What Really Happens To Your CPF Savings At Age 55? In The News - my cpf & me 2006 Roadshow E-Services - View Your Investment Statement While On The Move

WHAT REALLY HAPPENS TO YOUR CPF SAVINGS AT AGE 55?

You may not be reaching age 55 anytime soon but understanding how the CPF withdrawal works will go a long way in helping you plan the use of your CPF wisely. Here is an overview of what you should know about your CPF savings when you turn 55.

1) A Retirement Account will be created for you   Your Retirement Account (RA) contains the CPF Minimum Sum which is made up of your CPF savings transferred from the Special Account (SA) and/or Ordinary Account (OA). The CPF Minimum Sum is currently $94,600 and is meant to provide you with a retirement income from age 62 onwards. It will be increased by $4,000 (in 2003 dollars) every 1 July till it reaches $120,000 (in 2003 dollars) in year 2013. It will also be adjusted every year for inflation.   2) What is the amount of CPF you can withdraw   Depending on the total balance in your SA and OA, the following withdrawal rules will apply to determine the amount that will go to your RA. CPF Balance in Special Account (SA) and Ordinary Account (OA) at age 55 Amount to be set aside in Retirement Account (RA) $5,000 or less No amount will be set aside in your RA. You can withdraw all your savings. $5,001 to $10,000 You can withdraw up to $5,000 and set aside the remainder in your RA. $10,001 to $189,200* At least 50% of the total balance will be set aside in the RA. You can withdraw the remaining amount. Better yet, choose to set aside more up to $94,600 in your RA to earn more interest. Above $189,200* $94,600 will be set aside in your RA. You can withdraw the balance in excess of your Minimum Sum. Note: The values stated in the table above are applicable to only those who turn 55 from 1 July 2006 to 30 June 2007. *The amount is calculated based on twice the current Minimum Sum of $94,600 and will adjust accordingly with the change in Minimum Sum. If you do not have enough CPF savings to meet the CPF Minimum Sum, you may pledge your existing property bought with your CPF savings up to 50% of the CPF Minimum Sum. For more details on property pledge, please refer here.   3) You need to set aside Medisave for your healthcare needs   The Medisave Required Amount, currently at $8,300, is the amount that you are required to have in your Medisave Account (MA) before you can withdraw any CPF balance after meeting the CPF Minimum Sum. If you wish to withdraw your Medisave at age 55, you need to first set aside the Medisave Minimum Sum. The current Medisave Minimum Sum is $28,000. To sum up how the current Medisave Minimum Sum and Medisave Required Amount will affect the withdrawal of your Medisave balance, simply remember the three conditions below:   MA Balance Amount that can be withdrawn from MA Less than $8,300 No withdrawal of MA is allowed. If you have set aside the CPF Minimum Sum and wish to withdraw the remaining CPF savings, you will have to transfer up to 50% of the remaining balance from your OA and/or SA to your MA to meet the prevailing Medisave Required Amount. This also applies to subsequent withdrawals after age 55. More than $8,300 but less than $28,000 No withdrawal of MA is allowed. More than $28,000 You can withdraw the amount in excess of $28,000 from your MA and part of it will be used to top up your RA if you have a CPF Minimum Sum shortfall.

The Medisave Required Amount will increase by $2,500 (in 2003 dollars) each year until it reaches $25,000 (in 2003 dollars) on 1 January 2013. It will be adjusted every year for inflation in healthcare costs.

4) You will receive a monthly payout from your Minimum Sum from age 62

By setting aside the Minimum Sum, you can be assured of a source of retirement funds when you reach age 62. Your Minimum Sum will provide you with a monthly payout either for life or for a fixed period, depending on what you do with the amount. A. Monthly payouts for life With longer life expectancy, about 50% of members aged 62 today will live longer than 20 years. Buying a life annuity with a participating insurance company with your Minimum Sum guarantees you an income for life. When selecting an annuity, you should compare the annuity payouts offered by the various insurance companies. B. Monthly payouts for a fixed period You can choose to leave your Minimum Sum with the Board to earn the prevailing interest. The monthly payouts will start from age 62 and last about 20 years. This, however, may not be enough to cover your lifetime. You can stretch your Minimum Sum by starting your monthly payouts later. For example, if you start your payouts at age 63 instead of 62, the payouts will last till age 84 instead of 82. You also have the option to deposit your Minimum Sum with a participating bank. If you do so, you will receive monthly payouts pegged to the board’s payout amount. However, the payout period will depend on the bank’s interest rate and may not last 20 years from age 62.

5) Other important considerations

i) Plan your housing loan carefully. Ideally, your housing loan should have been fully paid up by the time you reach 55. This is because savings in your CPF OA and/or SA will be transferred to form the Minimum Sum in your RA. Your ability to use savings in your CPF OA to service your monthly instalments may be affected, and you may have to use cash to service your home loan after 55 if you do not have any balance in your OA. ii) When you reach age 55 and apply for withdrawal, any investment and cash balance in your CPFIS-OA Investment Account or CPFIS-SA will be released to you after you have set aside the full CPF Minimum Sum and Medisave Required Amount. You need to inform the Board before or at the time of applying for withdrawal if you do not wish to have your investments released to you or do not wish to close your Investment Account with your agent bank.

IN THE NEWS
VISIT US AT THE my cpf & me 2006 ROADSHOW 29 SEP to 1 OCT 2006, HDB HUB, TOA PAYOH CENTRAL The annual my cpf & me roadshow is here again! Learn how to use the CPF Board’s online financial tools and games such as the Retirement Calculator and the Voyage of Life as well as money management tips at the 3-day event starting tomorrow. Admission is free. Register for the Chinese seminar on Retirement Planning. Sign up for a Chinese seminar on Retirement Planning! Topics covered in the seminar would include retirement planning, investment and insurance.

Date	:	14 October, Saturday (9 am - 5 pm)
Venue	:	HDB Auditorium
Fee	:	Nominal fee of $10 is payable upon registration.