I went back, a couple of weeks ago.
Sometimes when you have some answers, they stir more questions inside that noggin and so I had to relieve my curiosity face-to-face with a CPF representative. See my original post for abbreviations and some context.
1. Growing the RA - Does the RA go away at age 65?
Context - Your RA is set up at 55 and monthly payouts start at 65. The payouts are part of the overall CPF Life annuity plan by the Singapore Government. Everyone's RA feeds into the CPF Life insurance pool to generate returns to fund everyone's monthly payouts.
Response - No. It's still there.
2. Growing the RA - So if I am working at 55 and into my 60s, are my CPF contributions going into the RA?
Context - You and your employer will still be liable for CPF contributions after you turn 55. Where does the money go?
Response - Yes and no.
If you have a shortfall in your FRS minimum sum at age 55, any contribution into the CPF will go into making up that shortfall. So that money goes into your RA.
If you have met the FRS minimum sum at age 55, CPF contributions go first into meeting the MA minimum sum, then the rest go into the OA.
Extra - You can keep the contributions coming in in your OA for withdrawal anytime, or you can transfer them to your RA so that you increase your RA contribution and hence receive higher monthly payouts later.
3. Growing the RA - Can I top up my RA? I don't see that function online.
Context - Apparently one can top up one's RA outside of any other top-up mechanism currently available.
Response - Yes you can. The function on the CPF online portal only becomes available when the RA is set up at age 55. You can top the RA by any amount up to the ERS maximum at any time thereafter.
4. OA after 55 - Can I use my OA for say my kids' education after the RA is set up?
Context - Is the OA still available after the RA is set up?
Response - Yes. All monies that exceed the FRS minimum sum amount on the year you turn 55 will go into the OA. You can use the money in whole or in part for whatever personal whims, fancies or reasons you have.
Where education is concerned, there is an 'education loan' aspect to CPF. Up to 40% of a parent's OA can be used to fund his/her child's tertiary education in Singapore at approved institutions. The child then has to pay back these funds with interest to the parent's OA after he/she graduates.
Given the earlier response re use of OA for personal reasons, the CPF doesn't need to know what you use the money for - be it a sports car, cruise around the world or kid's overseas education. So be savvy/stealthy and let's not go down the education loan route.
5. RA top ups after 65 - Can I make top ups to my RA after I start receiving payouts?
Context - If you come into a bunch of money later on in life, is CPF a worthy recipient?
Response - Yes you can make top-ups to your RA at any time. However, the impact of the top-ups after 65 will not have as much of an impact to your monthly payouts, as opposed to having top-ups done between the ages of 55 to 65 with a dedicated investment period via CPF Life.
6. Opting out of CPF Life - I read I can opt out of CPF Life. How?
Context - Yup it's possible. Shock and awe I know.
Response - Yes, you can opt out. This can only be done in person at age 65, and you must meet these criteria
- prove you have a monthly payout plan that gives you the same or higher monthly payouts compared to CPF Life payouts,
- plan must be from MAS-certified and recognised insurers based in Singapore, and
- payouts must be for life.
If approved, then you can withdraw all of your CPF at age 65 except for what's in Medisave.
In all likelihood, the stumbling block will be payouts for life requirement. Dividends from shares don't count.
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So with two visits down I am able to put together a Best Case Scenario to maximise your CPF payouts.
It's best to have the most money in your RA when you turn 55. That allows the biggest sum to grow for the next 10 years within the CPF Life insurance pool. The later you top up your RA, the less time for the top-up amount to contribute most effectively (via interest earned) to your final total at age 65 when payouts can start.
The ideal scenario is
(1) to always have your RA topped up to the ERS minimum sum from age 55 to age 65. This year 2025, the FRS minimum sum is $213k and hence the ERS minimum sum is $426k. If you hit 55 this year and have $213k in your RA, you can top up another $213k to meet the ERS number.
$426k in your RA at age 55 and topping up nothing else sort of guarantees you'll get about $3200 a month for life (on the standard plan, there are 3 payout plans) starting from when you hit 65.
Here's the interesting bit -
(2) As all the minimum sums go up annually, you are allowed to top up your RA to meet the new ERS limit. That's looking like a $16k top up each year. If you did that every year till 64, you'll be adding ($16k x 9) $144k to your RA as fresh funds.
Also you'll need to make these $16k top-ups in January so that the maximum return can be made in the year, versus making half the interest if the top-up is done in June with just 6 months in the (first) year to go.
With your initial sum growing with the top-ups and with interest applied, you would have contributed $807k or so to the CPF Life insurance pool by the time you're ready to receive monthly payouts at 65. (see chart below)
Consequently, with more money in the CPF Life pool, your monthly payouts would also now increase, to about $6k a month for life. (see screencap below from CPF monthly payout estimator) This is roughly double what you would get with ERS without annual top-ups (once again, based on 2025 minimum sum requirements).
Side note - $16k top ups, that's what your adult kids are for :)
How can one meet do a top-up to meet the ERS minimum sum? Besides an inheritance coming in or striking Toto, the easiest way is the sell one's property. Since most of us used our OA to pay for our homes, the funds from sale would go back into the OA as required by law.
It sounds dramatic but
- if selling one's home at age 54
- to have funds go back into one's OA by age 55
- to use these funds to top up the RA to meet the ERS minimum sum at age 55
- with enough of a OA balance to buy a likely smaller HDB flat, move in with the kids or live in Malaysia etc.
- to secure a more realistic monthly stipend way more than $2k a month
why not?
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Alrighty, that's about it for now. But wait, I was explaining this to a friend and he came back with a question about inheritance. I am going back to visit Maxwell CPF centre again. It's on the way to my yoga class, ok. Also it's ok to stress frontline civil servants out. Also I've not yet made a nomination.
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