Retirement plans are crucial for monetary stability, and in Singapore, the Central Provident Fund (CPF) goes a long way toward ensuring citizens save properly for retirement. If turned 55 in 2024, putting aside the Basic Retirement Sum (BRS) of S$102,900 can yield a monthly payout of anything between S$840 and S$900 from the age of 65.
The CPF Retirement Sum Framework
The CPF retirement sum helps in specifying how much is needed to provide the desired monetary payouts during retirement. Within this framework are three tiers:
A Basic Retirement Sum (BRS) is meant for covering basic living expenses, except for rentals. The Full Retirement Sum (FRS) is for a more comfortable retirement lifestyle. The Enhanced Retirement Sum (ERS) is for someone who wishes for larger monthly payouts.
At age 55, any balance in the Special Account (SA) and Ordinary Account (OA) is transferred into a newly created Retirement Account (RA) not exceeding the FRS. It is the amount in the RA that determines the future monthly payouts.
Monthly Payouts Based on Retirement Sums
For people turning 55 in 2024, the retirement sums and their corresponding estimated payouts from the age of 65 are as follows:
Basic Retirement Sum (BRS) of S$102,900 yields monthly payouts of S$840 to S$900. Full Retirement Sum (FRS) of S$205,800 results in monthly payouts of S$1560 to 1670. Enhanced Retirement Sum (ERS) of S$308,700 pays monthly payouts of S$2280 to S$2450.
Changes to Retirement Sums and Accounts
Retirement sums are changed annually for factors such as long-term inflation and increase in life expectancy. For example, individuals turning 55 in 2025 will have a BRS of S$106,500 and an FRS of S$213,000.
From 2025, the Enhanced Retirement Sum will become four times that of the Basic Retirement Sum in order for members aged 55 and above to save more for accrued retirement, for higher monthly payouts. Additionally, the Special Account will cease for those aged 55 and above with savings in RA up to FRS, with the remaining SA savings shifted to OA.
Strategies to Enhance CPF Retirement Payouts
Consider doing the following to enhance CPF retirement payouts:
- Top up to the Enhanced Retirement Sum (ERS) for higher monthly payouts. Any cash top-ups may also qualify for tax relief, making it more valuable.
- Postponing CPF LIFE payouts after age 65 can further enhance monthly payouts by up to 7 percent for each year the payouts are deferred, until age 70. This allows CPF savings to earn additional interest and provides for a larger payout.
- Lower-balance members would be eligible for the Matched Retirement Savings Scheme (MRSS) that matches dollar-for-dollar (up to an annual limit) for the cash top-up of RA. The scheme will be enhanced from 2025 to further boost retirement savings.
Conclusion
To retire planning effectively, it is essential to understand CPF retirement sum framework and the corresponding payouts in the months. Exploring the option of topping to ERS, delaying the payout commencement age, and engaging with specific government schemes such as MRSS will allow Singapore retirees to bolster their financial security and lead a more comfortable retirement.