For an updated version, refer to the article
HERE.
Dear Readers,
I would like to share with you an important issue I believe every Singaporean faces: What if I cannot hit my CPF Retirement Sum?
Answer:
NOTHING HAPPENS!
MORE LINKS
Fresh Year, Fresh Pessimism?
4 Things to know About Withdraw $ from CPF
5 Financial Things to do in your 20s
6 Points your CPF is like your Bond Portfolio
Reducing CPF Housing Accrued Interest
5 Things about CPF Nomination YOU SHOULD KNOW
Do not worry. If you do not hit the Retirement Sum (
FRS or BRS), there is no penalty involved.
You are also not required to top up the difference to CPF in the event you do not hit the Retirement Sum.
Yes! You are correct! It is not compulsory for you to hit your CPF Retirement Sum.
Whether you hit it or not, you would still draw a monthly payout from CPF when you reach your drawdown age (age 65). You will just receive a lower money payout from CPF.
The only problem is that you are unable to withdraw most of your money in your Retirement Account - you can only withdraw up to $5,000
But, you can pledge your property to withdraw money in excess of the Basic Retirement Sum (BRS).
The BRS on 2016 is set at $80,500.
If you pledge your property at age 55, you will be able to withdraw money in your CPF in excess of the BRS.
Eg: if you have $100,000 in your Retirement Account (RA) as of December 2015, you can withdraw up to $19,500 from your RA if you pledge your property to CPF.
We talked about the types of CPF Retirement Sum previously (Link
HERE)
Although the figures look daunting and achievable, there are actually not many serious consequences if you do not meet it.
Actually, you do not really need to hit the FRS.
A lot of people are actually looking at the FRS and wondering if they can ever withdraw the money above the FRS.
However, you can aim to hit just the BRS (for more info, click
HERE).
1) If you hit BRS with no excess money, you will still be able to withdraw up to $5,000.
2) If you hit FRS, you can pledge your flat to withdraw out the money in excess of the BRS.
3) If you have money above the FRS, you can withdraw the excess money out or you can keep them inside to receive ERS (for more info on ERS, click
HERE).
Personally, I would say aiming to hit the BRS is more achievable, possible, more satisfying and less daunting mentally.
1) It is a much lower target, hence an easier target to reach.
2) You still get a monthly payout, just not as much as FRS and ERS.
3) Yes, you cannot withdraw any money out. But, if you hit the FRS with no excess, you still need to pledge your house with CPF before you can withdraw the money in excess of BRS.
4) Of course, the more money you have in your CPF account, the money your dependents will get if you pass away before you finished the money in your CPF.
Instead of looking at the CPF minimum sum as a target where you can withdraw money at a certain age, look at it as a savings + annuity + life insurance plan.
We posted an article about how CPF is like insurance
HERE
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