Turning 54 Soon? Here’s How To Set Aside Your CPF OA Savings For Home Mortgage Before It Goes Into Your Retirement Account

Most Singaporeans are aware of the significance of turning 55 years old. When we turn 55, CPF kindly reminds of our pending retirement by creating a Retirement Account (RA) for us.

When we are 55, our combined OA and SA monies will be transferred to our newly created Retirement Account. The amount transferred is up to our Retirement Sum which is determined by whether we choose to set aside the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) and pledge our property.

For those of us who have less than the Retirement Sum in our OA and SA, this automatic transfer can leave us without CPF savings for housing payments. Our RA is meant for our retirement and is used to fund our CPF LIFE; it cannot be used for housing payment.

Instead, what we can do when we are 54 years old is to set aside our CPF Ordinary Account savings for home mortgage before it is transferred to our Retirement Account.

Read Also: What Happens To Your CPF Monies After Transferring It To Your Retirement Account (RA) At Age 55?

We Can Reserve Our Ordinary Account (OA) Savings for Housing

If we plan to continue using our OA savings for housing payments after 55, we can apply for reserve our OA savings for housing. This can be done when we are 54 years old. For those of us who are prone to forgetfulness, 6 months before our 55^th birthday, CPF Board would send a package – “Reaching 55” – to inform us of our CPF withdrawal options and creation of the Retirement Account. This is a good reminder for us to reserve our OA savings for housing.

To reserve our OA savings, we can login into my cpf Online Services > Click on “My Requests” > Select “Retirement (eg. Retirement Sum & Age 55 applications)” > Select “Decide on my CPF options for members reaching 55”.

Reserving our OA savings for housing isn’t our only option. If we continue working after 55, our new CPF contributions will continue to replenish our OA and can be used for housing.

Read Also: How Much Can You Withdraw From Your CPF Account At Age 55?

We Can’t Reserve Our OA Savings Indefinitely

As our CPF savings are meant for our retirement, CPF Board doesn’t allow us to hold and reserve our OA savings forever. CPF Board will transfer the reserved OA savings tor our RA if we don’t use it for housing as intended, such as when:

• there is no payment made to our property for 6 months
• we have not started using our CPF savings towards the property for 5 years
• our property is sold
• when the purchase of the property stated in the form is aborted

Based on the conditions that CPF has set, the reserved OA savings are intended for our existing property repayments. We cannot reserve it for a future property purchase, though we can reserve it if we are currently in the process of purchasing a property.

Additionally, once we start receiving our monthly payouts under CPF Life or the Retirement Sum Scheme (at 65 unless we choose to defer it), our reserved OA savings will be transferred to our RA if we have not met the Full Retirement Sum by then.

Reserving Our OA Means Less For Retirement

While reserving our OA for housing means we pay less in cash for our housing repayments, it also means that we are taking away from our retirement. This is because the Retirement Sum going to our RA would be lower.

If we had allowed our OA savings to transfer to our RA, it would have been allowed to compound for the next 10 years until we start receiving our CPF Life payouts. Our savings would have also compounded at a higher interest rate (4 %to 6% p.a.) than keeping it in our OA which earns an interest rate of 2.5% p.a.

If mortgage interest rates continue to remain low, it may make more financial sense to actually switch to paying off our remaining mortgage payments in cash and allow our OA savings to flow into our RA and earn the higher interest if we have the financial capability to do so.

Read Also: How Older Singaporeans Can Continue Using CPF To Enjoy Higher Risk-Free Returns After Age 55

54 Years Old Is A Time To Plan What Happens To Our CPF Monies

Most of us recognise that turning 55 is a major milestone for us and our CPF accounts. It is the age when we can first withdraw (in cash) from our CPF accounts, and our Retirement Accounts are set up.

However, if we wait until age 55 to think about whether we need to continue using our CPF monies to finance our home mortgage, it would be too late. Our CPF monies would have been transferred to our Retirement Account on our 55^th birthday and cannot be withdrawn for housing payment.

Likewise, we will need to determine whether we are setting aside the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) and pledge our property, or even decide to top-up to Enhanced Retirement Sum (ERS) before we actually reach 55.

For those of us who are nearing the age of 55, CPF Board would send you a package – “Reaching 55” – with information on these CPF changes. We can also make an appointment to attend a CPF Retirement Planning Session where we will be guided in a one-on-one session on the applicable CPF changes and information.

Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55