You will be able to explain what can be withdrawn at 55 and what stays to fund CPF LIFE.
In the month after her 55th birthday, Linda's cousin withdrew everything CPF would let him take and paid off his car. Two years later he told Linda he wished he had left it in. Not because the car was a bad idea, but because the money would have kept earning interest, and nothing had forced him to decide that month.
At 55 some of your CPF becomes available to withdraw. How much depends on your balances and the retirement sum you set aside, and the decision to take it is yours, with no deadline.
Under current rules, two kinds of money can be withdrawn from 55.
The first is a set amount that every member can take out, whatever their balances. The CPF Board publishes the current figure.
The second is your savings above your retirement sum. Once your RA has been formed up to the Full Retirement Sum, any OA savings left over can be withdrawn. If you have pledged your property and kept only the Basic Retirement Sum, the part of your RA above the BRS can be withdrawn as well, as lesson 6.2 explained.
If your SA and OA together don't reach your retirement sum, everything goes into the RA, and only the set amount is available to withdraw.
With Linda's made-up figures from lesson 6.1, her RA takes S$240,000 and her OA is left with S$20,000. She can withdraw that S$20,000 and the set amount. If she pledged her flat and kept only a BRS of S$120,000, an example figure, another S$120,000 would become available.
Money in the RA stays there. It isn't paid out as a lump sum. From your payout eligibility age, it funds your monthly CPF LIFE payouts for life, which module 7 covers. The payout eligibility age is set by law and has been raised before, so check the current age for your cohort on cpf.gov.sg.
MediSave stays too. It keeps paying your premiums and approved bills, with the same limits as before 55.
Every dollar you withdraw is a dollar that stops earning CPF interest and won't be there later. For OA savings above your retirement sum, the cost is the OA interest you give up. For RA savings released by a pledge, the cost is a lower monthly payout for the rest of your life.
The second cost is easy to underestimate, because it is spread thin. A lump sum at 55 feels large. A smaller monthly payout from your sixties into your nineties adds up to more than most people expect, and it can't be reversed once payouts start at the lower level.
There's also no rush. Savings above your retirement sum can be withdrawn at any time after 55. Your birthday isn't a deadline. They keep earning interest in your OA while you decide. Leaving them in costs you nothing in access, because you can ask for them whenever you need them.
People withdraw at 55 for good reasons: to clear an expensive debt, to fund a known cost like a child's wedding, or because they have other savings and want the money invested elsewhere. People also withdraw for poor reasons: because a colleague did, because they fear the rules will change, or because the money is simply there.
A useful test is whether you would take a loan for the same purpose. If not, ask whether the money is better left earning guaranteed interest until a real need turns up. Withdrawals can also be used to pay down a housing loan that is still running, which can make sense if the loan rate is higher than the OA rate.
You can also go the other way. If you want higher payouts later, you can move OA savings into your RA, up to the Enhanced Retirement Sum, rather than withdrawing them. Lesson 6.2 covered that option.
Linda's S$20,000 of spare OA savings is already spoken for. Her HDB loan has a few years left, and her instalments come from her OA. Withdrawing the money would mean paying the instalments in cash instead. She decided to leave it in, take nothing at 55, and look again when the loan is paid off. She noted that if she still had OA savings to spare then, she would compare withdrawing them with moving them into her RA for higher payouts.
Check the current withdrawal rules for your cohort on cpf.gov.sg. Then write what you expect to be able to withdraw at 55, using your projected balances, and whether you would take it or leave it, with the reason.
Write what you expect to be able to withdraw at 55 and whether you would withdraw it or leave it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).