#1 A Retirement Account Is Opened For You
When we turn 55, CPF opens a fourth account – Retirement Account (RA) – for us. Our combined balances from our Ordinary Account and our Special Account is transferred into this Retirement Account (RA).
These funds are then set aside, and compounded, for the next 10 years, for the purpose of joining the CPF LIFE scheme when we turn 65.
#2 Choose Your Retirement Sum – The Min Amt That You Need To Keep In Your CPF At 55
When we turn 55, we also have to choose the retirement sum we want to keep - Full Retirement Sum (FRS), Basic Retirement Sum (BRS) and Enhanced Retirement Sum (ERS).
The FRS is the standard plan. Choosing to go on the BRS will require us to have sufficient property charge and/or pledge our property. The ERS is not actually a third option. This just allows us to save more than the base level set by the Full Retirement Sum, but places a maximum cap on the amount we can top-up our Retirement Account to after we turn 55.
We can withdraw anything above our chosen retirement sum.
#3 Topping Up Our Retirement Account
Before 55, we can top up our Special Account up to a maximum set by FRS. Once we turn 55, and our Retirement Account is opened, we can now top up our Retirement Account up to a maximum set by the ERS.
#4 How Much Can I Withdraw From CPF At 55?
As mentioned above #2, there are three retirement sums we can choose to save in our Retirement Account at 55, and we can withdraw anything above it.
Even if we cannot meet the retirement sums, we can still withdraw up to $5,000 regardless of how much CPF balances we have.
#5 Decide If We Need Our OA Balances To Continue Paying For Our Home Mortgage
Also mentioned above, both our Ordinary Account and Special Account balances are transferred to create our Retirement Account balance. What many of us may not realise is that we can choose to stop our Ordinary Account balances from flowing into this account.
While we should have tried to pay off our home loans before hitting the home stretch before retirement, it is not uncommon to require our Ordinary Account balances to continue servicing home loans past 55.
What Actually Happens To Your Funds In Your RA?
Once your funds are transferred to your RA, it is set aside for the next 10 years to compound before you can enter the CPF LIFE scheme. While your funds are sitting in your RA, it continues to earn an annual interest return. We can also choose to compound it for up to 15 years, and only join CPF LIFE at 70.
Our funds will also compound at a slightly higher rate to boost our CPF LIFE monthly payouts once we are eligible. Interest returns on our Retirement Account are as follows:
| Retirement Account Balances | Interest Returns (per annum) |
| First $30,000 | 6.0% |
| Next $30,000 | 5.0% |
| Remaining balances | 4.0% |
It’s interesting to note that even though we may have started with an FRS that is double the BRS, after 10 years, it ends up being slightly less than double. The same applies to the ERS balances after 10 years, which is less than 1.5 times the FRS and less than 3 times the BRS. This is because the first $30,000 of our balances receives 2% higher interest, and the next $30,000 of our balances receives 1% higher interest, than the remaining funds in our RA.
This is also why the CPF LIFE monthly payouts may seem like it favours those on the BRS. In actuality, it is just a function of giving greater interest returns to the first $60,000 of our Retirement Account balances.
..and at 65
#1 You Can Withdraw 20% Of Your Retirement Balances
Most of us may already know we can withdraw $5,000 from our CPF balances when we turn 55. What majority of us may not know is that we can withdraw up to 20% of our RA balances when we turn 65 – or right at the moment when we can choose to start our CPF LIFE monthly payouts – inclusive of the first $5,000 we may have withdrawn at age 55.
This ability to withdraw 20% of our retirement balance at age 65 is only important if we haven’t hit our FRS or, if we choose to pledge our property, our BRS. If we are able to hit these sums, we will be able to withdraw anything beyond it.
Finally, it’s important to note that just because we have the option of withdrawing these sums does not mean we have to withdraw these sums from our CPF balances. Leaving our funds in our CPF RA enables us to compound it for our retirement, which will give us a bigger monthly payouts on CPF LIFE.
#2 Choose to go on the CPF LIFE Standard Plan, Basic Plan or Escalating Plan
If we choose to go on the CPF LIFE Standard Plan or Escalating Plan, our RA balances will be contributed to CPF LIFE. This means we would not have any RA balances, and our lifelong monthly payouts will come from CPF LIFE.
However, if we choose to go on the CPF LIFE Basic Plan, we would contribute only 10% to 20% of our RA balances to CPF LIFE, depending on our age and gender. This is to pay for the security of a lifelong monthly payout, once our RA balances have been used up as we draw down from it rather than CPF LIFE.
#3 You Need To Apply To Start Your CPF LIFE Monthly Payouts
While CPF LIFE starts giving us a monthly payout from age 65, this is not automatic. CPF LIFE only automatically starts disbursing these monthly payouts when we turn 70. If we want to receive our monthly payouts as soon as possible, we need to apply to start receiving our CPF LIFE monthly payouts.
Bonus!
Min amt to keep in SA is 40k. So anything in excess of 40K shld be "invested away" ~3 mths before turning 55.
Once RA account is created, you can sell/cash out the investment, and let the fund roll back to SA - where it will continue to grow at 4%.
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