 10 years, until we reach the payout eligibility age of 65. We can also choose to compound it for up to 15 years, and only join CPF LIFE at 70 (when we have to start our CPF LIFE monthly payouts).
Here’s how the funds in our Retirement Account will compound for the next 10 years if we turned 55 in 2019:
|If We Turn 55 In 2019||Full Retirement Sum (FRS)||Basic Retirement Sum (BRS)
(0.5 X FRS)
|Enhanced Retirement Sum (ERS)
(1.5 X FRS)
|Year 1 (55)||$176,000||$88,000||$264,000|
|Year 2 (56)||$183,940||$92,420||$275,460|
|Year 3 (57)||$192,198||$97,017||$287,378|
|Year 4 (58)||$200,786||$101,797||$299,774|
|Year 5 (59)||$209,717||$106,769||$312,664|
|Year 6 (60)||$219,006||$111,940||$326,071|
|Year 7 (61)||$228,666||$117,318||$340,014|
|Year 8 (62)||$238,712||$122,910||$354,514|
|Year 9 (63)||$249,161||$128,727||$369,595|
|Year 10 (64)||$260,027||$134,775||$385,278|
* Estimated Retirement Account balances
At the end of year 10, we will turn 65, and have the option to enter CPF LIFE to start receiving a monthly payout for the rest of our lives.
It’s interesting to note that even though we may have started with an FRS that is double the BRS, after 10 years, it ends up being slightly less than double. The same applies to the ERS balances after 10 years, which is less than 1.5 times the FRS and less than 3 times the BRS. This is because the first $30,000 of our balances receives 2% higher interest, and the next $30,000 of our balances receives 1% higher interest, than the remaining funds in our Retirement Account.
This is also why the CPF LIFE monthly payouts may seem like it favours those on the BRS. In actuality, it is just a function of giving greater interest returns to the first $60,000 of our Retirement Account balances.
How Much We Contribute To CPF LIFE?
This table depicts our Retirement Account balances when we turn 65. We are actually contributing these sums into CPF LIFE, rather than the retirement sums we initially chose.
Why this is important is because when we turn 65, there is another decision to make (besides whether we should defer payouts till we turn 70). We need to choose the CPF LIFE plan we go on. There are three CPF LIFE plans:
|Standard Plan||Basic Plan||Escalating Plan|
|Full Retirement Sum||Full amount||10% to 20%||Full amount|
|Basic Retirement Sum||Full amount||10% to 20%||Full amount|
|Enhanced Retirement Sum||Full amount||10% to 20%||Full amount|
If we decide to go on the Basic Plan, we only contribute 10% to 20%, depending on our age and gender, of our Retirement Account balances to the CPF LIFE scheme. Here’s an article you can read more about this.
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