[YOUR LETTERS] CPF WEBSITE UNABLE TO EXPLAIN CPF POLICIES CLEARLY AND CONFUSE SINGAPOREANS

Dear editor,
 
My dad is semi-retired and he is very concerned about the latest changes in the CPF minimum sum scheme. Honestly, I'm only in my mid-twenties and CPF MS doesn't affect me much. 
 
Out of curiosity, I searched around the internet to understand more about CPF MS but I was very disappointed because the CPF website itself is so difficult to navigate and it does not explain itself well at all. It is very frustrating. The other sites I saw that talks about CPF MS is very political based and often bash political parties. I am not interested in those. 
 
But luckily I found this IM$avvy Facebook page that tried to explain CPF MS in a simple straight forward manner.
 
CPF board website is a failure because it cannot even explain things in a simple manner. Here are the extracts on MS from IM$avvy. I hope you can let more Singaporeans more about this: 
 
Q: What is the CPF Minimum Sum?
 
A: The CPF Minimum Sum refers to the amount kept in your CPF Retirement Account from age 55. This sum will provide you with a monthly income to finance your retirement needs.
 
Q: How does it affect me?
 
A: When you turn age 55, your accumulated CPF savings up to the Minimum Sum will be transferred into a new Retirement Account. Monthly payouts will be made to you from age 65 from this account.
 
Q: How much is the monthly income I can expect to receive?
 
A: Your monthly income depends on how much you have accumulated in your Retirement Account. The more you accumulate, the higher your monthly payout. For example if you have the prevailing Minimum Sum of $139,000 in your Retirement Account upon reaching 55 now, you will receive about $1,200 a month from age 65 until your Retirement Account is depleted. If you have a lower amount of, say $50,000, you will receive about $450 a month.
 
Q: Can I withdraw my savings before 65 years old?
 
A: Once you turn 55 years old, you can withdraw all your CPF savings above the Minimum Sum.
 
What if I have less than the Minimum Sum at age 55? Does that mean I can’t withdraw anything?
No, you can still withdraw $5,000 even if you have not saved up to the Minimum Sum.
 
How does that work?
Let us explain with some examples. Today, the Minimum Sum is $139,000.
 
Example A
If you have $250,000 in your CPF account at age 55, you may withdraw $111,000 (i.e. $250,000 less the Minimum Sum of $139,000).
 
Example B
If you have $50,000 in your CPF account at age 55, you may withdraw $5,000.
 
Example C
If you have $140,000 in your CPF account at age 55, the amount above the Minimum Sum is $1,000. However, as this is less than $5,000, you may still withdraw $5,000.
 
Q: Can I leave less than the Minimum Sum in CPF, and withdraw more of my savings at age 55?
 
A: You can if you have more than half the Minimum Sum, and own a property at age 55. You can then choose to pledge your property, to withdraw savings above half the Minimum Sum.  However, this means that you will receive less monthly payouts for your retirement from age 65.
 
Q: Why can’t I withdraw all my money at age 55?
 
A: Think of it this way. If we withdraw all our money at age 55, it is likely that we might allocate more for our immediate needs, instead of spreading our savings over our retirement. So, when we eventually stop working, we might not have enough for our daily needs.
 
We are inclined to underestimate how long we will live, after observing our elders, hearing stories about people with health problems, and looking at obituaries in the newspapers. What we forget, is that we belong to a younger generation that enjoys better health and nutrition, and are therefore likely to live longer than our parents and our grandparents.
 
Leaving our savings in CPF allows us to earn risk-free and higher interest rates than leaving our savings with a bank, providing us with a monthly income eventually, when we tend to need it most.
 
Q: If I do not have enough savings to meet my Minimum Sum, do I have to top-up?
 
A: It is not necessary to top up in cash to your Retirement Account to make up the Minimum Sum.
 
However, when you sell your property, the CPF savings used to buy your home plus interest* would be refunded to your CPF account to make up your Minimum Sum, before you receive the rest in cash.  
 
*This is the interest you would have earned on your CPF savings had you not withdrawn your savings for the property.
 
Q: How is the Minimum Sum set and why does it increase yearly?
 
A: The Minimum Sum is calculated to provide for the basic needs of a lower-middle income retiree. If we aspire to have a higher living standard, we must plan our finances carefully so that we have additional savings to provide for this when we retire.
 
As the cost of living increases every year, there is a need to increase the Minimum Sum with inflation to maintain the same standard of living. However, do note that once you reach age 55, the Minimum Sum applicable to you will remain fixed and does not get adjusted. The Minimum Sum amount adjusted subsequently only applies to younger members who have not reached 55 years of age.
 
 
 
 
Wee Cheong
 
 
 
.

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