Planning for you (children) and me

What happens when you turn 55

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below.

On your 55th birthday, a CPF Retirement Account (RA) is created for you. Here are some things you should know about your CPF RA to help you plan your retirement better:

  • Your retirement funds are made up of your savings from your CPF Special Account (SA) and Ordinary Account (OA). You can also top up your RA up to the prevailing Enhanced Retirement Sum.
  • You can withdraw the balances in your SA and OA if you have set aside your Retirement Sum in your RA.
  • You can opt not to withdraw your CPF savings when you turn 55, and keep it in your accounts to enjoy the attractive interest rates.
  • If you have S$60,000 or more in your RA nearing the age of 65, you will be placed under the CPF LIFE scheme.
  • You can withdraw the balances in your SA and OA if you have set aside your Retirement Sum in your RA.

Reaching 55 is a significant milestone! It also means you are one step closer to retirement. Here are some things you should know about your Central Provident Fund (CPF) to help you plan better.

Turned 55

Creating your retirement account at age 55

On your 55th birthday, a RA is created for you. Your savings from your SA and OA, up to the current Full Retirement Sum of S$181,000 as at 2020, will be transferred to your RA to form your retirement sum.

If you have S$60,000 or more in your RA nearing the age of 65, you will be placed under the CPF LIFE scheme which pays you a monthly payout. The payout you receive on a monthly basis depends on the retirement sum you have set aside in your RA. The more you set aside in your RA, the higher your payouts. This will give you a monthly payout starting from the age of 65 (for those born in 1954 or later).

If you wish to have higher monthly payouts of around S$2,000, you can choose to top up your RA up to the prevailing Enhanced Retirement Sum, which is S$271,500 in 2020.

Thinking of not withdrawing your CPF savings?

With the attractive interest rates that CPF is o­ffering, you can opt not to withdraw your CPF savings at 55, leaving them to grow for your retirement instead. After all, it is not mandatory to withdraw your CPF savings when you turn 55.

Do you know that the first S$30,000 of your combined CPF balances earn up to 6% p.a of interest? For a person with S$30,000 in his RA at 55, an additional 1% p.a in extra interest amounts to about an additional 15% increase in his monthly payout, or about S$40 more each month, for the rest of his life.

Thinking of using your CPF for housing repayments after 55?

You can use your RA savings that is above your Basic Retirement Sum (excluding top-up monies, interest earned and any government grants) to repay your home loans.

Alternatively, if you have yet to pay o­ your housing loan by age 55, it is prudent that you reserve some of your OA savings for this. You can apply to reserve your OA savings for repayment of your home loan before your savings are transferred to your RA. However, this means that you will be setting aside a lower retirement sum for your retirement.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.

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