Financial News and Advice in Singapore

Beginner’s Guide To CPF Retirement Sums And How To Get There (2021)

|Posted by | CPF, Retirement Planning
Tags: , , ,

Everything you need to know about the CPF Retirement Sum and ways you can reach these milestones a little faster. 

If you haven’t heard by now, Singaporeans turning 55 in 2021 are expected to have at least S$93,000 in their CPF savings (excluding Medisave) to meet the Basic Retirement Sum. If you have more aspirational goals for your sunset years, this checks out at S$186,000 for the Full Retirement Sum and S$279,000 for the Enhanced Retirement Sum.

Start panicking if you’re 30 years old right now, because the Basic Retirement Sum could rise to nearly S$190,000 by the time you turn 55 (assuming a 3% increase year-on-year). Try not to imagine what the Full Retirement Sum and Enhanced Retirement Sum would look like.

It’s enough to want to make you go back to being a carefree kid but don’t cocoon yourself in your blankets just yet. Here’s everything you need to know about the CPF Retirement Sum and how to get there faster.

(Hint: It’s not actually that bad.)

What is the CPF Retirement Sum?

Simply put, the CPF Retirement Sum indicates how much of your CPF savings you should set aside in order to have lifelong monthly payouts (via CPF LIFE) during your retirement years. At this point in time, these monthly payouts are disbursed when you’re 65 years old.

The CPF Retirement Sum comes in three tiers: Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS). The following table illustrates the difference between the three tiers.

TierNotes
Basic Retirement Sum Reflects funds needed to support basic needs in retirement, assuming housing and other needs are provided for. 
Full Retirement Sum Equivalent to 2X Basic Retirement Sum
Enhanced Retirement Sum Equivalent to 3X Basic Retirement Sum 

Although the CPF Board sets a CPF Retirement Sum each year, there is no requirement to achieve this amount. There’s a level of flexibility offered as well, because you can continue to top up your CPF accounts on an ad-hoc basis. Think of these retirement sums as benchmarks rather than strict tiers.

Instead, you are simply asked to retain a portion of your CPF savings accrued throughout your working years, in exchange for a degree of financial stability during your retirement.

The more CPF savings you set aside, the more you will naturally receive each month during retirement (see below).

Remember that CPF LIFE is not your only option for retirement income. Depending on your career and financial portfolio, your CPF LIFE payouts may play a more or less significant role. It’s essentially a national lifelong annuity plan that everyone automatically has.

What is the significance of the CPF Retirement Sum?

Having said that, the CPF Retirement Sum should still be considered as an important benchmark because it determines your available options when you reach age 55.

You probably already know that at 55 years old, your CPF Ordinary Account (OA) and Special Account (SA) are combined to form your Retirement Account (RA), which is used to then fund CPF LIFE. You are also eligible for a lump-sum withdrawal at this time.

Now, the sum total of your OA and SA at this point would either be 1) equal to or higher, or 2) lower than the Retirement Sum.

If your OA + SA total is lower than the BRS, you are allowed to withdraw up to S$5,000, while the remaining goes to your RA.

If your OA + SA total is higher than the FRS, you are allowed to withdraw S$5,000 plus any amount in excess.

Additionally, you can make a property pledge to withdraw more of your CPF savings, but doing so will lower the monthly payouts you receive from CPF LIFE. 

Please note that the above is an extremely simplified explanation, and is simply meant to highlight the effect of the Retirement Sum when you turn 55 years old. This is only one part of the much larger overall picture of your retirement planning.

Also note that you can choose not to make any withdrawals at age 55, and instead have the entire sum put into CPF LIFE to receive correspondingly higher payouts in future. Alternatively, you may simply preserve the option to make a withdrawal at a later time.

But with great money comes great responsibility. Take into account the overall assets and liabilities that you have on hand before deciding which option is the best one moving forward. After all, the high level of flexibility is there for you to make the best decision possible. The money in your CPF accounts is hard-earned after all.

(For completeness, your OA + SA total at 55 will be transferred to your RA, up to the FRS amount. You’ll have to perform your own top-up via the Retirement Sum Topping-up Scheme (RSTU) to hit the ERS. No sum of money is automatically allocated towards that. The remainder in your OA and SA can be drawn down at your discretion.)

What are the prevailing Retirement Sums?


BRSFRSERS
2020S$90,500S$181,000S$271,500
2021S$93,000S$186,000S$279,000
2022S$96,000S$192,000S$288,000

The above table sums up the three Retirement Sum tiers for the next three years. As you can see, the sum goes up by about 3% per year, rounded to the nearest hundred. 

This increase is introduced to keep pace with inflation, so as to be a more accurate marker for retirement planning purposes. However, this is just a gauge and can be adjusted by the CPF Board to reflect economic conditions and/or life expectancy rates.

Check out how you can better prepare for retirement with this CPF SA shielding ‘cheat code’.

What are the effects of achieving the Retirement Sums?

Remember how we mentioned that the Retirement Sum you put aside will be used to fund your CPF LIFE payouts? Therefore, how much you put into your RA at age 55 will determine how much you receive each month when your CPF LIFE payouts start.

Here’s a simple illustration:

RA balance at age 55Estimated monthly payout from age 65
S$90,500 (BRS)S$580 – S$810
S$181,000 (FRS)S$1,070 – S$1,490
S$271,500 (ERS)S$1,560 – S$2,180

The important thing to know is this: you are not required to adhere to these three Retirement Sums. You can still receive lifelong income with any amount you happen to have in your CPF savings at age 55.

Heck, you can even be exempted fully or partially if you’re on a lifelong pension scheme or private annuity plan. However, this is subject to approval from the CPF Board.

Rather, think of the Retirement Sums as handy indicators for the quality of life you should expect in your golden years.

(For a more customised forecast, use the CPF LIFE Estimator.)

Obviously, this only works if you put in a reasonable amount that will generate a sustainable payout for you. But as mentioned at the beginning of this article, there’s nothing to stop you from setting up additional streams of retirement income, such as:

  • Purchasing an additional endowment or annuity plan
  • Investing in the stock market for dividends
  • Downsizing your HDB flat and putting the proceeds into CPF LIFE
  • Renting out spare rooms for rental income
  • Cashing out your life insurance policies upon maturity 

How can I reach my Retirement Sums quicker?

It must be said that so far, CPF LIFE is the best-performing annuity plan available to Singaporeans, being backed by Special Singapore Government Securities, which are guaranteed by the Government. MoneyOwl’s CEO, Chuin Ting Weber, has even gone on record to say that CPF LIFE’s payouts and returns are highly attractive, making it difficult for private annuity plans to compete with it.

Certainly, there are advantages to having CPF LIFE play a starring role in your retirement portfolio. The more CPF savings you put in, the better payouts you can enjoy.

So if you’re looking to reach your retirement sums quicker, consider the following:

#1: Transfer from OA to SA for higher interest

The base interest rate for your OA is 2.5% per annum. For your SA, it’s 4% per annum. As higher interest grows your money faster, transferring your OA funds into your SA will help you reach the Retirement Sums quicker.  

You’ll need to be below 55, with an SA balance lesser than the FRS to do this. Do note that any transfers made to your SA are irreversible, so you should only do this if you’re sure you won’t be needing your OA funds for housing or other purposes. Your OA funds are meant for short-term expenses after all.

#2: Make a Retirement Sum top-up

You may also — via the Retirement Sum Top-up Scheme — choose to make cash top-ups directly to your (or your family members’) CPF accounts, as summarised below:


AccountTop-up limit
Below 55SAFRS
Above 55RAERS

As an added bonus, you also qualify for tax relief of up to S$14,000 per year (S$7,000 for self, additional S$7,000 for top-ups made for parents, spouse or siblings). This essentially lets you kill two birds with a single stone, so if it makes sense financially to top up your account, why not go right ahead and do that?

#3: Grow your OA and SA funds via the CPF Investment Scheme

Another way to accelerate the growth of your CPF funds is through market investments via the CPF Investment Scheme (CPFIS). If you’ve been actively investing for years or have time on your side to hedge against market uncertainties, you might want to give this a shot.

Under this scheme, you may invest your OA and SA funds in a wide variety of investments, including unit trusts (UT), investment-linked policies (ILPs), exchange-traded funds (ETFs), bonds, and more.

However, please note that the investments offered under CPFIS are not guaranteed, and carry the risk of loss. Hence, if you are not confident of investing on your own, this method may not be for you. Furthermore, if your investment horizon is insufficient, you be might better off letting your CPF funds accrue interest instead.

See below for more details of the CPFIS.


Funds restrictionRestrictions and exclusions
CPFIS-OAFirst S$20,000 not allowed for investmentStocks limits: 35% of investible savings
Gold limits 10% of investible savings
CPFIS-SAFirst S$40,000 not allowed for investmentHigher-risk UTs and ETFs excluded.
Selected investment types excluded. 

If you’re looking to invest your CPF OA via a robo-advisor, you can do so with Endowus (the only robo-advisor approved for CPF OA investments at the moment).


EDM Lead Gen

Start managing and saving money like a pro with SingSaver’s weekly financial roundups! We dole out easy-to-follow money-saving tips, the latest financial trends and the hottest promotions every week, right into your inbox. This is one mailer you don’t want to miss.


Read these next:
A Complete Guide To CPF In Singapore
Complete Guide To CPF LIFE: Facts, Myths And How To Make It Work Harder
Pros And Cons Of Keeping Your Savings In Your CPF Special Account
7 Investments You Can Make Under The CPF Investment Scheme (CPFIS)
Singapore Savings Bonds (SSB) Guide: Interest Rates And How To Buy


By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.