cpf minimum sum

Your Ultimate Guide to CPF Retirements Sums in 2022

The CPF minimum sum is exactly what it sounds like – the minimum amount that you would need to withdraw from your retirement account in order to lead a comfortable retirement. The retirement sum has been under much debate in recent years, with the PAP government announcing major changes in 2014 after much contention between citizens and the government.

What is the CPF Minimum Sum?

The retirement sum was first introduced for Singapore citizens in 1987, when they were given the option of withdrawing $20,000 SGD from their retirement accounts at age 55. After 25 years of contribution (i.e if you started working at age 20), this amount increases by 2% per year until age 65. In 2002, legislation was passed which mandated employers to deduct 10-15% of employees’ pay cheque into their retirement accounts.

Today, the retirement sum is calculated by taking into account 4 components: retirement contribution, property value or investment portfolio value, proceeds from CPF LIFE plan and income drawn from retirement account. The formula for computing this amount was first introduced in 2014. This means that Singaporeans who turned 55 between 2002 and 2014 have had different retirement sums according to their age group.

 

Types of Retirement Sums

 

Type RA Savings Required at 55 Estimated Monthly Payout (from 65 years old)
Basic Retirement Sum $93,000 $750 – $1,000
Full Retirement Sum $186,000 $1,390 – 1,860
Enhanced Retirement Sum $279,000 $2,030-$2,660

 

Basic Retirement Sum (BRS) 

The basic retirement sum is a guaranteed minimum amount of money which an individual will get during your golden years. Your basic retirement sum is part of the basic savings in your Retirement Account. The basic retirement sum is mandatory if you are between age 62 and 65. At age 65, the basic retirement sum will be transferred to an annuity account.

How it Works

You will be able to withdraw your basic retirement savings at age 65 or when you cease active employment, whichever comes earlier. To minimize tax implications on withdrawals after 55 years of age, it would be advisable to not divert your basic savings away from an annuity before then.

Plan

You can only use your savings in your Basic Retirement Sum Account for purposes other than buying an annuity after 55 years old. It’s a good term if you can only afford at least S$93,000 worth of savings.

piggybank near retirement glass container

Full Retirement Sum 

The full retirement sum is the maximum sum that can be received by a CPF member regardless of how much money he withdraws from his account after retiring. It’s designed to ensure that Singaporeans don’t need to worry about outliving their savings, but it does not mean that members will receive full retirement sums automatically or immediately upon reaching full retirement age.

How It Works

When members reach full retirement age, they will be automatically enrolled to buy an annuity plan using their full retirement sum which is equal to the prevailing BRS + 50% of the prevailing property value ceiling. This full retirement sum can also be transferred to CPF LIFE if they choose so at a later date. If this full retirement sum is not used up after 10 years, it will roll over into a Medisave Account or Special Account.

Plan

The full retirement sum cannot be transferred to a spouse’s account under any circumstances. It can only be used by the member himself whether he is single or married, and it cannot form part of the matrimonial assets in case of divorce or death of the member. In addition, full retirement sums on CPF LIFE must be annualized upon reaching 85 years old if they have not been fully withdrawn earlier. 

This is an ideal retirement plan for the working class with a good position that wishes to keep on earning profit after leaving the job.

Enhanced Retirement Sum 

The Enhanced Retirement Sum (ERS) is a retirement fund that was introduced in 2013 for Singaporeans when they turn 55. It is an enhancement over the retirement sum that was previously available to Singaporean employees under the Central Provident Fund (CPF). The Enhanced Retirement Sum can be used to help finance your retirement expenses when you are at age 55 and above.

How It Works

The Enhanced Retirement Sum plan gives participants two options

  1. To withdraw all the money in one go, which means there will be no monthly payout; or 
  2. To keep part of it for monthly payouts after retirement age. This second option allows participants to receive $100 per month for life starting from their retirement age until death, regardless of how long they live.

Participants who choose to withdraw all the retirement funds at one go will not be able to receive any monthly payouts. 

Plan

The retirement funds will only be available if the participant chooses to opt for a monthly payout option once he or she reaches retirement age. If at any point, the participant decides to switch from monthly retirement payouts to lump-sum withdrawal, part of his retirement savings could still be recovered by CPF if needed.

That said, this is the most complex plan for retirees and is recommended if you want the biggest profit after retirement.

The Enhanced Retirement Sum is subdivided into two separate pools – Tier 1 & 2 retirement sums.

  • Tier 1

Tier 1 retirement sum can also be referred to as retirement sum A and has no limits on how much you can accumulate in this tier before turning 55 years old. All Singaporeans are automatically put into retirement sum A.

  • Tier 2 

Retirement sum can also be referred as retirement sum B and has a limit on how much you can accumulate in this tier before turning 55 years old. This pool is targeted to higher-income CPF members who have regular HDB rental income or second property incomes. In other words, retirement sum B is always larger than retirement sum A.

In order to fully utilize retirement sum B, you have to be able to accumulate the full retirement sum before age 55 in retirement sum A and save a large portion of the retirement income afterward in retirement sum B so that it can supplement retirement income from retirement sum A when there are insufficient funds in retirement sum B. Retirement income from retirement sums A & B will only be available if you go for monthly payouts at your retirement age.

If you withdraw all retirement fund savings upon reaching retirement age, the entire amount will automatically go into either Tier 1 or Tier 2 depending on which pool you are initially put into (Tier 1 or Tier 2) by CPF.

Bottles of cash with coins

Why is the CPF Retirement Sum important?

The retirement sum is important because of its size and it determines the minimum amount you need to set aside for retirement.

It was raised from $80,000 on 1 Jan 2013. When you turn 55 after 1st July 2014, your retirement sum will be based on how much money you have in your CPF account at age 55. This new approach is intended to give people on lower incomes a bigger retirement nest egg while retaining the current level of support for those on higher incomes. Click here to read more about  the important of CPF shielding.

The retirement sum is the minimum amount that you need to set aside for retirement and if you have more than this sum, there’s no issue. Do note that:

  • Your retirement age must be at least 55 years old and not older than 65 years and 10 months of age (when you reach 55).
  • You can withdraw up to 20% of your retirement sum as a cash lump sum or up to $50,000 of your retirement sum as CPF Life annuity plan proceeds upon retirement. Any withdrawal amount above these limits will be taxable. 
    • As such, it is advisable that one should only withdraw what is needed; any excess amounts can then be used for other purposes.
  • Any withdrawal amount above will be taxable.
  • If you do not meet the minimum retirement age of 55, you will only receive 40 % of the retirement sum when you withdraw from your retirement account. 
    • This is because the rest (60%) will be set aside by the CPF Board to help pay for your medical costs when you turn 65 years old and are unable to work anymore.
  • Any excess amount above $161,000 in Retirement Account 1 (RA1) will earn an extra 1% interest per year

What are the Prevailing Retirement Sums?

 

Year BRS FRS ERS
2020 $90,500 $181,000 $271,500
2021 $93,000 $186,000 $279,000
2022 $96,000 $192,000 $288,000

 

How to Check Your Retirement Sum Status

  1. Go to CPF website (www.cpf.gov.sg) and sign in to my CPF account 
  2. On the retirement summaries page, you should be able to see your retirement sums under “retirement” section 
  3. If you are above 55 years old, this is what will pop up after clicking “Retirement Sum Summary” – note that the retirement age is 65 years old for the Year 2022 retirement calculation 
  4. You can also refer to these charts which provide retirement calculations according to current prevailing retirement sums. Remember that because of prevailing retirement sum changes every year, it’s possible that future calculations will be different from this.

How Do I Compute my Retirement Sums?

 

Type Computation
Basic Retirement Sum At least $93,000 needed
Full Retirement Sum 2 x BRS
Enhanced Retirement Sum 3 x BRS

 

If you have nobody in your immediate family who is receiving a basic pay-out and has yet to pass on at age 65, then it would be best for you to take the Basic payout. The Medisave minimum sum ensures that each CPF LIFE member has enough funds to meet their Medishield Life premiums until death. As such, the government will not allow one to withdraw from this account within 5 years of joining CPF LIFE.

However, if a member decides to opt for a lower payout (between 70% and 90% of the payout), he may continue with his existing HDB mortgage plan beyond 90%. This allows him/her time to make necessary changes in case his income level decreases after retirement due to medical issues.

This is usually the most asked question by those who just turned 55. Those who turn 55 years old before 2013 will have to wait till their age 67 to draw their CPF LIFE payout (2030). 

How Can I Reach My Retirement Sum?

In short, the answer is to have an earlier retirement. Your CPF Life payout can be a means for you to fund your retirement with a relatively lower monthly cash inflow. How much earlier will depend on your life expectancy and health condition. You can find out how much you would receive from the CPF Life Calculator  (You need to have a My CPF account in order to access the calculator).

As many people have said or thought, why do we need to use up all our savings? There is absolutely no point in working hard only to spend it all away on ourselves by the time we retire! What if we could use our money wisely for ourselves and invest it so that there’s still some left when we reach 65 and we can use that to fund our retirement?

Tips to keep in mind while planning for retirement

However, there’s something we need to take note of:

  1. We spend money and time on education so we can get better jobs. However, it is not always easy for everyone to get a good job. We would then work hard because we don’t want to be poor or struggle when we retire! 
  2. There are some people who do well financially and yet they choose not to save. For example, many rich people rather spend their money away than put it into savings such as an investment plan or real-estate investment. We all try our best to “play” the CPF system by studying how the interest rate works and choosing investments accordingly (that doesn’t mean doing everything the system says).

Conclusion

The CPF Retirement Sum is important because it is the amount of money we need to have saved up in order to have a comfortable retirement. 

  • The CPF retirement sum helps in tax relief because it can be used to offset the amount of income tax payable. The retirement sum is a significant part of the total CPF savings, and it is important to understand how it works to get the most out of it.
  • The Basic Retirement Sum is the minimum amount that we need to have saved up.
  • Full Retirement Sum is the amount that will allow us to live comfortably in retirement.
  • The Enhanced Retirement Sum is an optional additional sum that will give us even more benefits in retirement.
  • CPF Life payouts are calculated based on an individual’s contributions and his age at death. When the CPF Board receives the plea for a payout, it will take note of accumulated interest in the member’s account and he would be paid out accordingly.

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