Heartland Boy notices that there seems to be some confusion on the amount of money/cash that one can withdraw from his or her Central Provident Fund (‘CPF’) upon reaching the withdrawal age of 55. Indeed, withdrawal limits do get more complex when various schemes such as Retirement Sum Top Up (‘RSTU’) and transferring from one’s Ordinary Account (‘OA’) to Special Account (‘SA’) are taken into consideration. This is understandable as the answers to these questions can sometimes be found over several pages on CPF’s website. It takes considerable effort to piece those information into a consistent and congruent piece. Hoping to clear the confusion so that all CPF members can act with certainty and make more informed decisions, Heartland Boy consulted CPF Officers over several emails specifically on this topic. This article seeks to explain the amount of money that you can withdraw from your CPF at 55, especially if you have participated in popular schemes such as RSTU and transfers from OA to SA.

1.UNDERSTAND WHAT HAPPENS AT AGE 55

While most Singaporeans and Singapore Permanent Residents have acquainted themselves well with the various functions of OA, SA and Medisave (‘MA’), they are often very unfamiliar with the CPF Retirement Account (‘RA’). That is because the RA only appears upon the CPF member reaching the age of 55. The CPF Board will transfer your savings from your SA and OA to your RA to form your retirement sum. The money continues to reside in your RA and gain interest until they are withdrawn to participate in CPF LIFE when you choose to start your monthly payouts (between age 65 and 70). CPF LIFE is an annuity scheme that dispenses monthly payouts till your death. The monthly payout would depend on the amount of money you have in your RA at the point you join CPF LIFE from age 65 onwards, which is the payout eligibility age for members born in or before 1954.

2. HOW MUCH CAN YOU WITHDRAW FROM YOUR CPF AT 55?

Upon turning age 55, a CPF member can withdraw cash from his CPF OA and SA. The withdrawal rules are:

• $5,000 OR your OA and SA savings above the Full Retirement Sum (FRS)*, whichever is higher

And

• Any RA Savings (exclude top up monies, government grants, and interest earned) above the Basic Retirement Sum (BRS) that comes with a sufficient property pledge**.

*In Year 2016, the Basic Retirement Sum is $80,500. The Full Retirement Sum is twice of BRS at  $161,000. The Enhanced Retirement Sum ($241,500) is thrice of BRS. These schemes have replaced the previous concept of minimum sum.

**The definition of a sufficient property pledge can be found here

Heartland Boy has developed a few scenarios to illustrate how the withdrawal rules apply to a CPF member turning age 55.

In Scenario 1, as the combined balances in the OA and SA are less than the FRS amount, the CPF member can only withdraw $5,000. (Rule No 1) Heartland Boy’s parents both fall into this category and that is why he is extremely concerned.

In Scenario 2, the CPF member can withdraw $5,000 from his OA and SA. (Rule No 1) Additionally, the member can also withdraw $4,500, [$90,000- $5,000 – $80,500 (BRS)] assuming that there is a sufficient property pledge. (Rule No 2)

In Scenario 3, CPF member can withdraw $9,000 [$170,000 – $161,000(FRS)]- from his combined OA and SA balances. (Rule No 1). Additionally, he can further withdraw $80,500 from his RA if there is a sufficient property pledge. (Rule No 2)

Scenarios 1 to 3 are pretty straightforward, plain vanilla scenarios easily understood by most CPF members. However, what Heartland Boy is about to illustrate below gets more complicated. Unsurprisingly, its usefulness increases in tandem with the complexity.

3. HOW WOULD WITHDRAWALS BE AFFECTED BY RSTU AND TRANSFER OF OA TO SA

Recall that the CPF RSTU allows members to build up their retirement nest by toping up your own or your loved ones’ accounts.  Heartland Boy has advocated that the RSTU is a good tax reduction tool. In addition, he personally transferred his own OA to SA as a risk-free way to build up his retirement sum. However, taking the initiatives to perform these tasks had probably complicated the withdrawal limits/threshold. Therefore, Heartland Boy sought clarification from CPF to confirm his understanding on how the aforementioned schemes will affect his future withdrawal limits.

In Scenario 4, the CPF member can withdraw $5,000 from his OA and SA. (Rule No 1) Remaining amount of $115,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member will not be allowed to withdraw any savings from his RA as [$115,000 – $80,500 (BRS) – $80,000 (RSTU) = – 45,500 (Negative value).

In Scenario 5 and by applying Rule No 1, the CPF member can withdraw $9,000 from his OA and SA. [$90,000 + $80,000 – $161,000(FRS)] FRS of $161,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member can withdraw a further $500 from his RA as [$161,000 – $80,500 (BRS) – $80,000 (RSTU)]

In Scenario 6 and by applying Rule No 1, the CPF member can withdraw $89,000 from his OA and SA. [$170,000 + $80,000 – $161,000(FRS)] FRS of $161,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member can withdraw a further $500 from his RA as [$161,000 – $80,500 (BRS) – $80,000 (RSTU)]

In Scenario 7, the CPF member can withdraw $5,000 from his OA and SA. (Rule No 1) Remaining amount of $115,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member can set aside the BRS, with sufficient property pledge, to withdraw an additional $34,500 from his RA. [$115,000 – $80,500 (BRS)]

In Scenario 8 and by applying Rule No 1, the CPF member can withdraw $9,000 from his OA and SA. [$90,000 + $80,000 – $161,000(FRS)] FRS of $161,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member can withdraw a further $80,500 from his RA with a sufficient property pledge. [$161,000 – $80,500 (BRS)]

In Scenario 9 and by applying Rule No 1, the CPF member can withdraw $89,000 from his OA and SA. [$170,000 + $80,000 – $161,000(FRS)] FRS of $161,000 will be transferred to the RA. Based on RA withdrawal rule (Rule No 2), the CPF member can withdraw a further $80,500 from his RA if there is a sufficient property pledge. [$161,000 – $80,500 (BRS)]

4. SHOULD WE STILL PERFORM RSTU AND OA TO SA TRANSFER?

From the various scenarios illustrated, it is obvious that transferring from your OA to SA does not affect your withdrawal as it would have been under the plain vanilla scenario. Essentially, the perspective to adopt is that money already in your CPF has merely been transferred from an account that is more flexible (can be used for property and education) to an account that is more restricted in its purpose in search of higher interest rate. That is why Heartland Boy has been performing the transfer of OA to SA consistently as he has a long runway for his CPF funds to work harder in the Special Account. He was able to do so because he had bought his property early and know the monthly mortgage that he has to pay.

While cash top ups (RSTU) and CPF monies transferred from a giver’s OA to your SA or RA are not computed as part of RA Savings to meet the BRS requirement, let’s not forget that there is a personal tax relief for RSTU* and this allows one to reduce chargeable income. Well, you cannot have the cake and eat it too. Most importantly, if you are confident that you will amass the entire FRS from mandatory CPF contribution, you will be allowed to withdraw both your top up monies as well as your transfers as illustrated under Scenario 6 and 9. A good financial tip would be to monitor your annual CPF statement.

*Do note that CPF transfers from a giver’s OA to a recipient’s OA or RA does not attract tax relief.

CONCLUSION

The various CPF schemes available eventually seek to provide CPF members with a greater amount of retirement sum. Ultimately, it is important not to lose sight of the big picture. That is because the objective of CPF is to provide lifelong monthly income to meet retirement needs, and less about the amount that you can withdraw at 55.