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CPF likes to confuse people. With regards to just Medisave, there are 3 terminology:-
1) Medisave Contribution Limit — increased every 1st July, currently $39,500 as of 1st Jul 2010. If you already hit this limit, then any further Medisave contribution goes into SA (if you’re below 55) or into RA (if you’re >=55).
2) Medisave Minimum Sum — increased every 1st July, currently $34,500 as of 1st July 2010. If you turn 55 from 1st Jul 2010 to 30th Jun 2011, and you have more than this in your Medisave and you also meet the Minimum Sum (currently $123K), then you can take out the extra amount in your Medisave.
3) Medisave Required Amount — increased every 1st Jan, going to be $27,500 from 1st Jan 2011. This is to catch those people who have used a significant amount of their Medisave before they turn 55. For this group, when they turn 55, they need to have this amount in their Medisave before they can withdraw their CPF (assuming they can even meet the MS of $123K). So if they have more than $123K in their OA & SA combined, but less than $27.5K in their Medisave, they must use the extra OA+SA amount to top up their Medisave to the MRA quota, before they can withdraw the extra OA+SA that is above the MS. Hopefully you can follow. It’s quite simple really, just read carefully and think through.
Very rough example (may have mistakes!) :-
John is turning 55 in Feb 2011. He has $22K in Medisave and $100K in combine OA+SA. He decides to pledge his property to make up 50% of the Minimum Sum. So half of $123K i.e. $61.5K will come from his OA+SA and the other half will be from his property. That means theoretically he can withdraw $100K – $61.5K = $38.5K. But wait a minute! His Medisave does not satisfy the MRA! So he need to top up his MA from $22K to $27.5K first. That means another $5.5K taken from his $38.5K. So at the end of the day, John can only take out $33K for his 55th birthday present, even after pledging his property to make up 50% of the Minimum Sum.
If he didn’t pledge his property, John may not even be able to take out a single cent!
Of course for me when I turn 55 in 2025, the MRA will be $80K, the MMS will be $120K and the MS will be $350K. And I think these are conservative estimates!
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Dear Nuts,
I wanted to reply but guess you beat me to it. For the layman, all these can be super confusing and almost impossible to track.
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There seems to be some contradictions. Sometime ago the Medisave was increased but capped at $39500 and the minimum sum at $34500 at 55.
A friend of mine when he turned 55 he was able to take any money in excess of $34500 and therefore the above is correct.
But the new release is different. Now which is which is the correct.
I went to check my medisave account after seeing your article and I click on my medisave column and a message pops out saying from 1st July 2010, I have to maintain a minimum sum of 34,500 dollars before any money can be withdrawn when I reach 55. Looks like it has gone up more than what you describe.
ReplyDear Singaporean,
Nuts has answered your question. You can refer to his post.
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Is this mandatory increase yearly good or bad for us?
If is good, why not allow those who can contribute more to medisave a/c to do so and earn a higher interest rate in that a/c?
If is bad, then why still impose this increase yearly?
Dear Jasmin,
I always prefer cash on hand.
With a low limit, a person has the flexibility to choose whether to withdraw from his CPF, or leave it there.
With a higher Medisave Required Amount limit, he is obliged to top up the Medisave before he can draw on his money.
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