Navigating Your CPF Special Account Closure at Age 55: Key Steps to Maximize Your Savings

[This is my observation and not deem to be Financial advice. Please check with your trusted independent financial adviser rep for details]

Recently, there has been a significant change in CPF regulations that impacts members aged 55 and above. We’re here to help you understand this transition and provide guidance on managing your funds effectively.

 

 

What Happens to Your SA Savings?

Your SA savings will be transferred as follows:

  • Retirement Account (RA): Savings up to your cohort’s Full Retirement Sum (FRS) are transferred to your RA, continuing to earn at least 4% interest per annum. This ensures your retirement savings grow steadily. However, note that this 4% is not guaranteed and subject to adjustment by CPFB, although it is considered a risk-free investment guaranteed by the Singapore government for retirement purposes.
  • Ordinary Account (OA): If you have met the FRS, any amount exceeding your FRS is moved to your OA, earning 2.5% interest per annum and available for withdrawal.

 

 

Why This Change is Significant

For retirees relying on the 4% interest income from CPFSA, this change could be impactful. For example, assuming a retiree has $300,000 in CPFSA generating $1,000 per month in interest, the new changes will reduce monthly interest income to $625—a significant 37.5% drop.

To help you navigate this transition, let’s explore the options available to maximize your OA funds.

 

 

 

Making the Most of Your OA Savings

  1. Maintain Your OA Savings (Do Nothing)
    • Your SA funds will automatically move to your OA, earning a guaranteed 2.5% interest p.a.
    • You can withdraw these savings anytime after meeting your FRS requirements.
  2. Boost Your Retirement with Higher Payouts
    • Transfer OA savings to your RA, up to the Enhanced Retirement Sum (ERS), to enjoy higher CPF LIFE monthly payouts.
    • For example, a CPF member turning 55 in 2025 who has set aside the ERS of S$426,000 could receive S$3,080-S$3,310 monthly from age 65, or S$4,080-S$4,420 monthly if payouts start at age 70.
  3. Invest Your OA Funds (CPFIS)
    • If you have at least S$20,000 in your OA, consider the CPF Investment Scheme (CPFIS). You can invest in options like T-bills, Dividend Stocks, Singapore REITs, and Unit Trusts, conveniently online or with help from licensed financial advisors to build a diversified dividend income portfolio tailored to your investment objectives, current family financial situation, and risk profile.
  4. Invest Your OA Funds Outside of CPFIS (Withdraw from OA as Cash and Invest)
    • You have the flexibility to invest outside of CPFIS, accessing a wider range of options and potentially higher returns.
    • For example, Singapore bank stocks pay annual dividends between 4-5%, Singapore REITs 4-10% annual dividends, Private Credit Alternative Investments 7-10% annual interest, Private Equities Fund and Digital Funds generate 10-25% p.a. return.
    • However, it’s important to note that you forego the guaranteed 2.5% interest p.a. on those savings, and there are associated risks with these investments. CPF OA is considered risk-free, and the higher returns from these investment options compensate for the associated risks.
    • Alternative Investments are limited to Accredited Investors only. Please make sure you speak to licensed financial advisors specializing in Alternative Investments to understand the Investment Thesis and pros/cons of the investment.
  5. Withdraw for Immediate Needs
    • If you’ve met your FRS, you can withdraw funds from your OA to meet any urgent financial needs. CPF OA can serve as a good parking facility for your emergency fund.
    • Remember, you can choose to leave the remaining balance in your OA to continue earning 2.5% interest p.a.

 

Plan Ahead with Confidence

The closure of CPFSA is not the end of the world. There are many options available to optimize your cash return to beat inflation and make your money work harder for you during retirement. However, retirees must have proper risk management in place while generating higher returns from their retirement portfolio.

You can view the amounts transferred to your RA and/or OA by logging into your CPF account on the CPF website or the CPF Mobile application.

Make sure you take action now to secure your financial future!

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Loh Kok Keong Kenny

Kenny Loh is a distinguished Wealth Advisory Director with a specialization in holistic investment planning and estate management. He excels in assisting clients to grow their investment capital and establish passive income streams for retirement. Kenny also facilitates tax-efficient portfolio transfers to beneficiaries, ensuring tax-efficient capital appreciation through risk mitigation approaches and optimized wealth transfer through strategic asset structuring.

In addition to his advisory role, Kenny is an esteemed SGX Academy trainer specializing in S-REIT investing and regularly shares his insights on MoneyFM 89.3. He holds the titles of Certified Estate & Legacy Planning Consultant and CERTIFIED FINANCIAL PLANNER (CFP).

With over a decade of experience in holistic estate planning, Kenny employs a unique “3-in-1 Will, LPA, and Standby Trust” solution to address clients’ social considerations, legal obligations, emotional needs, and family harmony. He holds double master’s degrees in Business Administration and Electrical Engineering, and is an Associate Estate Planning Practitioner (AEPP), a designation jointly awarded by The Society of Will Writers & Estate Planning Practitioners (SWWEPP) of the United Kingdom and Estate Planning Practitioner Limited (EPPL), the accreditation body for Asia.

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In compliance with the Personal Data Protection Act, Financial Alliance Pte Ltd (“FAPL”) seek your consent to collect and use your personal data (e.g. name, NRIC, contact numbers, mailing addresses, email addresses and photograph) for the purposes of and in accordance with FAPL’s Data Protection Policy, which can be found on FAPL’s website at https://fa.com.sg/data-protection-policy/.

根据《个人数据保护法》,鑫盟理财私人有限公司征求您的同意向您收集并使用您的个人信息。鑫盟理财将根据公司的个人数据保护政策所阐述的用途使用您的个人资料(例如姓名,证件号码,联系电话,邮寄地址,电邮地址和照片)。 该政策可在本公司网站上查寻,网址为 https://fa.com.sg/data-protection-policy/.

By submitting this form, you are deemed to have read and understood FAPL’s Personal Data Policy.

提交此表格,即表示您已阅读并理解鑫盟理财私人有限公司的个人数据政策