Martin Lee @ Sg
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CPF Withdrawal and the Minimum Sum Scheme

CPF Life is probably one of the most confusing and opaque product that has come out from CPF board in recent years.

To come up to speed with understanding CPF Life, let’s first look at how the current CPF withdrawal and Minimum Sum Scheme works. I have to put a big disclaimer here that the information presented here is correct at this point in time. Things change and if you are reading this some time after I wrote this, you will need to verify the information again.

cpf minimum sum

I won’t be covering all the different cases here as it will get too lengthy. If you fall outside the criteria mentioned, the rules will be slightly different.

You may apply to withdraw your CPF money one month before you reach 55 or any time thereafter.

On or after 1 Jan 2013, the cash balances can only be withdrawn after setting aside both the CPF Minimum Sum and Medisave Minimum Sum. The Minimum Sum will be moved to the Retirement Account (RA) and you can then withdraw the rest of the savings in your Ordinary and Special Accounts in one lump sum.

The current Minimum Sum is $117,000 and will continue to increase every year to factor for inflation. For reference, the Minimum Sum was $40,000 in 1995. This is a tripling of the amount in 15 years. If we project it forward, will we see the Minimum Sum at $350,000 in 15 years time?

Half the Minimum Sum can be in the form of a pledged property, with the other half in cash. I suspect the pledged property portion may be reduced slowly in time to come.

Under the system (before CPF Life), CPF will pay you a monthly income in the form of withdrawals from your RA starting from the Draw Down Age (DDA). The DDA will be 65 for those who are still 55 and below as at 31st Dec 2009. This monthly payout is expected to last about 20 years.

All these while, the monies in the RA will continue to earn interest from the CPF. If you were to pass away, the remaining money in your RA will go to your CPF nominee beneficiaries or to your estate (depending on whether you made a nomination).

More on how CPF Life will affect all these in the next post but just for interest sake, I actually saw this question in the CPF Q & A section:

Q: When will the draw-down age be increased to 67?

A: We will first take steps to raise the draw-down age up to 65 as announced, and decide on the next steps in the next review.

I wonder what the Draw Down Age will be by the time I finally retire.

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19 comments
Jake says a couple of years ago

CPF Life is not sustainable. In 10 years, the total payouts equals 100% of the amount put aside. The it continues to handout the same amount for a long as you live. To the individual, splendid. The best returns. As a policy, it is heading for a crash. Too good to be true. The only answer from the govenment is that it is gauranteed by the government. That means, cannot change government. Change or no change, it is not sustainable. The balancing act is the minimum sum that has no limit or formulae. Depends on what happens, no one can predict the future. What the scheme leads to is an entitlement mindset. By millions. Because it was promised 10 years ago. Then whatever good reasons you come out with amounts to illegitimacy. Trust is dropped. People get angry. This is not the generation who can accept 15% cpr rate cuts. Why? Our forefathers saw the nation from $0 to riches. They were prudent by nature. They can accept lesser bounty because they experienced being poor. The 2nd and 3rd generation are not bad people. They were just educated. And they question and they remember. And they also believe in good deals. especially when it is advertised profusely. Enough of them will not accept lesser promises to cause a change of government or just revolt. They feel cheated. And believe that the leaders knew what would happen and schemed it. Because the govt led by the PM is talking like insurance salesmen promising the moon. And make it compulsory. And then explain away how things are ever changing…so lets stay united and so on. No. It wont do. Too many are educate in Maths and financials. Yet scared to lose so join in. hen expect no less. That’s an unsettling society. That’ s revolt. So how? Be honest. Say what is and what is not. Not not choice and see how 10 years later. Then advertise, advertise and and advertise until most people buy in. That’s effective commercial advertisement. This is social policy. Many individual psychology do not add up to the same sociology. This irresponsible governing. The only way is to be truthfully uncertain upfront. Then people will accept outcomes, even if disastrous, because they heard their leaders’ plans and words, truthfully, not using advertising techniques.

Reply
Ah Soh says 6 years ago

Dear Martin,
What happens if a person who has had pledged his property for up to half the min. sum dies at say 60 / 65 / 70 yrs old?
Will his dependents be affected?
Thank you

Reply
    Martin Lee says 6 years ago

    Dear Ah Soh,

    Not really.

    In any case, when a person dies, all his assets will go to his estate and will be distributed in accordance with his Will, etc.

    Reply
Mohd kassim bin wahid says 7 years ago

Hi there i would like to find out whether i can witdraw some money from ra( retirement acct) as i will turn into 65 in two weeks time,,, appreciate your kind attention into these matters

Reply
    Martin Lee says 7 years ago

    Dear Mohd Kassim,

    You get a regular monthly payout from your RA, but not so much of a lump sum withdrawal.

    Reply
yuen kum mun says 7 years ago

I am just 61 of age. i had a heart attack last year around Nov. unable to work with no incomes n heavy medications for high blood n heart problems. can I opt for early withdrawal from my minimum sum to keep me survive for the time being? Hope u can understand my situation now and appreaciate to hear from you asap.

Reply
    Martin Lee says 7 years ago

    Hi Kum Mun,

    There are certain provisions (on medical grounds) where you are allowed to withdraw your CPF early (after setting aside a reduced Minimum Sum). Not too sure whether your current medical condition will qualify you but you can try talking to CPF board.

    Reply
Vivian says 8 years ago

Can withdraw the CPF money when the age of 50 ? Bcoz it’s been 20+ years didn’t work in singapore .

Reply
    lioninvestor says 8 years ago

    Vivian,

    Withdrawal age only starts from 55 (after setting aside the minimum sum).

    Reply
      lioninvestor says 8 years ago

      It also depends on when you hit 55 as the changes are phrased in.

      Reply
ttiatlen says 9 years ago

Assuming one had far *more* than the minimum sum, can one choose to leave the entire sum in the RA and continue to earn the CPF MA interest rate, even as one withdraws a regular sum?

Reply
CPF Life Questions says 9 years ago

[…] is a follow up on the earlier post on CPF Withdrawal and Minimum Sum scheme and will explore a couple of issues on CPF […]

Reply
James Tan says 9 years ago

Hi Lion,

I had earlier written in to CPF Board to give a compilation of the breakdown of the annual increase of $4,000 and adjustment for inflation. I received no reply but the web-site subsequently had the following info:

55th birthday on or after Minimum Sum (in 2003 dollars) Minimum Sum (after adjustment for inflation)

1 July 2003 $80,000 $80,000
1 July 2004 $84,000 $84,500
1 July 2005 $88,000 $90,000
1 July 2006 $92,000 $94,600
1 July 2007 $96,000 $99,600
1 July 2008 $100,000 $106,000
1 July 2009 $104,000 $117,000
1 July 2010 $108,000 } To be
1 July 2011 $112,000 } announced
1 July 2012 $116,000 }
1 July 2013 $120,000 }

Source : http://mycpf.cpf.gov.sg/CPF/my-Cpf/reach-55/Reach55-2.htm

Middle column is for unadjusted increase of $4,000 per year while right columnis taking into account the inflation rate. So, unlikely that the minimum sum will reach $350K by 2013. Of course, unless they change the policy again and decide to increase another 10 years. But think, how many people would have that amount in CPF when they retire?

My question that remained unanswered till today: How was the adjustment for inflation calculated? End 2008 saw the start of crisis and went into 2009, but look at the inflation figures. The adjustments are the highest for these two years. How do these compare against the CPI? Well, it’s really anyone’s guess how these adjustments are arrived at.

Reply
    lioninvestor says 9 years ago

    Hi James,

    No, the MS won’t reach $350k by 2013.

    I was talking more about 15 years from now, in 2025.

    In just 6 short years from 2003 to 2009, it has actually gone up close to 50% from 80k to 117k.

    They actually mentioned that the MS will always be increasing to factor for inflation.

    Reply
      James Tan says 9 years ago

      Hi Lion,

      Hmm, maybe, maybe not… To be honest, the minimum sum increase is inevitable, so long as the policies are tweaked in an acceptable way… There are people who withdraw half a million from their RA and within 2 years, go back to govt for public fund assistance… Ridiculous right??? But it is happenning… So it is because of people like that that the increase has to come in…

      Anyway, another thing we have to remember… When the baby boomers start retiring and withdraw funds all at one go, do you think CPF is able to pay out to everyone and still maintain a reserve sum for GIC to invest??? Plus, we have an aging population, the money going into CPF is getting smaller and smaller, so what to do??? No choice but increase minimum sum and increase DDA…

      But then again, DDA increase must be matched by increase in retirement age… This aspect not dealt with properly so DDA unlikely to increase in short run… Maybe we all have to work until we cannot walk… ha ha ha…

      Reply
        lioninvestor says 9 years ago

        Indeed…the majority might be working all their life. This is already happening now – you see a lot of elderly people selling tissues to make a living.

        Reply
SWN says 9 years ago

Hi Lioninvestor,

Does it mean that when one opt for CPF Life after 55, he is not required to set aside the minimum sum, unless his CPF Life is lower than the minimum sum, in which case he has to provide for the difference?

Reply
    lioninvestor says 9 years ago

    Hi SWN,

    Under the new system, part of the money you set aside in the Minimum Sum will actually go into CPF Life.

    Reply
Garrett says 9 years ago

Good recap. Looking forward to your post on CPF Life.

Reply
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