Retirement may seem like a very far prospect for some Singaporeans. Nevertheless, one thing is for certain: everyone needs to have adequate funding for food, health, shelter, and other living needs when they grow older. As you age, neither your body nor your mind performs the same way it did in your youth, and you’re more prone to getting sick. Taking care of yourself may prove to be more expensive than it was before. All the same, you will want to have enough money tucked away to support your needs as well as that of your family.
One instrument that you can use to plan for your retirement is your Central Provident Fund (CPF) savings, or Singapore’s mandatory social security savings scheme. You can treat your CPF savings as a nest egg of sorts. The more you put away and the later in life you withdraw them, the higher your monthly retirement income will be.
Older and younger Singaporeans alike shouldn’t be shy to ask questions about their CPF. The funds will be of notable importance to them either in the near future or later in their life. To help you get to know CPF better, here are the five most questions about the scheme as well as their accompanying answers.
When Is It Possible to Withdraw Your CPF Savings?
The CPF retirement account withdrawal age is 55 years old. When you turn 55, you can start planning in advance for your retirement by withdrawing your savings from your CPF Ordinary Account or Special Account. You may also withdraw the first $5000 from either CPF account even if you don’t meet the Basic Retirement Sum at 55 years old. Monthly payouts from your CPF savings only start when you’re 65 years old.
It’s important to note that you don’t have to withdraw all your CPF savings in one go right after you turn 55. In fact, it’s good to leave a portion of the money in the CPF account so that it can accumulate more interest. This will also result in higher monthly payouts in the coming years.
How Do You Build Up Your CPF Savings?
It’s never too early to start building up your CPF savings so that you can guarantee yourself the most comfortable life in your old age. There are three practical ways that you can build up your CPF savings as early as now:
- Do cash top-ups to either your Special Account or your Retirement Account under CPF’s Retirement Sum Topping-Up Scheme. Doing this will help you receive higher monthly payouts and guarantee payouts for an extended duration. Your accounts aren’t the only ones you can top up—you can transfer cash to the accounts of your loved ones, too! Build up the retirement savings of your parents, grandparents, or other family members to gift them a comfortable retirement.
- Transfer funds from yofiur Ordinary Account to your Special Account, as the latter will accumulate higher interest.
- If you have experience in investment and are willing to take the risk, it’s also possible to invest a portion of your CPF funds. This is not mandatory, however, and even if you don’t invest, you’ll still be able to withdraw interest on your CPF savings without any risk.
What Is CPF LIFE?
CPF Lifelong Income for the Elderly, or CPF LIFE, is the Singapore government’s insurance annuity scheme. Under CPF LIFE, you’ll be insured against running out of your retirement savings and receive a monthly payout for as long as you live. There’s no minimum amount of CPF savings that you need to accumulate in order to join CPF LIFE. But a low Retirement Account balance may also mean lower payouts.
Both the CPF LIFE premiums and payout amounts are determined by an independent actuarial consultant. They factor in your age, gender, CPF interest rates, and mortality rate.
When Should You Start Receiving Your Monthly CPF LIFE Payouts?
You can choose to start receiving monthly CPF LIFE payouts from when you turn 65 years old to when you turn 70 years old. But for every year that you defer your payouts, your income will increase up to 7%. If you can afford to defer until you turn 70 years old, you’ll have a much higher monthly payout than if you started at 65 years old.
You can visit the Central Provident Fund Board’s official website and use their CPF LIFE Estimator to calculate how much you’ll receive from 65 onwards. In the meantime, think carefully about when you want to start receiving payouts. It may be in your best interest to defer until later if you have other sources of income, for example passive income or part-time employment.
What Are the Smartest Ways to Use CPF to Plan for Your Retirement?
If you’re clever about your CPF savings, you can enjoy your post-retirement life to the fullest. Here are some additional tips for using your CPF to plan a trouble-free transition into a retired life.
- Transfer funds to your own Special Account, or the Special or Retirement Accounts of your parents. You’ll be eligible for tax relief on up to $7000 of cash top-ups.
- Make it a New Year’s resolution to start topping up your CPF accounts in January. The earlier in the year you transfer money to your accounts, the more interest you’ll have earned on it come your retirement.
- You don’t have to transfer a large sum into your CPF account in one fell swoop. You can actually start with small but consistent sums. The goal is to keep retirement at the top of your mind and build a habit around saving up for it with your CPF.
You can learn even more about CPF, CPF LIFE, the Retirement Sum Scheme, and other important social security instruments from the Singaporean government’s online sources. Hopefully, this briefer has enlightened you about CPF and increased your resolve to save up for an ideal post-retirement in Singapore!
