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How to use CPF to retire: CPF Retirement Account, interest and payouts

2020 has been a tough year, and if there’s one good thing to come out of it, it’s that it has reminded many of us to start cleaning up our finances and planning for the future and our retirement.

According to a report by ChannelNews Asia, over 198,000 people voluntarily topped up a total of $1.81 billion to their CPF accounts between January and September this year. Compared to last year, that’s a 34% increase in the number of top-ups and 23% increase in the sum topped up.

If you, too, are thinking of how best to pad up your retirement funds, the first step is to understand how your CPF Retirement Account (RA) works. Here’s a comprehensive guide to your CPF RA, the retirement sums and monthly payouts you can expect.

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What is the CPF Retirement Account (RA)?

For your 55th birthday, the Government will give you a CPF Retirement Account (RA), which will hold CPF savings you had in your CPF Special Account (SA) and Ordinary Account (OA). This money will be set aside in your RA until you turn 65 years old, which is when you’ll begin receiving monthly payouts.

How much you set aside in your CPF RA determines how much you’ll receive in future CPF retirement payouts. You can choose to set aside the Basic Retirement Sum (BRS), the Full Retirement Sum (FRS) or Enhanced Retirement sum (ERS).

Basic Retirement Sum (BRS)

The BRS is the minimum sum you can choose to have transferred into your CPF RA (from your SA and OA). If you do not have enough to meet the BRS, you won’t need to top up the shortfall or sell your property (phew!), but you’ll receive less in monthly payouts.

You’ll be able to withdraw $5,000 from age 55, and the rest of the payouts will be from whatever else is in your RA.

Full Retirement Sum (FRS)

The FRS is the “standard” maximum amount that will be transferred from your CPF OA and SA. This means that when your CPF RA is created, your CPF SA and OA savings will be transferred there, up to the FRS. Again, if you don’t meet the FRS, you won’t need to top up anything.

The FRS is twice the BRS.

Enhanced Retirement Sum (ERS)

For those who want to set aside even more savings, beyond the FRS, you can top up your CPF RA up to the ERS limit. More on this below.

The ERS is thrice the BRS.

How much are the CPF retirement sums?

The CPF retirement sums change each year. According to CPF, it increases yearly to adjust for “long-term inflation and improvements in standard of living”.

If you turn 55 years old in…Basic Retirement Sum (BRS)Full Retirement Sum (FRS)Enhanced Retirement Sum (ERS)

Tip: Use the CPF Retirement Sum calculator

If you’re not sure how to go about deciding how much to set aside for retirement, CPF has a nifty online calculator.

You’ll need to input your retirement age goal and answer questions about your lifestyle, and the CPF Retirement Sum calculator will (based on a set of assumptions) recommend how much CPF savings you should strive for.

CPF Retirement Account interest rates

Like all your CPF savings, whatever you have in your retirement account will also earn interest.

AccountInterest Rate
CPF Ordinary Account (OA)2.5%
CPF Special and MediSave Accounts4%
CPF Retirement Account (RA)4%
CPF members under 55 years old+1% on your first $60,000 of combined CPF balance
CPF members 55 years old and up+2% on your first $30,000 and +1% on the next $30,000 of combined CPF balance

The CPF RA interest rate from 1 October to 31 December 2020 is 4%. Although due for review at the end of this year, it was recently announced that this rate will be extended until 31 December 2021.

For those above 55 years old, you earn an extra 2% on your first $30,000 combined CPF balance, and extra 1% on the next $30,000.

If you’re younger, you earn an extra 1% on the first $60,000 of your combined CPF balance (across all accounts, including CPF RA).

CPF Retirement Sum Topping-up (RSTU) Scheme

While there’s always a lot of talk on “locking up” your savings in CPF, growing your CPF RA savings allows you to receive higher monthly payouts in your golden years.

If you want, you can top up your CPF RA to the full or enhanced retirement sums. You are allowed to gift your loved ones with CPF money: If they’re under 55 years old, you can top up their CPF Special Account (SA). If they’re above 55, you can top up their Retirement Account directly.

Tax reliefs for CPF top-ups in cash

If you top up with cash, you will also receive tax reliefs of up to $7,000 per year, and an additional $7,000 if you top up for a family member.

As mentioned earlier, you can opt to top up your CPF Retirement Account to the Enhanced Retirement Sum. For example, if you turn 55 this year (2020), instead of leaving just $186,000 in your CPF RA, you can pad up your retirement savings further, up to the ERS of $279,000.

However, do note that any top-ups beyond the FRS (to the ERS) are not eligible for tax reliefs. Tax reliefs from CPF top-ups also contribute to the personal income tax cap of $80,000.

CPF Retirement Account payouts

We’ve talked a lot about how much you need to plan and save up. Now, let’s talk about how much you will actually receive once you unlock your CPF retirement payouts at age 65.

If you…CPF RA savings (at 55 years old)Monthly CPF payout from age 65 onwards
Own a property, and withdraw your CPF RA above the basic retirement sumBasic retirement sum ($90,500)$750 to $810
Do not own a property, or choose not to withdraw your CPF RA above the basic retirement sumFull retirement sum ($181,000)$1,390 to $1,490
Top up to the enhanced retirement sumEnhanced retirement sum ($271,500)$2,030 to $2,180

Note that the published payouts are based on 2020 retirement sums.

Help! I don’t have enough in my Retirement Account.

What if you’re self-employed, retired early or for whatever other reason don’t meet the Basic Retirement Sum? Don’t worry, you can still withdraw your CPF savings (once eligible) and you won’t be forced to top up your CPF RA or sell your property.

If you have at least $5,000 in CPF RA, but don’t meet the BRS

Can withdraw $5,000 from age 55. The rest will be your retirement sum used for your monthly payouts.

If you have less than $5,000 in CPF RA, and don’t meet the BRS

Can withdraw whatever you have from age 55. Whatever you continue earning from thereon will be your retirement sum used for your monthly payouts.

CPF LIFE vs Retirement Sum Scheme (RSS)

If you’ve made it this far, you probably already have quite a good understanding of the CPF RSS: you set aside CPF savings in your Retirement Account, “unlock” them at 65 years old, and receive monthly payouts from then onwards.

But in addition to the CPF Retirement Sum Scheme, you may have heard of CPF LIFE – what’s that all about? Well, the Retirement Sum Scheme is actually sort of like CPF LIFE’s predecessor. CPF LIFE was introduced in 2009 and most of us young ‘uns are automatically enrolled into it.

Right now, only a small group of people are under the RSS. It’s not obsolete yet, but if you were born in 1958 or later and meet the following CPF RA balances, you’ll be placed in CPF LIFE instead:

  • Turned 55 between 1 Jan 2013 and 30 Apr 2016, and have at least $40,000 in your CPF RA when you are 55 years old

  • Turned 55 between 1 Jan 2013 and 30 Apr 2016, and have at least $60,000 in your CPF RA six months before your reach your payout eligibility age

  • Turned 55 on 1 May 2016 and after, and have at least $60,000 in your CPF RA six months before your reach your payout eligibility age

If you aren’t on CPF LIFE, it’s most likely because your RA balance isn’t high enough.

CPF LIFE is a “national longevity insurance annuity scheme” that is quite similar in that you also receive monthly payouts, except instead of stopping them at age 90 (which is the case for CPF RSS), the payouts are for life. If you’re optimistic you’ll live into your hundreds, then CPF LIFE may seem more attractive.

Since it’s an insurance scheme, you are required to pay a premium (out of your CPF RA) though. CPF LIFE is a mandatory scheme – i.e. you have no choice – but you can apply for an exemption if you are receiving lifelong monthly payouts from a pension or a private annuity (bought using cash or under the CPF Investment Scheme).

So if you are going to top up your CPF account, we hope this article gave you a clearer explanation of how to do it and where the money goes!

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