Connect with us


Turning 55 Soon? Here’s How You Can Use CPF As Your Personal Savings Account (And Earn Up To 4% Interest)

Use CPF as your “personal ATM” after 55

In recent years, many of us have realised that CPF is a safe haven for our monies with more Singaporeans making CPF contributions during the pandemic. As we know the CPF scheme pays up to 4% of interest on our CPF balances. However, the trade-off is that we cannot withdraw our CPF balances (except under certain conditions and when we finally retire at 65). However, what if it was possible for us to earn the 4% interest and still retain flexibility in on-demand withdrawal.

Turning 55 marks the moment when Singaporeans can finally withdraw part of our hard-earned CPF monies. It is also an age when many of us have accumulated enough hard-earned money to think about how to grow this sum while still retaining stability and liquidity as we grow close to retirement.

For those of us who want to take advantage of the security and high interest rates of our CPF accounts in our golden years, here’s how we can use CPF as our personal savings account.

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

We Must Have The Full Retirement Sum Set Aside Before 55

Before we proceed to think about using our CPF accounts as a high interest savings account, we must already have the Full Retirement Sum (FRS) set aside in our Ordinary Account (OA) and/ or Special Account (SA).

This is because we can only freely withdraw our CPF monies above the FRS after 55. For cohorts turning 55 in 2022, the FRS is $192,000. Any amount above FRS, that can actually be freely withdrawn, forms the basis of our CPF “personal savings account”.

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

We Can Use The Voluntary Housing Refund To Go Above FRS

As anyone who has tried to optimise their CPF account would realise, it is not simple to go above the FRS as CPF limits our top-ups. We cannot utilise the Retirement Sum Topping Up (RSTU) Scheme to top up our Special Account (SA) once we have reached the FRS before 55 years old. Most of us will have to depend on our mandatory CPF contributions to grow our CPF monies above the FRS.

However, for those of us who utilised CPF monies for housing, we can make a voluntary housing refund (VHR) of up to the full principal amount withdrawn for the property with the accrued interest. This can be done even if we have no intention of selling our home and are not required to refund our CPF housing monies.

This Can Increase Our CPF Monies To Earn 2.5% In OA

Assuming we are 55 and above and already have the FRS set aside in our Retirement Account (RA), any amount we use for voluntary housing refund can be withdrawn freely. For example, we have $200,000 in our CPF at 55, $192,000 (FRS) is moved to our RA when we turned 55. The remaining $8,000 is held in our OA and SA and may be withdrawn freely. For simplicity, we assume that this amount is evenly split: $4,000 in OA and $4,000 in SA.

Assuming we had taken out $250,000 in principal and accrued interest for housing, we can now use our excess cash savings to make a voluntary housing refund (up to $250,000). If we refund $50,000 under VHR, this $50,000 will be refunded to our OA to earn interest of 2.5% p.a. As we have already set aside the FRS in our RA, the $54,000 in our OA and $4,000 in our SA can be freely withdrawn after we turn 55.

As illustrated in the example above, this effectively creates a personal savings account earning 2.5% p.a. interest using voluntary housing refund to deposit into our CPF before we turn 55. Using the VHR to increase our OA savings and earn 2.5% can be done at anytime after we have hit the FRS. It can be before, during and after we turn 55.

Do note that after we turn 55, we can use RSTU to top up our CPF accounts to the Enhanced Retirement Sum. However, we cannot withdraw this amount.

Read Also: 4 Reasons To Make Voluntary Housing Refund For CPF Monies Used For Your Home Downpayment And Monthly Mortgage

We Need To Be Just Before 55 And Use The CPF Shielding Hack To Earn 4% Interest

If we want to earn the 4% p.a. interest of our Special Account, it requires much more preparation in  advance. We would need to shield our Special Account balances just before we turn 55.

This is because at age 55, our CPF monies (both SA and OA) funds our Retirement Account (RA) up to the FRS. Once this amount enters our RA, we are unable to withdraw it freely as it is used to fund our CPF LIFE. Our SA balances which earn the higher interest of 4% p.a. flows first to our RA, followed by our OA. Additionally, after 55, we also no longer have the option to transfer our OA balances to SA.

Thus, to earn the higher interest of 4% while using our CPF as our “personal savings account”, we will need to utilise CPF shielding hack on top of using the voluntary housing refund.

Assuming we have excess cash savings that we want to earn the 4% interest in our SA, we can do a voluntary housing refund (VHR) to boost our CPF monies above the FRS, transfer it to SA and shield our SA before turning 55. Being near the age of 55, we can deploy the CPF shielding hack by investing our SA in a low-cost and liquid fund offered on the CPF Investment Scheme (CPFIS). Once we turn 55, our OA monies and unshielded SA monies will be used to fund our RA but our shielded SA balances will remain accessible once we redeem our investment.

For example, we have $50,000 cash savings, and $152,000 in OA and $40,000 in SA (which hits the FRS amount of $192,000). If we refund this cash savings via VHR, we can increase our total CPF monies to $242,000 ($202,000 in OA and $40,000 in SA). We then transfer this amount from our OA to SA and end up with $152,000 in OA and $90,000 in SA. As we can only invest amounts above $40,000 in our SA, we then invest or “shield” $50,000 of our SA. Once we turn 55, the $152,000 in OA and unshielded $40,000 in SA will be used to fund our RA up to the FRS. We then redeem/ our investment of $50,000, which will flow back into our SA. From here on, the $50,000 will remain in our SA earning 4% p.a. interest and we can withdraw them freely.

Read Also: CPF Shielding Hacks (Special Account & Ordinary Account): Do They Really Make Sense?

There Is A Limit To Our Voluntary Housing Refund

Theoretically, if we had more cash savings, we could make a larger VHR and boost the amount of SA we shield and then keep as our “personal savings account” deposit. However, this amount is also limited by the VHR limit.

We can only refund up to the principal and accrued interest we owe to our own CPF accounts. If we had taken out only $100,000 from our CPF accounts for housing, this $100,000 is the limit we can make a VHR and the amount we can deposit into our “personal savings account”. If we had made prior VHRs, the remaining owed principal and accrued interest is the maximum that we can refund.

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

The utility of CPF continues even when we turn 55 and after. For those of us who miss out on the opportunity to deploy the CPF shielding hack, we can still enjoy the 2.5% p.a. interest on our OA when we make a voluntary housing refund after 55.

Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.