Reaching 55 and CPF

I attended “Reaching 55” talk conducted by CPF Board on Wednesday. This talk was useful to understand the many rules and policies of CPF for those who turn 55 years old this year.

Broad areas covered:
1. to explain how much a member can withdraw at age 55 years old
2. to explain CPF Life scheme
3. to explain what happens to CPF used for investment (CPFIS) and CPF withdrawn for education and housing

Some things understood after the talk

Member has to set aside the following minimum sums before you can start to withdraw CPF money at age 55 onwards:

1. Minimum sum of $139,000
2. Medisave Minimum sum of $38,500

If a member does not have both minimum sums, then at age 55 the most he can withdraw is 10% of a calculated sum, based on his balances held with CPF. (Most CPF members belong to this category.)

If a member has more than both minimum sums in his account, then he can withdraw the difference after setting aside both minimum sums.

CPF withdrawal can be made only once a year within the one-year window period after each birth date of every year.

Member can choose not to withdraw and earn the prevailing interest rate of between 2.5% to 5% from CPF Board. This is better return than putting the money in a commercial bank.

At age 55, CPF will create a Retirement Account (RA) and the Minimum Sum is then moved to the RA account, firstly taking the balance from Special Account (SA) and secondly taking the remaining balance from the Ordinary Account (OA) in that order. (Note: OA earns lower interest than SA.)

Because member is continuing working and CPF contributions are still being made, Ordinary Account and Special Account will still be in place together with Medisave Acount (MA) and Retirement Account.

This post does not include what if there are shortfalls in a member’s Minimum Sum amount and Medisave Required Amount.

One take-away for me was that if a member has Minimum Sum and Medisave Minimum Sum, he should get CPF Board to close the CPF Investment Scheme (CPFIS) account and transfer all investments to member’s own cash account e.g. CDP account for equity investment. This way, member can save paying bank charges on the CPFIS account with a local bank.

Copyright © 2012, 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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