Is Retiring at age 55 Possible with the CPF Retirement Account?

It's no secret, every one of us wishes to retire as soon as possible.

But we know the only way to do this effectively is to save a sum of money we can draw from when we do retire. A HUGE sum of money.

The alternative is to ensure that we continue to have a income stream matching our living standards.

So, if I'm spending $3,000 every month, I would need $3,000 a month when I retire, right?

Wrong!

I have to first adjust for inflation. After all, things will only get more expensive each year. Just take a look at your local cai png stall and see how much 1 meat and 2 veges cost today.

And we haven't factored in other things such as an increase in utility bills, GST increase, chicken shortage, pandemics, etc.

None of us are wizards or fortune-tellers, so we can't predict the future.

However, we can make plans based on existing data and forecasts.

And that's why the CPF RA is a great asset in helping us get closer to our retirement goals.

The question then is...

Can we retire at age 55 with just this account?

It depends.

You see, when every one of us turns 55, the CPF RA is created, and we can only withdraw the CPF savings above the Full Retirement Sum (FRS).

This withdrawal amount excludes:

• Any interest earned

• Any government grants received

• Top-ups made under the Retirement Sum Topping-Up scheme

All of these will remain in your RA to be used for your future retirement payouts. The amount in your FRS will be used to pay for CPF LIFE, an annuity plan that pays a monthly payout after you hit 65.

So, if your withdrawal amount is sufficient to fund your lifestyle for ten years (from 55 to 65), you can retire with this account and wait for the monthly payouts to continue to sustain your retirement.

For most people, however , this amount may not be enough, or you may want to save even more money to enjoy your retirement better.

In this scenario, retiring at age 55 may not be the best option, and that means continuing to work and saving money is the option.

In either case, while we're still working and building our retirement funds, it's a good idea to top up this account whenever possible.

Not only is it a good form of saving, but the RA benefits from a higher interest rate (up to 6% per annum) than leaving money in the bank.

At the same time, other instruments are available in the market for those with a higher risk appetite or who prefer some liquidity. But do speak with a licensed financial consultant to know your options before ever jumping into any financial asset you're unfamiliar with.