CPF

CPF LIFE: 3 Retirement Decisions You Should Think About Right Now

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I know, you can’t even imagine where life would lead you next year let alone think about your retirement decades later.

But do you know that spending a little time and effort on your retirement right now can help you go from a mediocre retirement to an awesome one?

As Singaporeans, we have the Central Provident Fund (CPF) that would form the foundation of our retirement. But most young people don’t think much about it. They just treat their monthly salary contributions as a part of life and as an “out of sight, out of mind” matter.

What if I tell you that if you take a few minutes to think about your retirement now, it would make a difference between you retiring with a few hundred dollars and you retiring with at least a thousand dollars a month from CPF alone?

Related: 5 Things You Should Do with Your CPF When You Start Working

If you want to retire like a champ, start thinking about the 3 CPF LIFE decisions you would have to make

But first, what is the CPF Lifelong Income For The Elderly (CPF LIFE)?

It is a CPF retirement scheme that provides Singapore Citizens and Permanent Residents with a monthly payout for as long as they live.

If you turned 55 on 1 May 2016 or later and have at least S$60,000 in your Retirement Account six months before you reach your payout eligibility age (from 65 years old), you are pretty much set.

If you do not have enough CPF retirement savings or if you are born before 1958, you can still apply to join CPF LIFE at any time between your payout eligibility age and one month before age 80.

Isn’t it awesome that we are guaranteed to get a monthly payout FOR LIFE under CPF LIFE? But how much you get depends on the following decisions you would have to make:

1. At what age would I want to start receiving CPF LIFE monthly payouts?

Currently, you can choose to start receiving payout anytime between age 65 to 70. Of course, the later you start your payout, the more you will get per month when you start.

CPF will write to you six months before you reach your payout eligibility age (currently 65 years old) to explain your available options. You will only need to choose your CPF LIFE plan when you wish to start receiving your CPF LIFE monthly payouts.

2. How much would I want to receive from CPF LIFE per month?

This is a tricky question but it’s the most important one.

Once you know how much you want to get every month from CPF during retirement, you can work backwards and see whether your savings now, taking into account the funds you may need for housing and education, are on track to achieving that goal.

Your monthly payout under CPF LIFE depends on how much Retirement Account funds you have when you turn 55. Do note that the payout is not fixed and may be adjusted due to factors like life expectancy, interest rate changes, etc..

Here’s an estimated guide if you turned 55 years old this year and choose to start your payout at 65:

Retirement Account savings required at 55 in 2017 Your monthly payout* for life from 65
If you own a property and choose to withdraw your Retirement Account savings above your Basic Retirement Sum (subject to sufficient CPF property charge/pledge) Basic Retirement Sum (BRS)

S$83,000

S$700 – S$750
If you do not own a property or choose not to withdraw your Retirement Account savings above your Basic Retirement Sum Full Retirement Sum (FRS)

S$166,000

The FRS is 2 x BRS.

S$1,280 – S$1,380
If you wish to put more savings in CPF LIFE Enhanced Retirement Sum (ERS)

S$249,000

The ERS is 3 x BRS.

S$1,860 – S$2,000

Table taken from CPF website.

CPF LIFE Payout Estimator

If you are above 50 years old, you can calculate the estimated monthly CPF LIFE payout you would get with your current Retirement Account balance here. With that said, even though I am far from 50, playing around with the calculator helped me get a better idea of my potential payout next time.

Increasing your payout

If you think that you wouldn’t have enough savings by 55 to get your desired payout, you can make cash top-ups or CPF transfers (or both) into your Retirement Account up to the Enhanced Retirement Sum.

You can also buy an additional CPF LIFE annuity to get a higher CPF LIFE payout.

Related: 5 Common Retirement Planning Mistakes That Singaporeans Make

3. Do I want to get more or less, now or later?

The final decision you would have to make when you want to start your CPF LIFE payout is which plan you want to opt for.

CPF LIFE Plans Available

*The CPF LIFE Escalating Plan will be available from January 2018.

The three different plans cater to different needs. It depends on whether you want to leave more savings for your family after you pass on and whether you need more payouts earlier or later.

How payouts differ between plans starting at 65 years old for a 55 year old with S$83,000 Retirement Account savings:

Your CPF payout over time

Again, you can play around with the calculator to see the difference in each plan’s payouts.

CPF also has a Retirement Estimator and Retirement Calculator to help you with your retirement planning.

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