CPF Retirement Sum – How Does It Work and How Much Do You Need?

cpf retirement sum

Already counting down the days to retirement… when you’re only 25 years old? Late nights at the office and crazy bosses can do that to you.

Every month, you see a large chunk of your earnings disappear into your CPF accounts. But as a salaried employee, your CPF savings are likely to form an integral part of your retirement income.

Yet you’ve heard ominous warnings about the Retirement Sum rising, and how you won’t be able to get your money out if you don’t meet it.

So what exactly is the CPF Retirement Sum, and how does it affect you?

Note: This article walks you through the CPF Retirement Scheme. However, do note that the CPF Retirement Sum scheme is slowly being phased out by the newer CPF LIFE Scheme (introduced in 2009).

As long as you are a Singaporean/Permanent Resident born in 1958 or later (and meet the required retirement account balances), you will be placed on CPF Life.

Read about CPF Life here: CPF LIFE – The Complete Guide to Monthly Payouts, Plans & Minimum Sums.

 

What exactly is the CPF Retirement Sum (previously Minimum Sum)?

When you turn 55, your Ordinary Account and Special Account will merge to form your Retirement Account. You will be allowed to withdraw any excess money, but are obliged to leave behind the Retirement Sum in your account.

This cash is not to be touched until you are ready to receive your retirement payouts at age 65, or later if you wish, hence it was previously termed the “minimum sum”.

Henceforth, the money in this Retirement Account = your Retirement Sum. So to know how much of your Retirement Sum you’ve already saved up, you can simply add up your OA and SA funds.

Of course, this retirement money needs to be of a certain amount before you can receive meaningful payouts, because the government isn’t going to give you money for free.

 

How much is the CPF Retirement Sum?

There are actually not one, but THREE retirement sums.

“What?!”, you scream. As if that wasn’t confusing enough.

The amount you receive in monthly retirement payouts will depend on which of the three Retirement Sums you manage to meet.

Now, the actual monthly payout under the Retirement Sum Scheme is not published. This is because only a small group of seniors currently fall under this scheme. For those age 62 and under in 2020, you should be reading up about CPF LIFE.

CPF does, however, publish estimated Retirement Sum payouts, computed based on the CPF LIFE standard plan. The retirement sums for those turning age 55 up to year 2022 are as follows:

Age 55 in 2020 Age 55 in 2021 Age 55 in 2022
Basic Retirement Sum (BRS) $90,500 $93,000 $96,000
BRS monthly payout (from age 65)  $750 to $810 $770 to $830 $790 to $850
Full Retirement Sum (FRS) $181,000 $186,000 $192,000
FRS monthly payout (from age 65)  $1,390 to $1,490 $1,430 to $1,530 $1,470 to $1,570
Enhanced Retirement Sum (ERS) $271,500 $279,000 $288,000
ERS monthly payout (from age 65)  $2,030 to $2,180 $2,080 to $2,230  $2,140 to $2,300

Now, remember that you can withdraw in excess of your retirement sum at age 55?

If you want to withdraw your funds till only the Basic Retirement Sum is left in your account, you’ll have to own a property, and will be made to place a charge or pledge on your property before you can do so. This means that usually only those who really need the money will withdraw till only the Basic Retirement Sum is left.

Conversely, if you have funds exceeding the Enhanced Retirement Sum when you turn 55, you can pick and choose which of the Retirement Sums you want to leave in your account for retirement payout purposes.

 

Will my retirement payments stop if my CPF Retirement Account runs out of money?

The short answer is — it won’t happen if you have at least $60,000.

If you were born in 1958 and after, and have at least $60,000 in your Retirement Account six months before you reach the age where you can receive payouts (age 65 or later), you are automatically enrolled in CPF LIFE.

You turned 55 between 1 January 2013 and 30 April 2016 You turned 55 on 1 May 2016 and after
  • At least $40,000 in your Retirement Account when you reach 55 years old; or
  • At least $60,000 in your Retirement Account six months before you reach your payout eligibility age.
  • At least $60,000 in your Retirement Account six months before you reach your payout eligibility age.

CPF LIFE guarantees retirement payouts for life.

That means that if you manage to live till the age of 150 and totally drain your Retirement Account, you will still continue to receive payouts.

 

Retirement Sum Scheme (RSS) vs CPF LIFE

The main difference between the Retirement Sum Scheme is that you will receive monthly payouts until 90 years old whereas for CPF LIFE, you will receive them for life.

If you are on the RSS, you will start receiving monthly payouts based on which “Retirement Sum” goal you managed to hit up to 20 years.

You savings has a base interest rate of 4% provided by the Government so your RSS payouts will extend beyond 20 years until you turn 95 years old.

From 1 Jan 2020, the duration will be capped at 90 years old for those who are currently receiving payouts. Those who will turn 65 from 1 Jul, 2020 and under RSS will also get payouts until 90 years old rather than the previous 95 years old.

Given that 1 in 3 Singaporeans live past 90 years old, this is makes the Retirement Sum Scheme even less attractive than CPF LIFE, which is a scheme in which your retirement payouts last you through life.

If you’re born in 1958 or after, and have at least $60,000 in your Retirement Account 6 months before you reach your payout eligibility age, you will be automatically included in CPF LIFE.

There is only a small group of people still on the RSS only, and if you (or your parents) are one of them, don’t fret: if you were not automatically placed on CPF LIFE, you can apply to join anytime between your payout eligibility age and before you turn 80 years old or remain on the Retirement Sum Scheme.

The caveat for CPF LIFE is that you have to pay a significant lump sum premium that is paid from your Retirement Account, which will restrict your ability to use your CPF monies after 55, unless you have enough in there.

To calculate your exact CPF LIFE payouts, you can use the CPF LIFE Estimator to check how much you can get. Or, read our tome on CPF LIFE: Monthly Payouts, Plans & Minimum Sums

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What if I can’t meet the Basic Retirement Sum?

If you can’t even meet the Basic Retirement Sum, your situation will be a little different when you turn 55.

For those who have $5,000 or less in their entire Retirement Account (for instance because you’ve been self-employed and haven’t made CPF contributions, or haven’t been working), you get to withdraw the entire amount when you turn 55. You will not receive any retirement payouts, so you should hopefully have done some retirement planning on your own.

Let’s say that at age 55, you have more than $5,000 but less than the Basic Retirement Sum. In that case, you will be allowed to withdraw $5,000 when you turn 55, and that’s it. You will then wait till you’re at least 65 to receive payouts, which will be pro-rated based on how much you have in your account.

If at age 55 you have less than the Full Retirement Sum but more than the Basic Retirement Sum, you will be allowed to withdraw $5,000. If you also own property and have a sufficient property charge/pledge on it, then you will also be allowed to withdraw any savings above the Basic Retirement Sum.

For those with less-than-satisfactory amounts in their Retirement Account, there is one final solution—continuing to work past age 65 and delaying the onset of your retirement payouts, so you have more time to accumulate your desired Retirement Sum.

Which Retirement Sum do you think you will meet when you retire? Tell us in the comments!