Explainer: What’s the CPF Retirement Sum?
Planning your retirement early can certainly be a little daunting, but it doesn’t have to be that way. Think of it like this: the earlier you start planning or saving for retirement, the more it becomes less of a problem later on!
Chances are you’ve probably already heard of the CPF retirement sum. We’re here to help you make sense of it with this handy guide of the most essential things you need to know about the CPF Retirement Sum.
What’s the CPF Retirement Sum?
If you’re a salaried employee, you already know that your Central Provident Fund (CPF) account takes a chunk of your monthly wage to accumulate savings in three separate accounts. These accounts are used to pay for housing, healthcare, and eventually, retirement.
Once you reach 55 years old, a Retirement Account will be created for you. Basically, the amount you’ve earned in your Ordinary Account and Special Account will be transferred to this account.
Here’s where the Retirement Sum comes in. Essentially, this amount is a requirement that CPF members must reach before being allowed to make withdrawals.
If your account maintains the minimum threshold once you turn 65 years old, you can also apply to start receiving lifelong monthly payouts under CPF LIFE.
As of January 2022, you need to have at least $96,000 in your Retirement Account to meet the Basic Retirement Sum, which we’ll talk more about below.
CPF Retirement Sum Tiers
While the retirement age in Singapore has been raised to 63 years old as of January 2022, there are no changes regarding the CPF withdrawal ages. This means that you can begin making withdrawals once you turn 55 years old.
Once you do, expect to receive a bunch of documents related to your CPF, where you have to indicate your chosen Retirement Sum tier. And what are these tiers, you ask?
Basically, the Retirement Sum has three tiers or levels, each of which has corresponding conditions that you must meet in order to avail the payouts.
Think of it this way: the higher your tier is, the higher the threshold that you must meet, which will yield to higher monthly payouts.
You can refer to this handy table below to compare and contrast tiers:
|Basic Retirement Sum (BRS)||Full Retirement Sum (FRS)||Enhanced Retirement Sum (ERS)|
|Minimum Savings Amount||$96,000||$192,000 (twice of basic sum)||$288,000 (thrice of basic sum)|
|Monthly Payout from 65 Years Old||$770 - $830||$1,450 - $1,550||$2,120 - $2,280|
|Maximum Withdrawal Amount||Up to $5,000 (Must be above minimum amount)||$5,000, or your Special and Ordinary Account savings above your Full Retirement Sum, whichever is higher||Not allowed to use PayNow for withdrawal from RA above BRS; interest from RA cannot be withdrawn|
Basic Retirement Sum (BRS)
If you own a property with a remaining lease that can last you to 95 years old at least, then it means that you can withdraw your RA savings above the BRS.
If you chose the BRS, then you must “pledge” the property you own or have sufficient property charge. A property charge is automatically created when you use the funds in your Ordinary Account to pay for your property or your housing loan.
So if you ever decide to sell your property one day, the amount of the pledge will be refunded to your CPF account from the proceeds of the sale.
You can then reuse this amount to purchase another property or you can save it until it reaches the Full Retirement Sum, which will be explained below.
Pledging is important because it allows you to withdraw from your RA above the BRS, capped at $5,000. Once you reach 65 years of age, you’re guaranteed to receive monthly payouts ranging from $770 to $830 through CPF Life.
Full Retirement Sum (FRS)
The FRS is basically the maximum amount that will be transferred to your RA once you reach 55 years old. It’s also the maximum amount in which you can top up your Special Account before turning 55 years old.
You must set aside $192,000 (or whatever amount the FRS would be in the future) in your RA before being allowed to withdraw more than $5,000.
Furthermore, you don’t need to pledge a property nor do you need to own one in order to make withdrawals. When you turn 65 years old, you will receive a monthly payout ranging from $1,450 to $1,550 through CPF Life.
Enhanced Retirement Sum (ERS)
The ERS is designed for those who wish to put more savings into CPF LIFE.
The amount stated in the ERS represents the maximum amount of how much you can top up your RA. You may only start topping up your RA after you reach 55 years old.
The purpose of topping up is to maximise the compounded interest earned in your RA (currently at 4% per annum), and your monthly CPF Life payouts. In this case, you’re guaranteed to get around $2,120 to $2,280 monthly once you turn 65 years old.
Take note that all three Retirement Sums increase about 3% each year. So if you’re still below 55 years old, expect your Retirement Sum to be significantly higher in the future.