09 September 2019

Maximising CPF Post-55

It's really great to hear from the post-55ers on their interesting ideas and experience in maximising retirement benefits.  Here's one from 'Adam' that cropped up in a previous conversation which I found especially interesting ... (re-posted with edits):

OA: Ordinary Account
SA: Special Account
RA: Retirement Account
FRS: Full Retirement Sum
ERS: Enhanced Retirement Sum

How do you protect your SA money from being taken to form the RA upon reaching 55 years old?

As it stands now, money in the SA earns 4% pa of interest. Likewise money in the RA also earns 4% per annum of interest. For those 55 years old and above, CPF also gives 6% per annum to the first $30,000 in your RA, and 5% per annum to the second $30,000 in your RA, while the rest of the money in your RA earns 4%.

So for example, I have $176,000 in my RA, the interest my RA money would earn in a year is: $176,000 x 0.04 + $900 = $7,940. The $900 is derived from the 6% and 5% interest for the first $30,000 and second $30,000 respectively.

Now, the issue is, how to "prevent" the CPF from taking money from your SA to form the FRS in your RA when you turn 55?

Supposing I am now 54 years and 11 months old, and I have $230,000 in my SA. Next month, when I turn 55, CPF would automatically take $176,000 from my SA to form the FRS in my RA, leaving me with only $54,000 in my SA. I would rather that CPF take the $176,000 from my OA to form the FRS in my RA and leave my $230,000 in my SA intact to earn 4% interest pa.

Right on my 55th birthday, I woke up in the morning, logged in into my CPF account and lo and behold, my RA was created. At that time, the FRS was $161,000, and all the money came from my SA with a little leftover.

Right from the start, I had planned to top up my RA to ERS. If I were to use my CPF money to top up my RA to ERS, they would take money from SA first before taking money from the OA. Since I didn't want my SA to be hollowed out, I had to use cash ($80,500) to top up my RA to the then ERS of $241,500.

Every January 1st since then, I have been topping up my RA with $7,500 in cash, to keep up with the new ERS limit. The interest earned in your RA each year is not counted towards the new ERS limit. Let me explain:

This year the ERS limit is $264,000. By next year, it would be increased by $7,500 to the 2020 limit of $271,500. My current RA amount is $296,000 including the interests earned over the few years, but I would still be able to top up another $7,500 in January 2020.

So you can indeed continue to top up your RA to meet the new ERS amount of each progressive year up till you are 70 years old. 70 years old is the latest age at which you can join the CPF Life plan. 55 years old is the earliest age at which you can opt to join the CPF Life plan.
[This para may be misleading. Firstly, what Adam is saying is that a CPF member can choose to delay CPF LIFE payout till age 70. So up till then, top-ups to RA up to ERS are still possible. Secondly, a CPF member can decide which CPF LIFE scheme to select any time after age 55, up till a decision is made to begin payout (latest by age 70).]

The biggest hurdle (and pain) is the very first top-up from the FRS to ERS. For those turning 55 years old this year, the FRS is $176,000 and the ERS is $264,000, this makes the top sum to be a whopping $88,000!! This is no small sum and takes some saving effort to build up. So if you intend to top up your RA to ERS, you must plan and start saving early. After that first top-up, every year is $7,500, a more manageable sum.

How's that for maximising our CPF?

[Appended ...]
Stay tuned for next two weeks' posts on CPF Board's responses to some related queries.


Eeffocian said...

Hi there

I was under the impression that any amount above FRS or ERS (depending what you choose at age 55), you can withdraw that amount to your bank account. For eg. If your RA is $300k (SA + OA), and you decide on FRS, you can withdraw 300-176=124. Im guessing you don't want to withdraw that remaining balance and would wish to put it in SA to gather that additional guaranteed interest?

Unknown said...

Just visited CPF office. Once you hit FRS, no further money will be transferred from SA to RA. however if policy states that FRS will be increased then money will be transferred to RA till it reaches FRS. YOU can DRAW DOWN money from FRS to Basic retirement sum BRS. Eg I have 166k FRS. I can draw down to BRS which means I can take out 83k from RA. BUT the catch is I must return this sum back to CPF. Therefore I'm rewired to pledge my property to CPF eventho my property is fully paid and I'm debt free. When I sell my property or my beneficiary sell the property, 83K of the sale proceeds will then be returned to CPF. At this moment the officer claimed that only the borrowed sum must be returned to CPF. however policies keep changing thus it is possible that in the future, I will need to return 83k plus all interest accrued at prevailing rate to CPF. This is what I understand.

Anonymous said...

From the amount of your example $176,000, shouldn't the interest be $1,800 ($30,000 x 0.06) + $1,500 ($30,000 x 0.05) + $4,640 ($116,000 x 0.04) = $7,940?

Anonymous said...

don't understand what is this all about

Victor said...

Here’s a little clarification on the 2nd last paragraph of your article on the age at which you can join CPF Life plan. If you’re turning 55 this year, it’s compulsory for you to be in the CPF Life plan, i.e. you’re already in it, no need for you to join it. Six months before Payout Eligibility Age (PEA, currently at 65 for people who are 55), CPF Board will write to you for you to opt for 1 of 3 types of CPF Life Plan that suits you (each type with different monthly payout amounts and bequeathed amount in case of early demise). If you are deferring the start of the monthly payout till up to 70 years’ old (maximum age at which monthly payout must begin), you don’t have to indicate your option for type of CPF Life plan until just before monthly payout begins. For people born before 1 Jan 1958, CPF Life is not compulsory - they can choose to remain on the previous CPF Retirement Sum Scheme or opt to join 1 of the 3 types of CPF Life plan any time before they turn 80. More information is given here:
Victor Koo

Victor said...

This way of maximising your CPF returns as described in this article works only if you have spare cash lying around. Bear in mind that whatever you top up into your CPF SA is not reversible and you can only get monthly payouts from age 65 onwards. Another not so attractive way, if you have spare funds in your CPF OA account which you are not using for housing loan repayments, is to transfer OA funds, which earn min 2.5% interest p.a., to SA which earns min 4% interest.

Anonymous said...

Quite a number of mistakes in the post as pointed out by a few readers already. Plse do amend.

Anonymous said...

Victor I totally agree with your perspective as thats how I see it too.
Top up are irreversible and monthly payout are spread out example 29 years so the payout is too low
for you to retire with unless you have other cash park somewhere else to see you through

Anonymous said...

Same thoughts went to my mind to top up my SA beyond FRS and then when hit 55, only the FRS amount get transferred to RA and the rest still remain SA and earn 4% interest.
However, as earlier comment above indicated, CPF does not allow this loophole.
Can only top up to maximum of FRS when BEFORE age 55.
AFTER age 55, then can top up beyond FRS to ERS.
All top up after age 55 cannot be taken out as cash, will form the endowment lump sum when CPF Life payout starts.

Anonymous said...

Sorry, not endowment lump sum in above comment - should be lump sum premium for the CPF Life annuity.

Anonymous said...

What's the damn difference...you still cannot take out your hard-earned money

Anonymous said...

There is no loop hole so many smart alec. Think you can beat the scholars? What goes in cannot or very difficult to come out, unless you are sure you will live that long. Before you transfer or top up best to check with CPFB directly instead of hear-say from proclaimed expert then later cry father cry mother. Also goal post keep shifting and MS keep rising, got to consider these too.

CreateWealth8888 said...

Optimizing or maximizing our CPF is huge difference. Better to optimize

Lizardo said...


You're right. The excess can be withdrawn upon age 55. The views shared by "Adam" was in the context of him using CPF to achieve the best outcome with the risk-free interests offered by CPF scheme.

Lizardo said...

Unknown mentioned about drawing down to BRS (half of FRS). This will require pledging an owned property to do so. Of course, the eventual CPF LIFE payout will also be much lower as a result.

Lizardo said...


Not sure where the error was you referred to. What Adam said about the interest was indeed $7,940 as you've similarly computed.

Lizardo said...

Victor Koo,

Thanks for pointing out the subtlety. Indeed, it is not about "joining" CPF LIFE, since it is compulsory, unless one belonged to the older age groups.

And you're right, Adam's situation was that he was already close to age 55, and was examining how to maximise within CPF.

Transfer of OA to SA is only possible upto FRS amount up till age 55. He had already hit that limit. So he was exploring how to maximise his SA and RA (compared to OA) given their higher interest rates post-55.

Lizardo said...


Interesting. So is this maximising or optimising? Hmmm...

Lizardo said...


You seem to have concerns over the lock-up of CPF funds. If one does find the CPF scheme optimal and wants to get back your CPF as much as possible at the earliest possible, then I suppose the most viable approach is to pledge your property and go for BRS for RA at age 55, and withdraw all outstanding amounts thereafter in the OA and SA.

Anonymous said...

Hi Lizardo,

It is obvious that CPF is quite a "hot" topic among your readers even prompting many of them to comment and give their views. And kudos to you for your patience to craft an answer to each of them.

From their comments and views, it is apparent that the CPF Board has their work cut out for them to make their policies clearer and to reach out to a wider audience. The problem is further compounded by the changes or "fine tuning" of the policies by CPF Board over the years. Some may say "changing goal post!"

It is thus not surprising that there is lingering suspicion about the CPF scheme as a viable means to secure one's retirement. I treat the RA as one my retirement funds as it provides steady income without being subjected to the vagaries of the stock market.

I simplified the formula to calculate the interest earned in the RA and it is valid as long as the RA amount is $60,000 and above. For eg.

RA amount : $60,000, Interest earned = $60,000 x 0.04 + $900 = $3,300
RA amount : $135,000, Interest earned = $135,000 x 0.04 + $900 = $6,300

You can verify it with the more "complicated way".

And like UncleCW8888, I am a fellow OA millionaire.

There is one thing I would like the CPF Board to do. And that is, to let us know the interest earned in our various CPF accounts on a monthly basis instead of waiting till the end of each year. For people like us above 55 yo, and wishing to withdraw only the interest from our OA and SA, knowing the monthly interests earned from the two accounts would help us greatly in our planning and withdrawals.


Lizardo said...


Guess CPF touches all Singaporeans. As it should.
And thanks for your detailed sharing!