For Singaporeans, there are a few milestones that are as momentous as reaching the age of 55, since that is the CPF Retirement Age, and the earliest time you could withdraw your CPF monies that you have been accumulating diligently and mandatorily for most of your life.
A recent survey of 7,200 Singapore residents aged 55 to 70 conducted by the CPF Board revealed that 40% of CPF members who turned 55 didn’t take out a single cent.
For those who did withdraw monies, 51% of them kept their withdrawn CPF monies in savings accounts and equivalent instruments. The rest used the monies to pay for near-term expenditure like household expenses, their children’s education and paying off loans or spending on big-ticket items like holidays, overseas trips or home renovations.
By understanding how CPF withdrawals work, you can make an informed decision on whether you want to withdraw – and how much.
Happy 55th Birthday! Here’s What Happens At Age 55
As a special “Happy Birthday” from CPF, you’ll receive a “Reaching 55” information packet from CPF a few months before your 55th birthday. This includes the opportunity to make an appointment to attend the CPF Retirement Planning Service, a one-to-one session with a CPF staff who would explain the CPF rules that apply to you once you reach 55.
Creation Of Your CPF Retirement Account
Once you reach 55, your CPF Retirement Account (RA) will be created. Savings from your Special Account and Ordinary Account up to the Full Retirement Sum will be transferred to your RA. Funds in your RA will be drawn to provide monthly retirement income at your payout eligibility age (currently 65 for CPF members born in 1954 or later).
If you are born 1958 or after and have $60,000 or more in your RA 6 months before your payout eligibility age, you will be automatically enrolled in the CPF LIFE scheme, which provides monthly payouts for life. Otherwise, you will be on the Retirement Sum Scheme, where you will receive monthly payouts until your RA monies run out.
After the Full Retirement Sum has been transferred to your RA, you may then withdraw your remaining monies at any time. For higher payouts under CPF LIFE, you may choose to further top up your RA to the Enhanced Retirement Sum of $264,000.
If You Don’t Have Enough For The Full Retirement Sum
If you do not have the Full Retirement Sum in your Special Account and Ordinary Account, you can apply to withdraw your RA savings (excluding government grants, top-up monies, and interest earned) beyond the Basic Retirement Sum, if you pledge a property you own.
If You Don’t Have Enough For The Basic Retirement Sum
Even if you do not have enough monies to meet the Basic Retirement Sum, even with property pledge, you can still withdraw up to $5,000 of your CPF monies at age 55.
To give you a better idea of how much CPF monies you are eligible to withdraw, you can use this handy CPF Withdrawal Calculator.
Once Your Reach CPF Payout Eligibility Age
CPF members born in 1958 or after have the option to withdraw a lump sum of up to 20% of their Retirement Account savings once they reach their payout eligibility age, including the first $5,000 that can be withdrawn at 55.
CPF members who are born in 1957 or earlier can already withdraw up to 10% of their Ordinary Account and Special Account monies when they turned 55. Thus, they can withdraw a lump sum of an additional 10% of their Retirement Account monies at the payout eligibility age.
Should You Withdraw Your CPF?
Obviously, withdrawing your CPF is a personal decision. If you have immediate needs, such as to cope with daily expenses, paying off loans or giving it to your children, then it is a no-brainer.
But if you do not have any immediate use for it, understand that by cashing out your CPF, you’re giving up opportunity cost of earning good risk-free interest that is unmatched by comparable financial products in the market.
If you withdraw your CPF savings from age 55, you will have less for your monthly CPF LIFE payouts, which commences as early as age 65.
Some might argue that investing in stocks or placing it in other investments could potentially give your better returns, but you should remember that with your retirement just a few years away, you may not have the time to ride out market volatility. Needing access to monies and selling off your investments during a market downturn would be a shame.
How To Withdraw CPF Monies?
You can apply to withdraw your CPF monies online, and receive it via interbank GIRO or PayNow, or mail in a a hardcopy of the form. Though not necessary, you can also visit any of the 5 CPF service centres islandwide for assistance.
Withdrawal Of CPF Monies Doesn’t Have To Be All Or Nothing
You do not need to withdraw the full amount that you’re eligible for at one go. Unlike the past, where you can only withdraw once a year, liquidity of your CPF funds is much improved, so you can plan and withdraw what you need, with comfort in the knowledge that if you do need the monies some time in future, it is there for you at a moment’s (technically a day, with PayNow) notice.
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