askST: How to make the most of CPF savings

Q: What happens to the rest of my CPF savings once I meet the Full Retirement Sum?

A: You will be able to withdraw your Special and Ordinary Account savings after setting aside your cohort’s Full Retirement Sum fully with cash or the Basic Retirement Sum with a sufficient property pledge.

If you don’t have an immediate need for these savings, you can consider leaving it in your Central Provident Fund (CPF) account to earn attractive interest. You can always withdraw them fully or partially as and when you like. With PayNow, you can receive the withdrawn money almost instantaneously.

If you would like to receive higher payouts in retirement, you can also transfer these savings, up to the current Enhanced Retirement Sum, to your Retirement Account (RA). For example, if a member turning 55 in 2020 sets aside the Full Retirement Sum of $181,000, he will receive about $1,390 to $1,490 in lifelong monthly payouts on the CPF Life Standard Plan from age 65.

By setting aside the higher Enhanced Retirement Sum of $271,500 at age 55, his lifelong monthly payouts under the CPF Life Standard Plan will increase to between $2,030 and $2,180.

Q: How can I increase my CPF retirement payouts?

A: You can increase your CPF retirement payouts through:

a) Cash top-ups or CPF transfers

You can make cash top-ups or CPF transfers to either the Special Account if you are below 55 years old or the RA if you are 55 years old and above. Topping up in cash lets you enjoy tax relief of up to $7,000 per calendar year.

b) Deferring the start of your payouts

You can start your retirement payouts anytime from age 65. However, if you are still working or have other sources of income, you may wish to defer receiving your payouts.

This will enable your savings to accumulate attractive interest of up to 6 per cent per annum, which will boost your future retirement payouts.

If you are on CPF Life, your monthly payouts will increase by up to 7 per cent per annum for each year that you defer payments by. The latest you can start your payouts at is age 70.

Q: My father has been self-employed all his life and he has very low CPF savings. Should I top up his CPF account for him?

A: Topping up your father’s CPF account is a good way to show your love.

Your father will enjoy attractive CPF interest rates of up to 6 per cent per annum on his retirement savings. With more savings in his RA, your father will receive higher monthly payouts in his retirement.

What’s more, you can also enjoy tax relief of up to $7,000 per calendar year when you top up your father’s RA with cash. Find out more about the Retirement Sum Topping-Up Scheme here.

Next January, the Matched Retirement Savings Scheme (MRSS) will be implemented to help lower-to-middle income seniors, who have yet to meet the Basic Retirement Sum, save more for retirement.

Under the scheme, the Government will match every dollar of cash top-up made to the RA of eligible members up to an annual cap of $600.

CPF Board will automatically assess members’ eligibility for the MRSS each year and notify eligible members every February.

Q: Why do I need to pay back interest on my CPF savings when I sell my property?

A: This is because if you had not used CPF to buy the property, your CPF savings would have earned interest. Refunding your CPF savings plus accrued interest when you sell the property restores your CPF savings to what it would have been had you not withdrawn it to purchase a property.

That said, you can continue to use your CPF savings, including the refunded amount from the previous property, to buy another property.

We have come across CPF members who are worried that they have to cough up cash to top up their CPF because the selling price of their property is not enough to fully pay back their CPF savings. There’s no need to worry about this; you don’t have to top up cash if you sell your property at market value.

Q: I heard I can make a voluntary refund to my CPF based on how much I have used for housing. What are the advantages of doing so and how can I do so?

A: Yes, you can indeed choose to make a refund to your CPF account without selling your property via the voluntary housing refund.

By making a voluntary housing refund, you reduce the amount that you would need to return to your CPF account when you sell your property. This refunded amount will also start earning attractive CPF interest to boost your CPF savings for retirement.

Reducing the amount you would need to return to your CPF account means you may receive more cash proceeds upon the sale of your home, which can help you pay for any required cash outlay when you buy your next property.

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