Announced in Budget 2024: CPF retirement sum ceiling to increase in 2025; Special Account to be closed for those aged 55 and above in 2025 – Wave Goodbye to 4.05% interest
Secure your future by being abreast of changes and options!
Mastering CPF changes: Your essential guide to assurance and security in your retirement
Clarity of changes and implications
Everything has its pros and cons. Ensure you are in the know of all the changes, and how it may affect your retirement plan.
How it may affect your retirement plan
Assess your retirement goals in light of the CPF changes. Consider factors such as the Enhanced Retirement Sum (ERS) and CPF Life payouts to adjust your financial plans accordingly. Once again, every decision has its pros and cons.
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What you need to know?
Changes to CPF-SA at Age 55
At 55, any CPF contributions meant for CPF-SA will now go into CPF-RA (up to the Full Retirement Sum, FRS, or Enhanced Retirement Sum, ERS). Even if CPF-SA funds are invested, once sold, proceeds will go into CPF-RA (up to FRS or ERS).
Enhanced Retirement Sum (ERS) Increased
ERS is now four times the Basic Retirement Sum (BRS), increasing to $426,000 in 2025.
Losing the flexibility and higher interest rate of CPF-SA can be frustrating, especially when these changes force you to lock your funds into CPF-RA, limiting your financial maneuverability at a critical age.
The higher ERS means needing to save even more to reach this new threshold, potentially straining your finances further just as you approach retirement.
Understanding CPF-RA and CPF LIFE
How CPF-RA Works:
Money in CPF-RA earns 4.05% interest but cannot be withdrawn and is paid out via CPF LIFE starting at age 65. CPF LIFE provides monthly payouts from age 65 until death, with payouts based on the amount in CPF-RA. Locking money in CPF-RA limits access to your savings, making it difficult to handle unexpected expenses or emergencies.
CPF LIFE Details:
From age 65 onwards, all interest earned from savings is allocated to the CPF LIFE pool, effectively no longer belonging to the individual. Upon passing, beneficiaries receive the CPF LIFE premium balance minus total payouts, along with any remaining CPF savings
Considerations for Topping Up CPF-RA:
If lifespan is shorter than age 75-76, you may lose money without considering the bequest. To achieve a 4%+ yield, you need to live until age 88-90.
Locking money in CPF-RA limits access to your savings, making it difficult to handle unexpected expenses or emergencies.
However, this interest supports lifelong payouts for those who outlive the average life expectancy, allowing for a potential 4%+ return if they live to 88 or 90. This means that if you pass away early, the return on your CPF LIFE investment is significantly reduced, potentially leaving your beneficiaries with less than expected.
The risk of not living long enough to fully benefit from CPF LIFE means your hard-earned savings might not provide the return you hoped for.
Secure Your Financial Future: Book a Free Consultation Today!
Before you go ALL IN to RA and to the ERS (just because “RA is giving 4.08%”), secure a consultation call with us to seek clarity. You have nothing to lose but lots of critical knowledge and great decisions to make!
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