1. UNDERSTAND WHAT HAPPENS AT AGE 55
While most Singaporeans and Singapore Permanent Residents have acquainted themselves well with the various functions of OA, SA and Medisave (‘MA’), they are often very unfamiliar with what would happen to these accounts upon reaching retirement age. Indeed, it is not uncommon to learn that CPF members do not know what would happen to their various CPF accounts upon turning age 55.
For a start, the CPF Retirement Account (‘RA’) only appears upon the CPF member reaching the age of 55. The CPF Board will transfer your savings from your SA and OA to your RA to form your retirement sum. The money continues to reside in your RA and earn interest until they are withdrawn to participate in CPF LIFE when you choose to start your monthly payouts (between age 65 and 70). CPF Lifelong Income For The Elderly (CPF LIFE) is an annuity scheme that dispenses monthly payouts till your death. The monthly payout would depend on the amount of money you have in your RA at the point you join CPF LIFE from age 65 onwards, which is the payout eligibility age for members born in or before 1954.
2. HOW MUCH CAN YOU WITHDRAW FROM YOUR CPF AT 55?
Upon turning age 55, a CPF member can withdraw cash from his CPF OA and SA. The CPF withdrawal rules are:
$5,000 OR your OA and SA savings above the Full Retirement Sum (FRS)*, whichever is higher
And
Any RA Savings (exclude top up monies, government grants, and interest earned) above the Basic Retirement Sum (BRS) that comes with a sufficient property pledge.
3. SHOULD WE STILL PERFORM RSTU(Retirement Sum Top Up) AND OA TO SA TRANSFER?
While cash top ups (RSTU) and CPF monies transferred from a giver’s OA to your SA or RA are not computed as part of RA Savings to meet the BRS requirement, let’s not forget that there is a personal tax relief for RSTU and this allows one to reduce chargeable income and save on income tax. Most importantly, if you are confident that you will amass the entire FRS from mandatory CPF contribution, you will be allowed to withdraw both your top up monies (by replacing it with mandatory CPF contribution because money is fungible) as well as your transfers. A good financial tip would be to monitor your annual CPF statements either online or via mail.
*Do note that CPF transfers from a giver’s OA to a recipient’s OA or RA does not attract tax relief.
CONCLUSION
The various CPF schemes available eventually seek to provide CPF members with a greater amount of retirement sum. Ultimately, it is important not to lose sight of the big picture. That is because the objective of CPF is to provide lifelong monthly income to meet retirement needs, and less about the amount that you can withdraw at 55.
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