How to Optimise Your CPF Savings Now That The Special Account (SA) Is Closing

For those who aspire towards the financial independence, retire early (F.I.R.E.) movement, our CPF savings are often regarded as a key supporting player. 

Apart from amassing emergency savings, increasing earning power, and investing, most of us also contribute to our CPF Ordinary (OA), Special (SA), and MediSave (MA) accounts right from our very first salary. This is with the aim of reaching the retirement sums that will determine the payout amount we will start receiving from age 65. 

The Basic, Full, and Enhanced Retirement Sums are calculated to address the estimated costs of living. From 2025, the Enhanced Retirement Sum (ERS) will be increased to four times the Basic Retirement Sum. 

If members can reach the maximum amount for the Retirement Account (RA), they will be able to receive higher monthly payouts (S$3,300 for those turning 55 in 2025) for life. 

Related: CPF Contributions in 2024 – Everything You Need to Know

The SA Closure and its impact on Singaporeans

The changes that will happen in 2025:

• Contribution rates will increase by 1.5% for those aged 55-65
• Members will be able to contribute up to S$426,000 to their CPF RA 
• CPF SA will be closed for those aged 55 and above

According to the Ministry of Finance, the rationale for the SA closure is such: “As a principle, only savings that cannot be withdrawn on demand should earn the long-term interest rate, and savings that can be withdrawn on demand should earn the short-term interest rate.”

Currently, when CPF members turn 55, a Retirement Account (RA) is created to provide monthly payouts in retirement. CPF funds from the Special Account will be transferred to the RA, followed by the OA. 

While members are not able to fully withdraw their CPF savings at age 55, they can withdraw an unconditional amount of up to $5,000 of the SA and OA savings, even if the Full Retirement Sum is not set aside. 

If you’re working on building a substantial nest egg, and hoping to withdraw from your SA after reaching 55, this latest news may sting. Not only is CPF SA shielding no longer an option, those who have saved the Full Retirement Sum also won’t be able to withdraw from their SA accounts once the change is effected. 

Related: Should I Invest In T-Bills With My CPF-OA?

Tips for Optimising Your CPF Savings 

Given that our CPF savings are primarily used as retirement income, there are some ways to optimise your savings to set aside the retirement sum you need.  

Review Your CPF Portfolio 

Under the CPF Investment Scheme (CPFIS), members can use a portion of their Ordinary and Special Account savings for investing in insurance products, unit trusts, fixed deposits, bonds and shares.

If you’ve not done so, now would be an opportune time to take a look at your options. Should you invest in T-bills or Singapore Savings Bonds, where the cutoff yield for a recent 6-month tranche reached 3.8%? Or you may wish to allocate a portion of your CPF savings into a fixed deposit with a bank. 

Regardless of your investment decision, always do your homework to understand the nature of your investment. Are low risk products able to generate a higher return than your CPF account’s interest rates? And will higher risk products set your retirement plans back if you sustain a bigger than imagined loss?

Related: What Can You Invest in Under the CPF Investment Scheme (CPFIS)?

Maximise Contributions to the Retirement Account (RA) 

If you’re below 55, you can make cash top-ups up to S$8,000 to your Special Account and up to another S$8000 to your loved one’s account. This allows you to enjoy tax relief for up to S$16,000. 

If you’re above 55, the same top-up can be made to your RA. The estimated returns can be up to 5% for those below 55, and up to 6% for those above 55.

From 2021 to 2025, eligible CPF members, under the Matched Retirement Savings Scheme, those between 55-70 are eligible for dollar-for-dollar matching for cash top-ups to their CPF accounts, up to an annual limit of S$2,000 and a lifetime matching cap of S$20,000. From 2025, this scheme will include seniors above the age of 70. However, these cash top-ups will not be eligible for tax relief. 

For seniors with retirement savings below S$99,400 (the Basic Retirement Sum for 2023), they will receive a one-time Retirement Savings Bonus (RSB) of between S$1,000 and S$1,500. The bonus will be paid to their SA or RA (depending on age) in December 2024.

Related: Guide To Retirement Planning in Singapore

Understand the CPF LIFE Scheme

The CPF Lifelong Income For the Elderly (LIFE) scheme is a national insurance scheme designed to provide Singapporeans between the ages of 55 and 79 with a lifelong monthly payout. The amount is based on your desired retirement lifestyle and can be determined via the CPF LIFE estimator. 

There are three plans available – Basic, Standard, and Escalating. The Basic plan provides progressively lower payouts, while the Standard plan gives a fixed monthly payout. Finally, the Escalating plan gives a payout that increases by 2% per year. 

Example: To receive a monthly payout of S$1,560–S$1,670, you will need S$308,900 in your Retirement Account (RA) at 65. A much lesser sum of $205,800 is required if you set aside the amount in your RA at 55. This is because CPF interest rates* of up to 6% per annum will help you grow your savings through compound interest.

* Based on the current 4% interest rate floor on Retirement Account monies.

Source: CPF Board

Related: Guide to the CPF LIFE Scheme

Diversify Your CPF Investment Portfolio

Portfolio diversification reduces your risk in investing, and the same applies for CPF savings. 

For those who have amassed a large amount of CPF savings and want to enjoy peace of mind from guaranteed returns, you may consider using a bond/fixed deposit laddering strategy to create a portfolio of low-risk products that mature at different dates. 

When the earlier investments have matured, you can reinvest the proceeds into other products to continue growing your money. 

Tips for Getting Retirement Ready 

Set Clear Retirement Goals

Needless to say, everyone has a different idea of retirement. Taking into account inflation and rising costs of living including medical costs, no doubt the amount required when one has stopped working is significant. 

That means having an adequate layer of protection from medical and health insurance coverage, while making careful investments to cash out during retirement.  

To stop work completely and travel around the world may be a lofty ideal but it is something to work towards if that is truly your goal. More often, people are taking baby steps towards a slower lifestyle as we inch closer towards retirement age. Some are opting for part-time roles with greater time flexibility to spend time on pursuits meaningful to them, such as taking on caregiving responsibilities, side projects, or learning new skills or hobbies.  

To start planning for retirement, here is a retirement calculator to help you project an estimated breakdown of retirement income based on your current assets and expenses.

Related: How to Start Planning For Retirement in Your 20s and 30s

Explore the Supplementary Retirement Scheme

Look beyond CPF and consider investment vehicles such as the Supplementary Retirement Scheme (SRS) for additional tax benefits and flexibility in growing your retirement income. 

How much is this going to impact your retirement? For starters, you enjoy tax relief for your SRS contributions (maximum of $15,300 per year for Singaporeans and PRs, and S$35,700 for foreigners). Not only are the investment returns tax-free, only 50% of the withdrawals from SRS are taxable at retirement. 

Upon reaching the statutory retirement age (which will be raised to 64 on July 1, 2026), you’ll be able to withdraw up to S$40,000 per year over a maximum of 10 years. That’s another S$3,300+ per month in addition to your CPF payout. Currently, you can open an SRS account with DBS, OCBC, or UOB. 

Related: 7 Most Popular Types of Investments in Singapore

Create a Realistic Budget

How much do you really need for your retirement? Based on the increased Enhanced Retirement Sum from 2025, which is S$426,000 and provides a monthly payout of S$3,300, this would seem like a pretty decent sum. That’s if you’re not planning to take overseas vacations or plan any major projects such as a home renovation. 

The costs of essentials will rise each year and similarly, what you are spending on will invariably increase. By then, your earning power would either be reduced or you may have stopped working. As seniors, it will also be the time when your spending in healthcare will increase. It would then be prudent to buffer more than less. But how much more are we looking at?

That brings us to the next point…

Related: Retiring With S$6,000 Monthly: How Much Do I Need to Earn Now?

Seek Professional Financial Advice

If online calculators are not exactly giving you a clear picture, websites such as ValueChampion can give you an overview of how to kickstart your planning. The next step would probably be to speak to a professional, either through your insurer or an independent advisor who would charge a consultation fee. 

Related: 6 Retirement Planning Mistakes To Avoid

Conclusion

Planning for your retirement is a journey and should be reviewed and adjusted as you go through life transitions such as getting married, buying a house, or job changes. 

While there will always be opportunities to maximise your cash or CPF savings, it’s crucial to factor in your investing horizon, risk appetite, and your financial bandwidth in view of other commitments. Fundamentally, our CPF savings are meant to safeguard our needs in the golden years and should be treated as such.     

Read more:

• A Guide to Understanding the CPF
• Best Endowment Insurance Plans Singapore 2024
• 3 Things You Didn’t Know You Could Pay For With Your CPF
• 5 Habits To Build Now To Retire Rich
• Simple Ways To Grow Your CPF Interest

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