May 18, 2007

A Quick Note About CPF and Retirement

A reader, Louis Tan, emailed to ask about the implications of the government raising the retirement age from, say, 62 to 65, 67 or 68 years. Yes, this signals to Singaporeans that they are expected to work longer before retiring. Apart from that, does it really mean anything?

Well, yes. It affects your CPF money.

How does the CPF work? You do not get to withdraw all your CPF money when you turn 55. First you must set aside a "Minimum Sum" and leave it in a "Retirement Account" with the government. At age 55, the only CPF money you can immediately withdraw is any excess you have, above the Minimum Sum.

When will you start getting your Minimum Sum back? When you reach the official retirement age. And then only in monthly instalments stretched over 20 years.

This is basically to ensure that in your old age, you can at least afford to buy your own rice and water, so that you do not become a nuisance to the government. Hopefully, you will die within 20 years of your retirement age, before your Minimum Sum runs out. Then the PAP government will not be responsible for your basic subsistence needs.

Now, what happens if the retirement age is raised? Obviously you'll have to wait longer before getting your Minimum Sum monthly instalments. For example, suppose the retirement age is raised from 62 to 68 years. You'll have to wait till you're 68 years old, before you can get your monthly cheque.

Since it is a long wait between your 55th and your 68th birthday, you will feel more motivated to continue working after you turn 55. Otherwise you may not have enough savings to last until your 68th birthday.

How much is the Minimum Sum? Currently it stands at $94,600. It will be slowly raised through the years, until it reaches about $120,000 in the year 2013 ($120,000 figure has not been adjusted for inflation).

If at the age of 55, your total CPF money is less than the then-prevailing Minimum Sum, then you get to withdraw nothing at all. Another reason to keep working.


Anonymous said...

Confirm or not?? Raise retirement age means CPF withdrawal age also raise???

Anonymous said...

It is silly, really... Not everyone can live till 62, let alone 68. And while working till the last days of your life is something that the govt is actively encouraging right now, personally, I don't think it's meant for everyone. Old people are especially prone to falling sick and with their existing health problems, even light work may not be suitable for them. The worst thing is, even if they have medical problems, they can't use their CPF money to tide them over.

Oh well... I suppose the best way is to earn as much as possible such that by the time you reach 55, whatever CPF money you can withdraw is virtually negligible.

Anonymous said...

Arh, upstairs anon, why else do you think they raise retirement age? By right whatever age you retire is your own business. When they announce raise retirement age, the only thing they want to tell you is no withdrawal of CPF yet

The only way to get CPF money out is to migrate right?

Anonymous said...

Wah lao!!! I didn't know lah! How come the Straits Times don't say this part one?! Damn dishonest lah!

Radikaz said...

why u read strait times in the 1st place?

Just to feel good?

Lucky Tan said...
This comment has been removed by the author.
Val said...

Mr Wang is getting productive..hehe..
It seems like in Sg we live to work eh..for Sg Pte Ltd.
I rather not live beyong 60..signz

Anonymous said...

My money is not my money.
My savings are not my savings.
The CPF is supposed to be my retirement fund, yet I cannot spend it. In this case, they should allow people to opt out. Sign a form saying that they won't ask for govt help after they retire and opt out of CPF.
We're educated enough and smart enough to do it. CPF is a legacy policy for our lesser educated predecessors who lived from day to day (BUILDING singapore if I might add), worked hard and didn't think about what tomorrow would bring.
The times have changed, the people have changed, but the govt still behaves like a bad parent.

A nation of sheep begets a government of wolves - Edward R Murrow

Anonymous said...

You forgot about the government being able to invest the CPF fund and getting returns over a longer period of time.

Of course, the interest obtained through that may not funnel down to the actual owners of the money in the fund.

Slawek Rogulski said...

Are self-managed Provident Funds allowed or likely to be allowed? I expect that those who wanted to manage their own fund would need to qualify as fund managers to be given that responsibility. Would a self-managed fund be better than a central one? The idea is that since it is your money, you as the owner should, or should have the option to, manage it.
This may sound a little philosophical, but I wonder if this is a correct assumption that people actually own their money or are they just loaned it out for the duration?
I also wonder if money is the only thing to provide for the future/retirement. It will nourish the body (water and rice) but what about the mind? Should it be let to go senile? And what of the spirit? Does it not need nourishment?

Gilbert Koh aka Mr Wang said...

CPF Act actually says that you start getting payouts from yuor Minimum Act at "age 60 or such other age as the Minister may prescribe".

In other words, it's up to the Minister.

The Minister has already prescribed it to go upwards, from the original 60 to 62, the current retirement age.

So when the retirement age is revised again, you can expect the Minister to _________.

[Fill in the blank]

Anonymous said...

A colleague once bought some furniture at Courts using their installment plan. He won a lucky draw, which was sufficient to pay for the furniture. Instead, he used the windfall to buy some hi-fi equipment, and he still has to service the 3 year loan. The reality is that many Singaporeans will blow their CPF on a overseas holiday rather than spread it out over their evening years. Not many has a 4 figure salary, double digit bonuses, stays in a subsidized HDB flat, and take public transport.

drwx .... my Linux travel step by step said...


many Singaporeans may blow their CPF on a overseas holiday rather than spread it out over their evening years.

BUT many Sinaporeans may not live pass 62.

BUT most (poorer) Singaporeans (who cannot afford high end medical attention) will not live pass 82.

Then how?

Your reality more real or their reality more real?

Anonymous said...

If you guys continue to behave and live like sheep, then you will continue to have wolves as leaders to tear your skin, feast on your meat, use your furs and wreck your bones.

Anonymous said...

Singapore’s life expectancy is among the highest in the world. Our growth rate in the proportion of elderly aged 65 years and over is one of the fastest. In 2030, Singapore would join countries like USA and Australia, experiencing high life expectancy and high proportion of older persons. According to this (, life expectancy at birth in Singapore is 77, or 22 years longer than 55. Even if one stops work at 62, there's still 15 years to twiddle one's thumbs, or bitching about the gahment, until finally kicking the bucket. Maybe we should bum around for a couple years after graduation instead of rushing to join the workforce so early.

Anonymous said...

Just like NS, CPF had long since since been corrupted from a noble ideal into a means of control over the citizens.

Actually, why are you even discussing this? You are just making the helpless feel worse.


Lucky Tan said...

I support the existence of CPF. If it doesn't exist something else has to be in place i.e. social security tax etc. Because if you trust people to be disciplined, you will find 30% are not and what are you going to do when that happens.

For example smoking, people know it is hazardous but find it difficult to stop. If the cigarette was invented in the 20th century (instead of 500 yrs ago) it would been banned outright by govts.

The problem with CPF is it has been tinkered with. The liberalisation for housing resulted in people having insufficient for retirement....hence later and later retirement. The second problem is that of low returns. The Chile govt actually put similar funds with professional fund managers and generate returns of 13%. The process is transparent and systematic.

It is easy to say get rid of CPF and lets count on individuals to responsible....the problem is people are generally responsible but the problematic 20-30% is enough to result in serious problems later on.

Even if the CPF had not been tinkered with, the issue of people not earning enough for basic living let alone retirement still exists ...the only solution is welfare, which is a dirty word in Singapore.

Anonymous said...

There is a danger of the wolves(as used in the postings here) to devour sicked< meatless and maybe even sheep carcases too! Just that wolves are as cunning as foxes and as such they will move to greener pastures themselves and leave the sheeps to starve and rot! Never think you own anything yet< you may have worked or paid for them> Take your HDB Flats for example< can you allow anyone to reside or rent it out as you like even you have paid fully for it? In another ten years or so< how many will have balance in their CPF Ordinary Accounts? Many will have negligible sums

Anonymous said...

The Social Security system, and other retirement systems, was created by Bismarck in the 1870s, with the intention of cooling down leftist fervor with a BLANK CHECK. As few people lived to that age anyways. IT was not intended as a welfare program...

Anonymous said...

If let's say they raise the retirement age to 65, would employers still want you, bearing in mind that the Government is going to let in another 2 million foreigners (mostly younger) fighting for jobs. If you cannot get a job, how are you going to survive the ten years from 55 to 65 years?

Anonymous said...

I think it's a good move by our money minded PAP. Here's a simple illustration:

1. Using Minimum Sum: $120,000 and withdrawal at 62.
2. Avg lifespan (male/female) till age 82.

Before raising retirement age:
From age 55 to 62, your $120,000 will compound at 4% p.a. for 7 years, resulting in about $158,000.
If you withdraw this amount equally for the next 12 months for 20 years to age 82, you get $658/mth.

After raising retirement age:
From age 55 to 67, your $120,000 will compound at 4% for 12 years, resulting in about $192,000. However, if you still use age 82 as lifespan, you will be withdrawing, for 15 years, $1066/mth. What if you had used 20 years (to age 87) for withdrawal? you still get to withdrawal $800/mth.

(NOTE: Calculation did not include inflation adjusted returns.)

So raising the retirement age can achieve a few objectives:
1. Create cheap labour force
2. Give the elderly something to keep their mind going senile
3. Earn their keep while growing their CPF so that when they really cannot work, they have more money
4. Reduce the dependency on government.

In fact, the government is under pressure to sustain the 4% p.a. retirement account because now they have to guarantee it for a longer period!

Gilbert Koh aka Mr Wang said...

It will be quite easily sustained in an aging population where a high proportion of senior citizens are childless.

Some of these old folks will die before their Minimum Sum runs out. If they have no surviving ildren or spouse, the remaining money will go to the government. Another convenient source of funds, to meet the 4% obligation to other not-yet-dead senior citizens.

Gilbert Koh aka Mr Wang said...

It will be quite easily sustained in an aging population where a high proportion of senior citizens are childless.

Some of these old folks will die before their Minimum Sum runs out. If they have no surviving children or spouse, the remaining money will go to the government. Another convenient source of funds, to meet the 4% obligation to other not-yet-dead senior citizens.

Anonymous said...

I am now in my early thirties, married, live in a HDB flat with my wife and kid. Assuming $120k spans over a 10yr period, it will be $500/mth. I honestly don't think this will be enough in 30 yrs time. And the scary thing is that many people are stretching themselves on property loans. How much will be left when they retire?

Anonymous said...

Sorry, typo above. should be 20yrs period.

Gilbert Koh aka Mr Wang said...

The $120,000 is not supposed to be "enough". It's just your "rice and water" money.

You still hav your other CPF money, over and above the Minimum Sum. And of course, you must have your own savings, beyond CPF.

Anonymous said...

Actually, the last para is not factually correct - you do get to withdraw at least $5,000. =P

Anonymous said...

the govt is smart. They collet all
our tax money and where does it goes? the defence budget, their ministeral and public salaries.
When U get old unable to work, you
are on your own with your money.
Don't depend on state money one cent.
No wonder the PAP got kicked out of
Socialis International years ago.
Their wonderful scheme was planned
that long ago

Anonymous said...

BTW, I think u'd failed to mention that when u croak, your nomination form would determine where ur remnants of your CPF would be distributed to.

And with all these sudden explosion of 'medical insurance' around, I guess even Civil Servants, who are supposedly covered under medical benefits (aka CSC) cannot depend entirely on it.

Self-reliance is the word here guys. Get life insurance (so in addition to ur CPF monies, ur descendants won't have much to worry), get medical insurance (so ur medical are covered), do some investments now rather than let it sit there and earn minimum 4% interest in SA and 2% in OA.

Everything is expected to shoot up, we can only suck thumb abt it. But sitting here and screaming abt it can't help. Depend on urself, not on others, not on govt, not on ur children. Is the key word. ;)