The CPF is a benefit account which is mandatory and provides healthcare and retirement earnings for Singaporeans. The contributions to this retirement account are made by the employee and the employer. The three types of CPF accounts are Ordinary, Special and the Medisave. Singaporeans can start withdrawals from this retirement account or CPF at 55. The funds which are in the CPF account are invested conservatively to ensure earnings of 5% per year.
CPF Retirement Sum Scheme:
As mentioned, CPF has three accounts, Medisave, Ordinary and Special accounts. The Special Account and the Ordinary Account are specifically designed for retirement. Before you reach the age of 55, your main account for retirement is the Special Account as most of the people tend to use the balance of the Ordinary Account as payment for the mortgage.
The retirement Account is created on your 55th birthday and the savings from the Special Account and the Ordinary Account is transferred to this account. This forms the Retirement sum, which is used for paying off the payouts on a monthly basis. This is termed as ‘CPF LIFE’.
CPF Top Ups:
With a Top up to the CPF account you are ensured of the perfect funding for your retirement. You also have the choice of making top ups for your family members. Basic information on the CPF Retirement account top up is given below.
For Members who turn 55 this year:
*Top up for higher payouts in future:
Savings from the Special account and Ordinary account are transferred to the Retirement account for the FRS (Full Retirement Sum). You have the freedom to withdraw from the Special Account and the Ordinary account even if the FRS is not catered to. This provides payouts on a monthly basis when you reach the age of eligibility, which can be deferred up to 70 years.
The monthly payouts can be high if the Retirement sum is high. The Full Retirement Sum (FRS) for those who are becoming 55 years old in the present year is $176, 000 which makes the payouts on a monthly basis to $1,350 to $1,450.
For those members who own a house are able to keep aside the Basic retirement Sum (BRS), which works out to $88,000. You can withdraw any amount which is above the BRS amount when you turn 55 years.
You can top up the RA to the ERS (Enhanced Retirement Sum) of $264,000 in order to receive monthly payouts which are higher. Here, the payouts work out to $1,960-$2,110.
Top-ups can be done via CPF transfers or even cash.
*Topping up of the CPF for family members:
You can help your spouse in Retirement savings by transferring the savings of the CPF which is above the $88,000 of the BRS. For top-ups for parents or grand-parents, you can transfer the savings of the CPF after keeping the BRS with enough pledge/property charge to make up the FRS for them of $176,000.
This property charge is created at the time the CPF savings are used to pay for any property. The refund of the CPF savings used for the specific property and the interest which is earned on the savings when you transfer, sell or even dispose of the real estate is secured.
The property pledge is created on a specific property when this is pledged for withdrawing the savings of the Retirement Account which is above the BRS. This pledge is able to secure the refund of the amount which is pledged when you transfer, dispose off or sell the property.
CPF Withdrawals from the age of 55 Years:
The Amount you can withdraw:
The amount which can be withdrawn from the CPF depends on the amount you have managed to keep aside in the RA. In case you have been able to keep the total FRS (Full Retirement Sum) you are able to withdraw the remaining from the Special Account (SA) and the Ordinary Account (OA).
In case you need to withdraw more, you need to set the BRS (Basic retirement Sum) aside, which works to half the FRS, with property pledge/charge. The remaining amount of the RA can be withdrawn.
In case you have less of the BRS or the FRS you are able to withdraw %5,000 sans any conditions.
Should you withdraw at the age of 55?
Before any withdrawal from the CPF it is important to consider your personal financial state. In case there is no urgent requirement of funds, you can leave the amount in the CPF. This can be withdrawn at a later date. You need to be aware that withdrawals can be made fully or partially over a period of time as long as the applicable conditions of withdrawal are met.
You need to be aware that the savings in the CPF continue to earn a 6% interest if you decide on not withdrawing the amount.
You also need to ensure you consider your goals of retirement when you decide to withdraw. This can decrease the retirement sum, which means, you get lower monthly payouts.
How to make a Withdrawal?
A letter is sent by the CPF Board six month prior to your 55th birthday with the required information on the available options. If you have decided to withdraw, you can
*Apply thorough the CPF Online services to receive the money via PayNow or GIRO or
*Fill the hard copy of the form of withdrawal for Members above 55 and mail the same to the CPF Board.
You also have the choice of transferring the funds from the CPF Ordinary and Special Accounts to the Medisave account to ensure the BHS (Basic Healthcare Sum) is met. The savings in the Medisave account are helpful in meeting the health requirements of sibling, spouse, grand-parents and parents. This can also be used to pay off the premiums of the medical insurance schemes.
Before taking any decision it is advisable to balance the pros and cons of withdrawals of the CPF amount. You can also seek help of a professional financial advisor who can guide you in the right manner.