Explain what you can withdraw at 55 and what stays behind to fund CPF LIFE.
Open your CPF statement on cpf.gov.sg and note your projected Ordinary Account (OA) and Special Account (SA) balances at 55, along with the retirement sum that applies to you. At 55, part of your CPF becomes available to withdraw, and the amount depends on those balances and the retirement sum you set aside. Withdrawing is your choice and there is no deadline, so you can work this out before your birthday.
Under current rules, two kinds of money can be withdrawn from 55. The first is a set amount, a fixed sum any member can withdraw regardless of their balances, with the current figure published by the CPF Board.
The second is savings above your retirement sum. Once your Retirement Account (RA) has been formed up to the Full Retirement Sum (FRS), any remaining OA savings can be withdrawn. If you have pledged your property and kept only the Basic Retirement Sum (BRS), the part of your RA above the BRS can also be withdrawn, as lesson 6.2 explains. If your SA and OA together fall short of the FRS, up to the set amount is kept in your OA and only the rest goes into your RA, so not all of your savings move to your RA.
Work through it in order: note the set amount, check whether your SA plus OA reach the retirement sum, see whether any OA savings are left once the RA is formed up to the FRS, and, if you plan to pledge and keep only the BRS, add the RA amount above the BRS.
Linda's figures, made up in lesson 6.1, show how this works. Her RA takes S$240,000 and her OA is left with S$20,000, so she can withdraw the S$20,000 plus the set amount. If she pledged her flat and kept a BRS of S$120,000 (an example figure), a further S$120,000 would become available, since S$240,000 minus S$120,000 is S$120,000.
RA money stays in the RA and is not paid out as a lump sum. From your payout eligibility age, the age set by law from which RA savings fund monthly CPF LIFE payouts, that money pays you every month for life (module 7 covers these payouts). The payout eligibility age has been raised in the past, so check the current age for your cohort on cpf.gov.sg. MediSave also stays in CPF and continues to pay premiums and approved bills, but the limits are not all the same as before 55. From age 60, you can use an extra yearly amount from your own or your spouse's MediSave for outpatient treatment. Check the current amount with the CPF Board.
Every dollar you withdraw stops earning CPF interest and will not 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 property pledge, the cost is a lower monthly payout for the rest of your life. That second cost is easy to underestimate because it is spread thin: a lump sum at 55 feels large, but a smaller monthly payout from your sixties into your nineties adds up to more than most people expect. A lower payout level cannot be reversed once payouts have started at that level.
Linda's cousin withdrew everything CPF allowed in the month after he turned 55 and paid off his car. Two years later he told Linda he wished he had left the money in. He did not think the car was a bad choice; his point was that the money would have kept earning interest, and nothing had required him to decide that month.
Savings above the retirement sum can be withdrawn at any time after 55. While you decide, savings left in the OA keep earning interest, and leaving them there costs you nothing in access because you can request the money whenever you need it.
Start by naming your reason and sorting it. Good reasons to withdraw at 55 include clearing an expensive debt, funding a known cost such as a child's wedding, or having other savings and wanting this money invested elsewhere. Poor reasons include a colleague having done it, fear that the rules will change, or simply that the money is there.
Next, ask whether you would take a loan for the same purpose. If you would not, consider whether the money is better left earning guaranteed interest until a real need appears. Then weigh the cost: lost OA interest, or a permanently lower lifetime payout if the money was released by a pledge.
Also check two alternatives. If a housing loan is still running, withdrawals can pay it down, which can make sense if the loan rate is higher than the OA interest rate. You can also move OA savings into your RA, up to the Enhanced Retirement Sum (ERS), for higher payouts later, as described in lesson 6.2.
Linda's S$20,000 of spare OA savings is already committed: her HDB loan has a few years left and the instalments are paid from her OA, so withdrawing would mean paying them in cash instead. She decides to leave it in, withdraw nothing at 55, and revisit when the loan is paid off. If she still has spare OA savings then, she will compare withdrawing them against moving them into her RA for higher payouts.
Withdrawal rules vary by cohort, so 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 down what you expect to be able to withdraw at 55, and whether you would take it out or leave it in.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).