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What is CPF LIFE and, are your savings in CPF LIFE sufficient for retirement in Singapore?

By 4th May 2019 May 23rd, 2019 CPF, Finance, Investment, Money, Retirement, Savings, Singapore
What is CPF LIFE and, are your savings in CPF LIFE sufficient for retirement in Singapore

What is the official retirement age in Singapore?

  • 55 years old – You are allowed to withdraw a certain amount of money from your CPF
  • 62 years old – The official retirement age in Singapore stipulated by MOM. You may continue working if you meet the re-employment criteria set by MOM
  • 65 years old – You can start receiving payouts from CPF if you meet CPF Retirement Sum. You may also choose to receive payouts later until the age of 70. However, CPF Board will start giving payouts at the age of 70 if you had not applied to receive payouts by then.
  • 67 years old – The maximum age you are allowed to work until should you meet the re-employment criteria and your employer continue to employ you until this age

What are CPF Retirement Scheme and CPF LIFE for?

CPF Retirement Scheme or CPF LIFE(Lifelong Income For the Elderly) is a pension scheme that is made up of contributions from yourself over the years. For Singaporeans born in 1958 and after, you are automatically enrolled into the new version of the CPF Retirement Scheme called CPF LIFE. On CPF Retirement Scheme, you get payouts until you are 95 years old while on CPF LIFE, you get payouts until your death.

There are 3 tiers in CPF LIFE and you can select the tier you prefer based on your desired retirement income. These are the current tiers for people turning 55 in 2019:

AmountMonthly payouts (standard plan)
Basic Retirement Sum (BRS)S$88,000S$730 to S$790
Full Retirement Sum (BRS x 2)S$176,000S1,350 to $S1,450
Enhanced Retirement Sum (BRS x 3)$264,000$1,960 to $2,110

CPF Life Payouts for retirement

Picture credit: https://www.facebook.com/CPFBoard/posts/10156872978750923

Given the high cost of living in Singapore, the Basic Retirement Sum gives you very little every month. Whichever tier you choose in your CPF LIFE, the amount needs to be in your CPF Retirement Account 6 months before you turn 65 and you can top up the amount if you wish to.

What is the cost of living in Singapore and how much do you need to retire here?

As everyone knows, being the most expensive city in the world, the cost of living is not cheap and it is not an easy job to retire comfortably in Singapore. Although, ultimately, how much you need for retirement boils down to the amount you are saving and spending from your current income and, the kind of lifestyle you want to live currently and in retirement.

Financial experts said that the needs for daily essentials vary across different income groups. However, they can estimate the monthly expenses for a basic lifestyle by only spending money on necessities such as

  • Utility and phone bills would cost up to S$300 a month
  • Food expenses are up to S$500 a month (without dining at restaurants)
  • Public transport fees are up to S$200 a month
  • Up to $500 for entertainment

Based on these assumptions, it can be estimated that monthly essentials for very basic daily needs would be about $1,500. This does not include housing as we made an assumption that most of the time by the age of 60 plus, most of the housing loans should be paid for.

If you are curious about how much you will need for retirement for the above-mentioned basic lifestyle, the followings are the basic calculations to retire comfortably.

A few assumptions for the calculations:

  • Average life expectancy in Singapore is 83 years
  • The basic monthly expenses during retirement are $1,500 SGD
  • The inflation rate of 2.5% per year
  • CPF monthly payouts are not accounted for
Retirement ageSavings needed to retire (after inflation)Equivalent value now (before inflation)Savings per month needed to retire
45S$1,885,930S$1,150,928S$7,858
50S$1,723,153S$929,452S$5,744
55S$1,540,267S$734,311S$4,279
60S$1,334,625S$562,372S$3,178
62S$1,245,339S$499,464S$2,805
65S$1,103,234S$410,878S$2,298
67S$1,002,724S$355,450S$1,990

Take note that on top of this, there may be other financial responsibilities that you may have to save up for such as housing loans, children’s education etc.

I have savings in my CPF for retirement. Aren’t they enough?

If you think you can withdraw all your savings from CPF one day, you are not the first one to get it wrong. You can withdraw your CPF savings only if your Ordinary and Special Accounts combined have less than $5,000 in total when you are 55 years old. Should you have more than $5,000 in your Ordinary and Special Accounts combined, CPF will merge the 2 accounts to form your CPF Retirement Account (RA).

Although you are able to withdraw money, there’s a minimum balance that must remain in the account. This amount is tagged to either the Basic Retirement Sum or Full Retirement Sum. Both sums change yearly and we will be using the current numbers which are applicable to those who turn 55 in 2019.

CPF balance at 55 years oldMinimum balance for property ownersMinimum balance for non-property owners
Less than S$5,000No limits apply. Able to withdraw everything
S$5,000 to S$176,000 (Full Retirement Sum)S$88,000 (Basic Retirement Sum)Only allowed to withdraw up to S$5,000
Over S$176,000 (Full Retirement Sum)S$88,000 (Basic Retirement Sum)S$176,000 (Full Retirement Sum)

How much should I save for my CPF Retirement Sum?

CPF Basic Retirement Sum increases every year and it’s been increasing at about 3.15% every year in the past. This is not a bad thing per se as CPF Retirement Scheme is responsive to the inflation.

Although the current CPF Retirement Sum may seem like a reasonable savings target to you, it is important to note that the sum may differ greatly by the time you retire and it is important to do a projection for your retirement if you are relying on the CPF Retirement Sum.

If you are turning 55 in 2041 and the CPF Retirement Sum continues to increase by 3.15% annually, it’s about 70% increment from the current sums.

Amount in 2019Projected amount in 2041
Basic Retirement Sum (BRS)S$88,000S$149,600
Full Retirement Sum (BRS x 2)S$176,000S299,200
Enhanced Retirement Sum (BRS x 3)$264,000$448,800

That is quite a lot of sum to save up for, isn’t it?

Other options for retirement planning

Interested in finding out how else to save for retirement? Check out our other article on retirement planning.

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