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.
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On or after 1 Jan 2013, the cash balances can only be withdrawn after setting aside both the CPF Minimum Sum and Medisave Minimum Sum.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.