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8 Apr 2022
SOURCE: CPF Board
Worried that you’re not financially ready for retirement? CPF staff Matthew answers your burning questions about saving for retirement, and provides some personal tips on how he grows his retirement fund.
Matthew: When you reach age 55, a brand-new Retirement Account (RA) will be created for you. The monies in your Special Account (SA) and your Ordinary Account (OA) will be transferred to the RA up to the Full Retirement Sum (FRS). With this retirement sum, you can join CPF LIFE which will provide you with a monthly payout from age 65 no matter how long you live.
Find out how the retirement sums are determined.
M: If you are already working and regularly contributing to your CPF, rest assured that you’re already on your way to a basic income for retirement. For those who want more, you can top up your SA and aim to hit your FRS as early as you can.
M: Many people like myself are already doing it. In 2020, CPF members topped up $3 billion into their CPF accounts. More than one-third of them were actually doing it for the first time. When you top up your CPF, you can earn high interest to boost your savings.
(Update: More than $4 billion in top-ups were made in 2021, with more than half doing it for the first time.)
Find out more about CPF top-ups.
M: Anytime is a good time, but it’s good to start young. You allow compound interest to have a longer period to grow your savings. If you’re doing a yearly top-up, you should top up early in January instead of December. By doing so, you can earn up to 20% more interest in just 10 years.
Learn more about why you should make cash top-ups earlier in the year.
M: It depends. If you’re not using your OA for housing, you can transfer your OA to SA to earn higher interest. For me personally, I did not transfer the monies in my OA as it is already earning an interest of 2.5% per annum. I would top up cash into my SA instead as the monies in my bank account is not earning much interest. This way, the interest gained will be higher.
Top up your retirement savings for higher payouts.
M: The monies in your CPF account can be used for various purposes such as housing or healthcare. When you reach age 55, you can also withdraw your SA and OA as long as you set aside your FRS. For those who want to withdraw more, you can withdraw your RA above your Basic Retirement Sum (BRS) if you have a property. When you reach the age of 65, you can withdraw 20% of your RA savings.
M: You shouldn’t withdraw for the sake of it at age 55. You can leave your savings in your CPF account to earn attractive interest. As and when you need it, you can withdraw it via PayNow which will reach your account almost instantly.
It’s easy to tell ourselves so long as we continue make more money each year, we will eventually have enough for retirement. But the reality is if you don’t start saving up for retirement, you might wake up one day and realise that you’re much closer to retirement than you thought. My advice is to start saving early and stay on top of your finances.
Information is accurate as of 08/04/2022