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The Ultimate God Tier Guide to CPF: Everything You Need to Know

  • SG Retirement Specialist
  • Jul 1, 2024
  • 5 min read

Updated: Jul 29, 2024

Understanding the Central Provident Fund (CPF) is crucial for every working individual in Singapore. This comprehensive guide will take you through everything you need to know about CPF, including details and concepts that might surprise you. Whether you're new to the workforce, planning for retirement, or already retired, this guide will help you make the most of your CPF contributions.


CPF

But First, What is CPF?

CPF, or the Central Provident Fund, is a mandatory savings scheme in Singapore designed to help citizens and permanent residents save for retirement, healthcare, and housing. Both employees and employers contribute to CPF, making it a cornerstone of financial planning in Singapore.

CPF Accounts and Their Purposes

CPF savings are allocated into three accounts, each serving a specific purpose:

  1. Ordinary Account (OA): Used for housing, insurance, investment, and education.

  2. Special Account (SA): Reserved for retirement and can be used for investment in retirement-related financial products.

  3. Medisave Account (MA): Dedicated to healthcare expenses and approved medical insurance.

For retirees, these accounts become the foundation of financial stability, ensuring that their savings can support various needs during retirement.

4. Retirement Account (RA): The savings in your Retirement Account (RA) is meant to provide you with payouts in retirement. You can start your payouts anytime from your payout eligibility age of 65.



Ordinary CPF Account, MediSave cpf Account, Special CPF Account, Retirement CPF Account

Source: CPF Board


Singapore CPF Contribution Rate

Understanding the CPF contribution rate is essential for maximizing your savings. The contribution rates vary based on age and income. Here's a breakdown:

  • For employees aged 55 and below: The total contribution rate is 37%, with 20% from the employee and 17% from the employer.

  • For employees aged 55 to 60: The total contribution rate is 26%, with 13% from both the employee and employer.

  • For employees aged 60 to 65: The total contribution rate is 16.5%, with 7.5% from the employee and 9% from the employer.

  • For employees aged 65 and above: The total contribution rate is 12.5%, with 5% from the employee and 7.5% from the employer.

These contributions are divided among the OA, SA, and MA based on specific allocation rates that change with age depending on the individual.

Little-Known Facts About CPF


  1. CPF Interest Rates: The OA earns an interest rate of up to 3.5% per annum, while the SA and MA can earn up to 5% per annum. These rates are higher than typical savings accounts, making CPF a robust savings tool.

  2. CPF Investment Scheme (CPFIS): You can invest your CPF savings in various financial products, including stocks, bonds, and unit trusts, to potentially grow your retirement funds.

  3. Top-Up Benefits: You can top up your SA or your loved ones' SA through the Retirement Sum Topping-Up Scheme (RSTU) to enjoy tax reliefs and grow your retirement savings faster.

  4. CPF for Housing: You can use your OA savings to pay for your housing loans, reducing the financial burden of purchasing a home.

CPF for Retirees

For retirees, CPF plays a vital role in ensuring a comfortable and secure retirement. Here are some key aspects retirees should be aware of:


  1. CPF LIFE: This is an annuity scheme that provides you with a monthly payout for as long as you live, ensuring you do not outlive your savings. There are different plans under CPF LIFE, and you can choose the one that best suits your retirement needs.

  2. Withdrawal Rules: Upon reaching the age of 55, you can withdraw a portion of your CPF savings. The remaining savings will form your Retirement Account (RA) to provide you with monthly payouts from age 65.

  3. Retirement Sum: To determine your monthly payout, you need to set aside a retirement sum in your RA. The retirement sum can be adjusted based on your needs and the available plans.

  4. Medisave for Healthcare: Retirees can use their Medisave Account to cover various healthcare expenses, ensuring they have the funds needed for medical treatments and health insurance premiums.

  5. Silver Support Scheme: This scheme provides additional support to the bottom 20% of retirees who have lower CPF balances, ensuring they receive some financial assistance during retirement.


More about CPF LIFE:

There are 3 different plans that each individuals can choose: 1) LIFE Standard Plan 2) LIFE Escalating Plan 3) LIFE Basic Plan


About Standard Plan - The Standard Plan offers steady monthly payouts over the years. If keeping a fixed budget is your preferred approach, the Standard Plan suits your needs. However, this plan does not protect you against inflation, so you will have to buy less as things get more expensive in the years ahead.


Standard CPF Life Plan

Source: CPF Board


About Escalating Plan - The Escalating Plan has monthly payouts that start lower initially, but grow by 2% a year for life. This helps you maintain your desired retirement lifestyle even as the prices of items increase over the years.


Escalating CPF Life Plan

Source: CPF Board


About Basic Plan - The Basic Plan offers monthly payouts that start low and fall progressively when your CPF balances fall below $60,000. This means that individuals will have to lower your lifestyle and buy even lesser in the future.


Basic CPF Life Plan

Source: CPF Board


Maximizing Your CPF


To make the most of your CPF, consider the following strategies:

  1. Early Contributions: Start your CPF contributions early to take advantage of the power of compounding interest over time.

  2. Voluntary Contributions: Make voluntary contributions to boost your CPF savings, especially if you're self-employed or earning additional income.

  3. CPF Transfers: Transfer funds from your OA to SA to earn higher interest rates, helping you grow your retirement savings more effectively.

  4. Monitor Your CPF: Regularly check your CPF statements and updates to stay informed about your account balances and changes in contribution rates.

Planning for Retirement with CPF


  1. Calculate Your Retirement Needs: Estimate how much you will need for your retirement by considering your lifestyle, healthcare needs, and other expenses. Use CPF’s retirement calculators to get a clear picture.

  2. Set Realistic Goals: Set achievable goals for your CPF savings and adjust your contributions accordingly to ensure you meet your retirement targets.

  3. Stay Informed: Keep up-to-date with changes in CPF policies and contribution rates to make informed decisions about your savings.

Conclusion


The CPF is an integral part of financial planning for Singaporeans, offering a secure way to save for retirement, healthcare, and housing. By understanding how CPF works and implementing smart strategies, you can maximize your savings and ensure a financially stable future. Whether you are just starting your career or are already retired, CPF provides the tools and resources to help you achieve your financial goals. Start making informed decisions about your CPF today with a free consultation from SG Retirement Planning to enjoy a worry-free retirement tomorrow.



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