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CPF Retirement Sum: What Young Singaporeans Need to Know

cpf retirement sum
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I’m still young, so why do I need to plan my retirement?

For most of us, retirement is decades away. However, it’s crucial to start planning for your future today. Thankfully, Singaporeans and Permanent Residents have CPF savings to look forward to upon retirement.

This is where a large portion of your earnings go – to your CPF accounts. On your 55th birthday, the savings from your Ordinary and Special Accounts will be consolidated into your Retirement Account (RA). This CPF retirement sum provides CPF members with monthly payouts to cover living expenses in retirement.

What is CPF Retirement Sum?

The Central Provident Fund (CPF) is an essential part of Singapore’s comprehensive social security system. It is a savings scheme funded by contributions from both employers and employees. It serves to meet Singaporeans’ housing, healthcare, and retirement needs. Read more on the 2022 CPF contribution rate.

At a glance, there are three accounts in your CPF:

  • Ordinary Account (OA): Primarily for housing, higher education, and investing.
  • Special Account (SA): These savings are reserved for your retirement.
  • MediSave Account (MA): Primarily used for hospitalizations, approved medical expenses, as well as MediShield/Integrated Shield plans.

So where does the CPF Retirement Sum come from?

When you reach 55 years old, the savings from your Ordinary Account and Special Account will be transferred to your Retirement Account (RA). This will form your retirement sum.

This retirement sum will be used to fund your CPF LIFE – a monthly payout for as long as you live. That said, the more you set aside as your retirement sum, the higher your monthly payout will be for the rest of your life.

How Much Is the CPF Retirement Sum?

To ensure retirement adequacy, CPF has 3 types of retirement sums. Depending on your desired monthly CPF LIFE payouts and your CPF balances, you can choose the type of retirement sum.

Here are the 3 types of retirement sums and their corresponding payouts for members turning age 55 in 2022:

Basic Retirement Sum (BRS)

This is for members who own a house. CPF recognizes that your property is an asset. That said, you can pledge your property and set aside a Basic Retirement Sum (BRS) when you turn 55.

  Retirement Account savings required at 55 Your monthly payout for life from 65
If you own a property with a remaining lease that can last you to at least 95 years old and choose to withdraw your Retirement Account savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above your BRS.  S$96,000 S$790-850

 

The Basic Retirement Sum is half the amount of the Full Retirement Sum. That said, your monthly CPF LIFE payouts will also be lower.

Full Retirement Sum (FRS)

This is the default option for Singaporeans. This retirement sum is twice the amount of BRS and is the maximum amount that will be transferred to your RA at the age of 55. It is also the maximum you can top up your SA before turning 55. 

Members who don’t own a property or who wish to receive the full monthly payout may choose to set aside a Full Retirement Sum (FRS).

  Retirement Account savings required at 55 Your monthly payout for life from 65
If you do not own a property or choose not to withdraw your Retirement Account savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above your BRS. S$192,000 S$1,470-1,570

 

Enhanced Retirement Sum (ERS)

Members who wish to receive a higher monthly payout may want to set aside the Enhanced Retirement Sum (ERS). This is three times the Basic Retirement Sum (BRS). That said, the CPF LIFE monthly payouts are also much larger.

To achieve this, you can top up your RA when you turn 55 to hit the ERS.

  Retirement Account savings required at 55 Your monthly payout for life from 65
If you wish to put more savings in CPF LIFE. S$288,000 S$2,140-2,300

 

This is a good option if you have excess funds which you can put into your RA to meet the ERS.

Take a look at the table below to compare the differences between the three retirement sums:

  Retirement Account savings required at 55 Your monthly payout for life from 65
Basic Retirement Sum (BRS) S$96,000 S$790-850
Full Retirement Sum (FRS) S$192,000 S$1,470-1,570
Enhanced Retirement Sum (ERS) S$288,000 S$2,140-2,300

 

According to CPF, “These monthly payouts are estimates based on the CPF LIFE Standard Plan, for members who turn 65 in 2032, computed as of 2022. Payouts may also be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual.”

How To Achieve Your Desired Retirement Sum Earlier?

The best time to start planning your retirement is right now. If you’re still years away from being 55 years old, here are some things you can consider to help you save more.

1. Use Cash Instead of Using Your CPF Savings When Buying a House

Planning to buy a house or condominium? Or maybe you’re planning to upgrade your property?

If you have extra cash, use it to pay for your house instead of taking out your savings from your OA. Another option you may consider is a home loan from banks and other financial institutions.

In doing so, the money in your OA will be safe and will earn up to 3.5% interest per year. Remember, these savings are primarily meant for your retirement – even if they can be used for other things. Wiping out your OA will mean a lower retirement sum. In that case, you’ll also receive lower monthly payouts.

2. Use Cash in Paying Off Your Mortgage

Just because you have money set aside in your OA doesn’t mean you can use it any time. If you want a higher retirement sum in the future, you’ll need to keep it untouched. This means using cash to pay off your monthly housing loan.

If you don’t have enough cash, consider using half cash and half CPF. This may feel like it’s a tall order financially. However, setting aside more savings for your retirement is worth it in the long run.

3. Transfer Your Savings From OA to SA

First of all, take a look at the base interest rates of each CPF account (1 April 2022 to 30 June 2022)

For members below age 55:

  • Ordinary Account: 2.5% p.a.
  • Special Account: 4% p.a.
  • MediSave Account: 4% p.a.

Plus, you can earn an extra 1% interest p.a. on the first S$60,000 of your combined CPF balances (capped at S$20,000 for OA).

Note: Members age 55 and above will earn an additional 1% interest p.a. on the first S$30,000 of their combined CPF balances. This is on top of the additional 1% interest on the first S$60,000.

Looking at these attractive interest rates, you can boost your retirement sum if you transfer funds from your OA to your SA. Doing so will increase interest from 2.5% p.a. to 4% p.a.

Keep in mind though that once you transfer your OA funds to your SA, you won’t be able to use these funds for housing.

4. Top-Up Your Special Account in Cash

For members below 55 years old, you can also top up your Special Account to grow your retirement sum.

For example, topping up S$100 a month to your Special Account for 15 years at interest rates of 4% p.a. will help you save more than S$24,000. Additionally, you will also get a tax relief of up to S$8,000 per calendar year if you make a top-up to yourself.

You can learn more about the Retirement Sum Topping-Up Scheme here.

5. Delay Your Retirement

If you want to continue working past the age of 55, who’s stopping you? Being a productive member of the workforce will also allow you to enjoy your employee’s CPF contributions to your account. That said, you can choose to delay your CPF payouts.

By delaying payouts, you will earn more interest, allowing you to receive a higher retirement income every month. For every year that you delay, your monthly payouts will increase up to 7%. Note that you can defer your CPF payouts until the age of 70.

health insurance concept

Alternative Way To Grow CPF Balance: CPF Investment Scheme

Want more options in growing your CPF balances?

If you’re willing to take a little bit of risk, you can consider applying for the CPF Investment Scheme (CPFIS). This option allows you to invest money from your Ordinary and Special Account savings into CPF’s pre-approved stocks, ETFs, unit trusts, government bonds, and more.

To start investing, you need to be:

  • At least 18 years old
  • Not an undischarged bankrupt
  • Have more than S$20,000 in your OA and/or
  • Have more than S$40,000 in your SA
  • Have completed the CPFIS Self-Awareness Questionnaire (SAQ)

How much CPF savings can I invest in CPFIS?

CPF Investment Scheme- Ordinary Account (CPFIS-OA): Any amount above S$20,000 in your OA can be invested into CPFIS.

Note: You can only invest up to 35% and 10% of your investible savings in stocks and gold.

CPF Investment Scheme- Special Account (CPFIS-SA): Any amount above S$40,000 in your SA can be invested into CPFIS.

You can also find out how much you can invest by:

  • Logging into my cpf digital services using your Singpass. Select my cpf then tap My Dashboards > Investment, or
  • Logging into CPF Mobile app using your Singpass then selecting My Investment, or
  • Visit any CPF Service Center with your identity card.

How Do I Know How Much My Retirement Sum Will Be?

To get an estimate, you can use a compound interest calculator. First, determine how many years it’ll take for you to reach age 55.

For example, if you’re 25 years old this year, you’ll be 55 years old in 30 years. Set S$96,000 as the “initial investment”, 30 years as the “length of time”, and 3% as the “interest rate”.

Here are your estimated Retirement Sums:

  • Basic Retirement Sum: S$233,017.20
  • Full Retirement Sum (BRS x 2): S$466,034.40
  • Enhanced Retirement Sum (BRS x 3): S$699,051.6

Note that this is only an estimate under the assumption that the Retirement Sums will grow at 3% throughout. CPF can always change the interest rate depending on inflation and other factors.

Frequently Asked Questions

What Is the Full Retirement Sum for 2021?

  Retirement Sum at age 55 in 2021 Your monthly payout for life from 65
Basic Retirement Sum (BRS) S$93,000 S$770-830
Full Retirement Sum (FRS) S$186,000 S$1,430-1,530
Enhanced Retirement Sum (ERS) S$279,000 S$2,080-2,230

 

What Is the Basic Retirement Sum Now?

The Basic Retirement Sum for members turning age 55 in 2022 is S$96,000. The monthly payout for life from 65 years old is S$790-S$850.

What Is CPF Retirement Payout?

CPF LIFE, short for CPF Lifelong Income For the Elderly, is an insurance annuity scheme that provides members with monthly payouts for as long as they live.

CPF LIFE replaces the previous retirement payout scheme called the CPF Retirement Sum Scheme. So who is eligible for CPF LIFE?

Singaporean Citizens and Permanent Residents are automatically eligible and enrolled in the scheme. Here are a few more criteria:

  • Born on 1 January 1958 and after
  •  At least S$60,000 in your CPF before age 65

But what if my CPF retirement savings run out of money? Will my monthly payouts stop?

CPF LIFE provides retirement payouts for life regardless of how much remaining savings you have in your old age. That said, if you are a member of CPF LIFE, you will receive payouts as long as you live.

And even if you are not auto-enrolled in CPF LIFE, you can apply to join the scheme anytime before the age of 80.

What Happens If My CPF Balances Do Not Meet The Basic Retirement Sum?

If you don’t have enough to meet the BRS, here are three things you need to know:

  • You don’t need to top-up the difference in cash or sell your property
  • You will still receive monthly payouts from age 65 based on the retirement savings you’ve set aside
  • You can still withdraw up to S$5,000 from your OA and/or SA.

Consider these situations, if you have:

S$5,000 or less: When you turn 55, you can withdraw the entire amount. However, you will not receive monthly payouts.

More than S$5,000, but less than BRS: You can still withdraw S$5,000 when you turn 55, but not more. When you turn 65, you will receive monthly CPF payouts. The monthly payout will be pro-rated based on how much you have in your account.

More than BRS, but less than FRS: If you pledged your property, you can withdraw any amount above the BRS. If you didn’t, you can only withdraw up to S$5,000. 

How Do I Top Up My CPF Retirement?

You can top-up your CPF retirement through:

  • CPF Mobile app
  • my cpf Online Services
  • GIRO: You can use GIRO to make small top-ups, regularly

Simply log in using your Singpass.

What is the fastest way to make a cash top-up?

The fastest way would be via PayNow QR or OCBC PayAnyone (for application via CPF mobile app only). With this option, your cash top-up is credited almost instantly upon successful payment.

Can I reverse my top-up?

No, cash top-ups and CPF transfers are irreversible. However, by topping up your CPF retirement, you will be earning a higher interest rate of 4% p.a. since the savings are locked in for a long time. 

What Happens to Your CPF When You Turn 55?

  • Your Retirement Account will be created: When you turn 55, your OA and SA will be transferred into a new account called Retirement Account (RA). These funds will be set aside and compounded for the next 10 years. This is where your CPF monthly payouts when you turn 65 come from.
  • You will receive an additional 1% on your first S$30,000: This interest will be credited into your Retirement Account which contributes to the growth of your retirement sum. Plus, if your combined CPF balances reach S$60,000, you’ll earn an extra 1% interest p.a.

When you turn 55 in Singapore, you will also have to choose the retirement sum you want. As discussed in the previous sections, there are three types of retirement sums – Basic Retirement Sum, Full Retirement Sum, and Enhanced Retirement Sum.

Lastly, you can withdraw cash from your CPF at 55. You can withdraw funds above the amount of retirement sum you chose. Even if you can’t meet the retirement sums, you still have the option to withdraw up to S$5,000. However, this means your monthly CPF payouts will be lower.

pension fund growing concept

How Much Can I Withdraw From My CPF Retirement Account?

The amount you can withdraw will depend on your CPF account balances as well as the year you are born. Additionally, the withdrawal amount excludes the following:

  • Interest earned
  • Any government grants you received
  • Top-ups made under the Retirement Sum Topping-Up Scheme

Here’s how much you can withdraw if you’re born in 1958 and after:

 

Savings in your OA and SA Amount you can withdraw
S$5,000 or less All of your SA and OA savings
Between S$5,000 and your Full Retirement Sum S$5,000

and

Any Retirement Account savings above your Basic Retirement Sum, if you own a property with remaining a lease that can last you to at least 95 years old.

More than your Full Retirement Sum S$5,000 or your SA and OA savings above your Full Retirement Sum, whichever is higher

 

and

Any Retirement Account savings above your Basic Retirement Sum, if you own a property with remaining a lease that can last you to at least 95 years old.

(Source: Central Provident Fund Board website)

Conclusion

It’s never too early to start planning a comfortable retirement. With CPF contributions, you can start saving to achieve your desired retirement lifestyle. Aside from monthly CPF contributions and topping up your balances with cash, you can also consider investing your cash to complement CPF.

Key takeaways:

  • There are 3 accounts in your CPF – Ordinary Account, Special Account, and MediSave Account. When you turn 55, the Retirement Account will be created.
  • Your Retirement Account will consist of your combined Ordinary and Special Accounts.
  • CPF LIFE provides monthly payouts for life.
  • If you choose to start your payouts later, you can receive a higher monthly retirement income.

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