31 May 2025
Tan Ooi Boon
Source: The Straits Times © SPH Media Limited. Permission required for reproduction
SINGAPORE – If you have planned for higher monthly payouts from CPF LIFE, you will probably not run out of money in your old age, even if you don’t have a large amount saved.
This is because payments of up to $3,300 a month should help retirees meet most of their expenses without having to dip into their nest-eggs.
The issue of retirement adequacy was highlighted in a recent poll which suggested that a person needs at least $600,000 to retire comfortably, as this amount would allow for spending of $2,500 a month from age 65 to 85. But those who live beyond 85 will need even more.
That people are living longer should be a compelling reason why all Singaporeans should make CPF LIFE their basic retirement plan because its payouts are, as its name suggests, for life.
For instance, a person turning 55 in 2025 can set aside the Enhanced Retirement Sum of $426,000 – a third less than $600,000 – so they can receive $3,300 a month from age 65. If they can save that, they would have received $792,000 by 85, or $192,000 more than those who just rely on their $600,000 savings.
Having fixed monthly payments is far better than relying on a lump sum because you are not likely to run out of money even if you are blessed with long life. So folk who live to 90 would have received $990,000 and about $1.2 million if they reach 95.
Here are the answers to three misconceptions that deter some people from benefiting from the national annuity scheme.
Money is 'locked up' for more
Some people get the wrong idea that CPF LIFE exists to “lock up” their retirement savings and prevent them from spending their money. But like any insurance product, you need to set aside your funds for at least a decade before you can enjoy higher returns from age 65.
Such high payouts are possible only because it is a non-profit scheme backed by the Singapore Government.
Of course, most people would want to spend their money today instead of saving it for later. But without a back-up plan, you will face a real risk of running out of money in old age.
CPF LIFE is not a legacy plan
Some people are worried that their funds in CPF LIFE will go to waste if they die early. But when members die, any unpaid portion of their CPF LIFE premiums, plus balances in their CPF accounts, will be paid to their nominated beneficiaries.
The truth is many seniors do not save enough for themselves. So the more pertinent question to ask is: How will your kids support you if you run out of money?
If you have planned for the highest payout from 2025 and are blessed to live to 90, CPF LIFE would have paid you almost $1 million, or more than two times your initial savings.
Payouts like that mean you can meet your own expenses and may even be able to leave a decent sum for your beneficiaries.
Top up to get more
If you had topped up your Retirement Account to $308,700 in 2024, your balance would hit close to $460,000 in a decade. But this amount does not mean you would qualify for the $3,300 monthly payout for the 2025 cohort since your balance would be more than the current maximum sum $426,000.
The total sum plus interest earned is merely an indication that your CPF LIFE is accumulating funds to start the payout for your cohort in 2024, which will be about $2,450. To get a higher payout, you need to deposit more money to meet the prevailing Enhanced Retirement Sum, without including the interest earned.
For instance, if you hit 55 in 2025, the full retirement sum of $213,000 will be moved to your Retirement Account. If you want to increase your payout of $1,700 to $3,300, you need to deposit another $213,000 to bring the total sum to $426,000.
You can find out how much you can top up to the highest prevailing payout by logging in to myCPF portal.
The lesson here is simple – make good use of Singapore’s best retirement scheme so that you will always have money to spend in old age.
Article was first published on The Straits Times on 31/5/2025