The CPF LIFE scheme is meant to provide Singaporeans with the security of a monthly income in our retirement, regardless of how long we live. This security of a lifelong payout is important, especially with rising life expectancy in Singapore.
Living longer is never a bad thing. However, along with it, we have to plan for a retirement that may be longer than the previous generations, and one that may even be prolonged further with continued advancements in medical technologies and treatments.
Do All Singaporeans And PRs Receive A CPF LIFE Monthly Payout?
The first thing we have to note is that the CPF LIFE scheme is not a handout from the government. It is merely a scheme that allows us to drawdown what we already contributed into our own CPF accounts in our working years in a sustainable manner.
Read Also: [Beginners’ Guide] Understanding CPF LIFE And Your Monthly Payouts When You Retire In Singapore
In other words, individuals who do not contribute to their CPF accounts, such as those working overseas, housewives, those unable to work and even freelancers or business owners who don’t make contributions, may not receive as much as someone who regularly contributed over the years.
Of course, these individuals or their loved ones can choose to make regular contributions into their CPF accounts if they want to enjoy a comparable CPF LIFE monthly payout.
When Do We Start Receiving Our CPF LIFE Monthly Payouts?
We can start receiving our CPF LIFE monthly payouts once we hit our Payout Eligibility Age (PEA). Currently, the Payout Eligibility Age starts at 65. We can also choose to defer receiving our CPF LIFE monthly payouts for any period of time between 65 and 70.
Once we hit 70, we have to start receiving our CPF LIFE monthly payouts.
How Much Will We Receive In CPF LIFE Monthly Payouts?
As mentioned, how much we receive in our CPF LIFE monthly payouts is a function of how much we have contributed – either as part of our salaries or through making voluntary contributions.
However, there are three other factors that can impact how much we receive each month:
– Whether we have saved the Basic Retirement Sum (BRS), Full Retirement Sum (FRS) or Enhanced Retirement Sum (ERS);
– Whether we choose the Basic Plan, Standard Plan or Escalating Plan; and
– When we choose to start our CPF LIFE monthly payouts between 65 and 70.
Read Also: Complete Guide To Understanding The “Benefit Illustration” Of CPF LIFE Payouts
In this article, we will look at the third point – how deferring the payout start age between 65 and 70 will impact our CPF LIFE monthly payouts.
To derive the calculations, we used a scenario of a male who turned 55 on 1 March 2019, with the Full Retirement Sum of $176,000 saved in his Retirement Account:
CPF LIFE Monthly Payouts
* In all figures where a range was given, we took the figure that was the upper limit.
If we are on the Basic Plan, we stand to receive a CPF LIFE monthly payout that is 34.3% higher by deferring our starting age from 65 to 70. On average, this translates to 6.1% higher CPF LIFE monthly payouts for every year we defer.
On the Standard Plan, we receive CPF LIFE monthly payouts that is 34.5% higher by deferring our starting age from 65 to 70. This is quite similar to the Basic Plan, and also works out to nearly 6.1% higher CPF LIFE monthly payouts for every year we defer.
Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55
On the Escalating Plan, we receive a CPF LIFE monthly payout that is 38.0% higher by deferring our starting age from 65 to 70. This works out to getting 6.7% more in CPF LIFE monthly payouts for every year we defer.
Cumulative Payouts And Bequests
Deferring our starting age not only impacts our CPF LIFE monthly payouts, but also the cumulative payouts we receive over time as well as the bequests we leave behind. Here’s how deferring our starting age from 65 to 70 will impact our cumulative payouts and bequests.
* In all figures where a range was given, we took the figure that was the upper limit.
The age we pass on is an important consideration in this decision as well. If we only live till 75, deferring our payout age till 70 would mean we get to enjoy less of our funds.
We only start getting better off if we live close to age 85, or the current life expectancy in Singapore. Even then, we would still not have taken more out of our CPF at 85 if we were on the Escalating Plan.
Of course, our bequests would also be higher. However, individually, we would not be able to enjoy the fruit of our life’s labour if we don’t live close to 85 or beyond.
* In all figures where a range was given, we took the figure that was the upper limit.
If we aim to leave behind a larger bequest, deferring our payouts from 65 to 70 looks to be the logical choice. We could also look at the combination of cumulative payouts and bequests to make a decision on which plan we want to be on and how long we want to defer our CPF LIFE monthly payouts.
We also have to consider that the results may alter in some ways if we do not save up to the Full Retirement Sum. We could have only the Basic Retirement Sum or Enhanced Retirement Sum, but this should impact the numbers in a largely similar manner.
We all have unique circumstances, and our decision on our CPF LIFE is an important retirement planning decision.
Read Also: How Long Does It Take To Beat The “Break-Even” On Your CPF LIFE Plan?
Simple Ways To Increase Our CPF LIFE Monthly Payouts
# 1 Do not withdraw the $5,000, or any sums that we are eligible to withdraw, at age 55.
# 2 Do not make further withdrawals at age 65.
# 3 Consider making Voluntary Contributions (VC) to our CPF accounts while we are young to enjoy the effects of compounded returns.
# 4 Consider the Retirement Sum Topping Up (RSTU) Scheme to contribute more to our CPF accounts, while enjoying tax savings as well.
# 5 Periodically transfer our Ordinary Account balances to our Special Account to earn an extra 1.5% per annum in interest returns.
# 6 Pay for part of our housing needs with cash to allow our CPF Ordinary Account balances to grow or for transfer to our Special Account.
Lastly, if we are still earning an income that can sustain us beyond the age of 65, we should consider deferring our CPF LIFE monthly payouts. This would give us higher monthly payouts when we stop earning an income.
Read Also: CPF LIFE VS Retirement Sum Scheme: What’s The Difference?
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