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askST: Live long, live well with CPF savings

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The Straits Times

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With most people living longer, how can your CPF savings help meet your retirement needs — from basic necessities to healthcare and housing? Here are some of the answers to your questions

 

Q: How does CPF help me with retirement?

 

A: The Central Provident Fund (CPF) system helps to give you peace of mind in retirement by taking care of two needs: lifelong monthly payouts for basic needs and savings for emergency needs. The money that you contribute to your CPF account during your working years goes into building this nest egg for retirement.

 

Q: How does CPF provide lifelong payouts?

 

A: This is done through CPF Life, a national longevity insurance annuity scheme that provides monthly payouts throughout retirement to avoid a situation where you run out of savings or income in your silver years. A CPF member can join CPF Life from age 65.

 

Q: How much can I withdraw from my CPF account during retirement?

 

A: When you turn 55, the amount that you can withdraw in a lump sum is, in general, the higher of the following:

 

a) $5,000;

 

b) Ordinary, Special and Retirement Account (OSRA) savings above your cohort’s Full Retirement Sum; or

 

c) OSRA savings above your cohort’s Basic Retirement Sum if you own a property with a remaining lease that can last you till age 95

 

CPF members are split into different cohorts based on the year they turn 55. Learn the difference between the Basic, Full, and Enhanced Retirement Sums here.

 

Q: Should I withdraw the maximum amount that I can the moment I turn 55?

 

A: You need not do so. It depends on whether you have an immediate need for the money withdrawn. Studies have shown that there have been CPF members who withdrew their lump sum at age 55 only to deposit it in the bank, which earns much lower interest rates. Such members will be worse off.

 

Leaving money in your CPF account allows you to enjoy up to 6 per cent interest per annum. All CPF members still have the right to withdraw their CPF savings at any time after age 55, whether in a lump sum or partially, as frequently as they like and at any time as long as they meet the applicable withdrawal conditions.

 

You can withdraw your CPF savings by submitting an online application with your SingPass on the CPF website and receive the payment via PayNow or Giro. To receive the payment via PayNow, you just need to register for PayNow and link your bank account to your NRIC number via your bank’s existing Internet banking platform or mobile banking application.

 

Q: Why can’t I withdraw all my savings at 55?

 

A: CPF Board wants to help make sure that later generations have enough savings to support their retirement, housing and healthcare needs in their silver years. Studies have shown that what most retirees need is a stream of monthly payouts to see them through to the end of their lives.

 

Setting aside your retirement sum helps to ensure that you receive a monthly income in retirement. The higher the retirement sum you set aside, the more monthly payouts you get in retirement. What’s more, with CPF Life, your payouts will be lifelong.

 

Q: Why do the retirement sums keep increasing?

 

A: Back in the 90s, a cup of kopi and toast cost about $1.50 at a coffee shop. Nowadays, the same cup of kopi and toast may cost $3. These are everyday examples of inflation, where the general rise in price level means that we can buy less with the money we have.

 

That, coupled with increasing standards of living and longer life expectancy, means it will cost more for future generations to enjoy their golden years.

 

Adjusting the retirement sums helps ensure that your monthly payouts are enough to support your living expenses in retirement.

 

If the Full Retirement Sum (FRS) had remained unchanged from $30,000 when it was first introduced in 1987, it would only provide a monthly payout of about $300 today and payouts will cease once the Retirement Account is depleted.

 

Compare this to the FRS of $181,000 today, which will provide a monthly payout of about $1,440 for life from the current Payout Eligibility Age of 65.

 

Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.

 

 

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