Invest 101

Should You Keep Your Excess Savings In CPF OA Or Withdraw Them When You Turn 55 From 2025?

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By now, most Singaporeans should be aware that their CPF Special Account (SA) will be closed when they turn 55. Their SA savings will be transferred to their Retirement Account (RA), up to the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS). Any remaining SA savings will be transferred to their Ordinary Account (OA).

This will start from 2025, and there will be a one-off move to close the Special Account of all seniors 55 and above. Manpower Minister Dr. Tan See Leng detailed that close to 720,000 members will be affected by this move. The median withdrawable SA balances these members is about $2,000,

At this stage, you have three main options for how you want to manage your excess SA savings:

Read Also: 6 CPF Changes Announced In Budget 2024

Option 1: Keep Excess SA Savings In OA

The first option is to keep your excess SA savings in your OA. You can continue to receive the prevailing short-term interest rate (2.5% p.a.) on your excess SA savings as it remains withdrawable on demand.

This could be a good option for those without any specific uses for the monies. Based on the December 2018 Retirement and Health Study by CPF Board, about 51% of the CPF members (aged 55 to 70) who made cash withdrawals kept the funds in the savings accounts of banks and finance companies.

Compared to the base interest rates of around 0.05% p.a. on most bank savings accounts, leaving the monies in your CPF OA, would generate superior returns. Additionally, the savings in the OA are also protected under the CPF Act from claim by creditors.

Read Also: 8 Types Of Investments You Can Make Using Your CPF OA Monies Via The CPFIS-OA

Option 2: Top Up RA To ERS Limit

The second option is to use the excess savings to top up your RA to the ERS limit. From 2025, the ERS will also be revised to four times the Basic Retirement Sum (BRS), compared to three times currently. This means you can contribute up to $426,000 (4xBRS) instead of $319,500 (3xBRS) in 2025.

This might be suitable for those concerned about longevity risk and wish to receive higher retirement payouts. For members on CPF LIFE, arguably the best annuity plan on the market, topping up the excess SA savings into your RA would enable you to receive a higher monthly payout.

Additionally, unlike private annuity plans, there is no minimum amount of CPF savings required to join CPF LIFE. This means you can top up any amount to your RA – which will be used to pay for the premiums on your CPF LIFE plan – for higher payouts at your withdrawal age for life.

For example, a 55-year-old male with $213,000 in his RA and on the CPF LIFE Standard plan in 2025 will receive a monthly CPF LIFE payout of around $1,670 at age 65. If he chooses to top up his excess SA savings of up to $213,000 into his RA (up to the new ERS limit of 4xBHS), he would instead be able to receive a monthly CPF LIFE payout of around $3,330. This is $800 more than if the ERS limit in 2025 stayed at $319,500 (3xBRS).

Savings At 55 Years Old (In 2025)
Monthly CPF LIFE Payouts From 65

$213,000
$1,670

$319,500
$2,530

$426,000
$3,330

However, it’s important to note that topping up your RA is irreversible. Therefore, you should first consider your liquidity needs before deciding on the amount of CPF LIFE payouts that you wish to receive.

While your beneficiaries will receive any shortfall between your CPF LIFE premium and the payout you have received, any interest earned on CPF LIFE premiums will not be passed on to them. This is because the premiums are risk-pooled to ensure lifelong monthly payouts to all members on CPF LIFE.

Read Also: Complete Guide To CPF Interest Rates: Ordinary Account, Special Account, Retirement Account, MediSave Account (And Extra Interest Rates)

Option 3: Withdraw Excess SA Savings

Finally, you may also withdraw all your excess SA savings. If you wish to do this, it may be useful to note that you don’t have to make a lump sum withdrawal, and can make partial withdrawals on demand over any period of time.

One reason for withdrawing excess SA savings could be to earn better short-term interest rate compared to what you can get on the OA (2.5% p.a. currently). This could mean investing in safe instruments such as Treasury bills (T-bills), Singapore Savings Bonds (SSBs), or even riskier products like stocks, exchange traded funds (ETFs), and unit trusts.

If this is your intention, you may not need to withdraw your excess CPF savings if they are available via the CPF Investment Scheme (CPFIS). Investing this way allows you to keep your savings within the CPF system. Additionally, should market interest rates fall from the current highs, you could switch your savings back into OA and earn the prevailing rates.

However, withdrawing your monies to invest outside the CPF system is also irreversible. You will not be able to contribute the same amount back into your OA to earn the prevailing OA interest rates. Any voluntary contributions would follow the allocation rates for mandatory CPF contributions, which stipulate a smaller portion to the OA. Moreover, there is also an annual cap of $37,740 for Voluntary CPF contributions.

Alternatively, for members with higher CPF balances beyond the revised ERS limit, you could transfer your excess SA savings to your family members up to their FRS. You can continue earning higher interest rates as a couple/family compared to what you can get in your OA.

Read Also: CPF Special Account: 10 Things You Need To Know About It

Make Your Decision Based On Your Needs And Retirement Objectives

The closure of the SA account was meant to ensure that only CPF savings committed to long-term retirement earned the higher long-term interest rate. In lieu, members have other options, such as topping to the higher ERS cap for higher monthly payouts, holding the monies in OA and continuing to earn the short-term interest rates while retaining liquidity, or withdrawing the excess SA savings for other uses.

The CPF system holds many benefits in ensuring our retirement needs are best served based on our level of savings. When considering our options, we need to factor in our retirement needs and objectives beyond the loss of interest between SA and OA rates. This will enable us to optimise the best outcome for our retirement needs.

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