If you’re in your 30s like I am, retiring in Singapore is the stuff of nightmares. By the time our retirement rolls around, the old folks selling cheap hawker food and kopi will be long dead and gone. What will life be like then? And how can we hope to afford it?

So it’s really important for us to understand CPF Life, which is the default retirement plan for Singaporeans. In fact, it’s probably the only retirement plan for some people. (Having kids and hoping they’ll be filial to you doesn’t count.)

Let’s find out what CPF Life is all about, what you need to join the scheme, and what the payouts are like. Warning: It’s a long read.

Disclaimer: All information is taken from CPF’s website and processed to the best of my abilities. If you spot any factual errors or ambiguities, please feel free to correct me.

What is CPF Life? How is it different from CPF Minimum Sum?

CPF Life is the current incarnation of the Central Provident Fund’s retirement scheme. Previously, the retirement scheme was called the CPF Minimum Sum Scheme, later renamed as the CPF Retirement Sum Scheme.

The old scheme is being phased out, so CPF Life will be the default scheme for most of us.

But in case you’re curious…

The older CPF Retirement Sum Scheme draws its payout from your CPF Retirement Account (RA), essentially treating it as a retirement fund. But this means your payouts will stop when your account balance dwindles to $0. As of 2019, the Retirement Sum Scheme payouts will end by age 90.

CPF’s new scheme, CPF Life (Lifelong Income For the Elderly), works differently.

First, you need to pay a lump sum premium, deducted from your RA, when you join the scheme. This means there’s a chance your Retirement Account will be depleted right from the start. 

On the other hand, as the “Lifelong” bit suggests, your retirement payouts will never stop.

In short, CPF Life is a much more attractive retirement scheme for the simple reason that you just don’t know how long you’ll live. So even if you get bitten by Edward Cullen and become immortal, you won’t run out of money.

Who is eligible for CPF Life? How do you sign up?

Can’t wait to sign up for CPF Life? Chill out. There’s no need to look for a sign-up link frantically, because, guess what, you’ll be automatically enrolled in the scheme!

Anyone who meets these criteria will be auto-enrolled in CPF Life:

• Singapore citizen or PR
• Born on Jan 1, 1958 and after
• At least $60,000 in your CPF before age 65

If you’re not automatically placed on CPF Life for some reason, you can still opt in for CPF Life anytime from age 65 to 79. (Yes, even if you’ve already started receiving Retirement Sum payouts!) Here’s how:

• Login to my CPF Online Services with your SingPass
• Click on My Requests > CPF LIFE > Apply for CPF LIFE
• The cut-off date is one month before your 80th birthday

What’s the minimum sum you need to join CPF Life?

Here’s where things get slightly complicated.

There is no minimum amount of CPF savings you need to join CPF Life. I repeat: There is no minimum sum required to join CPF Life.

But if you join CPF Life with only a small amount of CPF savings, you’ll get correspondingly small monthly payouts. Which may defeat the purpose of a retirement plan.

Here’s a table from CPF that illustrates this. Let’s say you join the scheme at age 65 with $60,000 in your account. Your estimated monthly paycheck is just $350 to $370 — not exactly comfortable…

*CPF Life 2022 Table taken from CPF website

So, while there’s technically no minimum amount to join, CPF Life is really only worthwhile if you have enough CPF savings to fund the retirement payouts you want.

Use the CPF LIFE Estimator to calculate the amount you need, then top up your Retirement Account before you join.

Hang on, does that mean you can withdraw the rest of your CPF?

There’s no minimum required to join CPF Life… but there is a minimum sum you cannot touch when you reach age 55. Meaning you cannot withdraw your CPF savings to buy a private island. Sorry.

This 'can-see-but-cannot-touch' money is called the CPF Retirement Sum. Actually there are three Retirement Sums: Basic, Full (Basic x 2), and Enhanced (Basic x 3). They increase every year. Here’s a table showing the current sums for those turning 55 soon:

So how much can you withdraw from your CPF then?

If you own a home in Singapore

• You can withdraw CPF savings above the Basic Retirement Sum (so if you’re 55 this year with $200,000 in CPF, you can withdraw up to $200,000 - $96,000 = $104,000)
• The property’s lease must last you up to age 95
• If you sell your home in the future, you must top up your CPF up to the Full Retirement Sum

If you do not own a home

• You can withdraw CPF savings above the Full Retirement Sum (meaning you can withdraw up to $200,000 - $192,000 = $8,000)
• This also applies to home owners who do not want to top up their CPF after selling their home

If you have less than the Basic Retirement Sum in your account, you can withdraw up to $5,000 at age 55.

READ ALSO: Past your mid-40s and buying a property? Here are 5 things you must know

How much CPF Life payouts will you get when you retire?

Now let’s move on to how much you can actually get from CPF Life and when you can actually see the money.

First, I need to emphasise that you will only start getting CPF Life payouts from age 65 (you can defer this payout age up to age 70). So if you retire before 65, you’ll need some kind of income stream until then.

With that out of the way, CPF Life payouts simply depend on two variables:

1. Your CPF Retirement Account balance
2. Which CPF Life plan you choose

Point one is straightforward. The more you have in your CPF, the higher your payouts. I’m just going to paste the same CPF Life payout table again — it indicates the payouts for any given amount of retirement savings. 

*CPF Life 2022 Table taken from CPF website

The payouts are pro-rated, so you won’t rugi. No need to worry about hitting this or that tier.

If you’re not retiring anytime soon, it’s better to use the CPF Life Estimator to calculate your expected payouts, since they change every year. You can also put in your desired monthly payout and it will tell you how much you need to have in your RA to get that. Nifty.

Now, on to point two…

CPF Life Standard vs Escalating vs Basic plans: which is better?

Yes, there are different CPF Life payout plans! Mind blowing, huh? 

1. CPF Life Standard Plan

• 100 per cent of your RA savings will be used to pay a lump sum premium when you join
• You then receive stable monthly payouts for life
• This is the simplest plan to understand and therefore the default plan we normally see in CPF Life illustrations. But it’s not the only plan!

2. CPF Life Escalating Plan

• 100 per cent of your RA savings go into the lump sum premium
• Payouts start out lower than that of the Standard plan
• Every year, they increase by 2 per cent to keep pace with inflation, eventually overtaking that of the Standard plan

3. CPF Life Basic Plan

• Only 10 to 20 per cent of your RA savings is deducted for the CPF Life premium; the rest remains in your RA
• Monthly payouts come partly from CPF Life and partly from your CPF RA savings
• Once your RA falls below $60,000, your monthly payout will decrease
• This is a 'legacy' plan and is likely to get phased out in the coming years

Which one to choose? Well, it’s a no-brainer to choose the Escalating Plan if you can. It’s tough enough having to cope with inflation while you’re working — just imagine what it’d be like in old age. No thanks!

The one problem is that the starting payout is significantly lower than that of the Standard plan payouts. If you’re going for this, you’ll want to pump more money in your RA to afford a decent standard of living.

In any case, choose carefully because you can only switch plans within 30 days of joining the scheme. To request a change within the 30-day timeframe, request it on the CPF website via My Mailbox.

What if you want higher CPF Life payouts?

If you’ve done the calculations and found your projected CPF Life payouts rather dismaying, there are two ways to boost them from within CPF.

1. Top up your CPF Retirement Account

Remember: The higher your RA balance, the higher your CPF Life payouts. You can increase your retirement income by topping up your RA with cash, up to the Enhanced Retirement Sum (currently $288,000).

Don’t worry — you can even do this after CPF has already deducted the premium for CPF Life. After the top-up has been credited, you can submit an “Apply to Increase CPF Life Premium” form.

2. Defer CPF Life payout date

By default, we start receiving CPF Life payouts at age 65. To increase your payouts, you can defer the payout starting date up to age 70.

This gives your retirement savings up to five more years to grow in your CPF. You end up with a larger lump sum premium which, in theory, results in larger payouts. However, you need to write it to CPF via My Mailbox to get an estimate of your new payouts.

To defer your CPF Life payout date,

• Login to my CPF Online Services with your SingPass
• Click on My Requests > CPF Life > Apply to Defer CPF Life Payout

If you have exhausted these options or are unwilling to pursue them, we have some more options in the final section — scroll down.

What happens to your CPF Life when you die?

Receiving monthly payouts for life sounds very well and good, but what if you die shortly after you start receiving CPF Life payouts?

Apart from the tragedy of dying while there’s so much life ahead of you, there’s also the matter of what happens to the payouts you were supposed to get.

Before you start posting on Facebook about the evils of CPF — no, CPF won’t just quietly absorb everything and put it towards nation building.

READ ALSO: 15 ways to help your parents plan for their retirement

Instead, CPF will refund the unused portion of your annuity premium back into your CPF account. This amount, along with any CPF Retirement Account savings left over, will be bequeathed to your CPF nominee(s) in cash (by default) or their CPF (if you so choose).

If you haven’t made any CPF nominations at the point of death, the money goes to your next-of-kin according to Singapore’s intestacy laws.

Is it possible to opt out of CPF Life?

Most of us will be automatically placed on CPF Life once we retire, whether we like it or not. Is there any way to opt out of the scheme?

Yes, you actually can — if you buy your own retirement insurance (aka private annuity) plan. In fact, you can be exempted from the CPF Retirement Sum as well.

But not just any plan will do. To apply for exemption:

• You must be age 55 and above
• Your private annuity must give you lifelong monthly payouts
• The annuity can be paid using cash or under CPF Investment Scheme
• The monthly payouts need to meet certain benchmarks (example: A 55-year-old male must receive $1,534/month from the private annuity to be fully exempted)
• You may be fully or partially exempted depending on how much payouts you get

Otherwise, you can only leave CPF Life under the following circumstances:

• Medical reasons (e.g. terminally ill, physically/mentally incapacitated)
• You are leaving Singapore and West Malaysia permanently with no intention of returning
• You are a Malaysian citizen and have left Singapore permanently for West Malaysia

If you successfully leave the scheme, CPF will refund the unused portion of your CPF Life premium minus any monthly payouts you’ve already received.

How to supplement CPF Life with your own plan?

There is a maximum for CPF Life: It’s pegged to the Enhanced Retirement Sum ($288,000 this year). So for those who are 55 this year, the highest CPF Life payout is $2,120 to $2,280 a month.

And that’s for the Standard plan. If you opt for the Escalating plan, it will be even lower.

If you’re used to a $3,000/month lifestyle and have no intention of downsizing your life, living on CPF Life payouts alone might be tough. Here are a couple of ways to supplement your retirement income:

Retirement insurance/annuity

As mentioned above, private annuities are basically like CPF Life but with private providers. You can get one without applying for CPF Life exemption — CPF has absolutely no problem with that. In that case, you can enjoy two retirement income streams.

You can tailor the plan depending how much much income you’d like to receive. Plus you might be able to fund your private annuity with your SRS account or under the CPF Investment Scheme, which reduces your out-of-pocket expenses.

Your own investments

If your objective is just to increase your retirement income but not to get exempted from CPF Life, then you can also look beyond annuity plans.

Any kind of investment would work as a CPF Life supplement, as long as it’s stable enough to provide steady income. For example, lots of Singaporeans like receiving dividends from local blue chip stocks or Singapore Reits. You can even park your funds in a diversified ETF like the S&P 500.

Not keen on DIYing your own retirement plan? There are also robo advisors, unit trusts, insurance products and many more. The sky is the limit.

READ ALSO: How does the CPF retirement sum work and how much do you need?

This article was first published in MoneySmart.