Retirement planning – CPF money

55 years of age is a milestone in a person’s working life. At 55, you are allowed to withdraw part of Central Provident Fund (CPF) CASH balances only after setting aside the CPF Minimum Sum and Medisave Minimum Sum. The current CPF Minimum Sum is set at $123,000 and the current Medisave Minimum sum is $34,500. This statement is an over-simplification of existing CPF rules. For each individual circumstances it pays to visit the CPF Board website for the details.

The idea behind restricting withdrawal of ALL CPF money at 55 is for members to set aside some cash balances with CPF Board so they can draw down this amount periodically. The draw down age is 65 year old if you are 56 years and below as at 31 December 2010. In other words, you can only touch the CPF minimum sum only after 65 years old.

With the minimum sum set aside, members can participate (or auto-included under certain circumstances for those born in 1958 and above) in CPF Life, which is an annuity scheme. CPF Lifelong Income scheme For The Elderly (CPF LIFE) is a scheme that will provide member with a monthly payout starting from the draw down age, for as long as member lives. Refer to CPF web-site for further details.

Let’s say, you have more than the CPF minimum sum in your ordinary and special accounts in the form of CASH balances (excluding investments made using ordinary and special accounts and CPF money used to buy residential properties), what will you do with the amount in excess of the CPF minimum sum? This is an important decision and a wrong use of the money or a wrong investment can wipe out the money withdrawn from CPF. At age 55 and above, a person’s earning capacity and employment opportunities diminished significantly. It is therefore imperative that people in this age group consider carefully how to preserve this wealth and to be conservative in their investments.

CPF members can consider leaving their money with CPF Board and not withdrawing them immediately, if they do not need the money urgently. There is no compulsory age at which members must withdraw their CPF. CPF balances not withdrawn will remain in their respective accounts and continue to earn interest. The interest rates are reviewed on a quarterly basis.

The prevailing CPF Interest Rates are as follows:
Ordinary Account 2.50% p.a.
Special, Medisave And Retirement Accounts 4.00% p.a.

 

Copyright © 2010, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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