Planning for your CPF LIFE – Lifelong Income For the Elderly (LIFE)
CPF Life is a life annuity scheme which provides one with monthly pay-outs for as long as he or she lives.
The CPF Life scheme was introduced in 2009 to better mitigate longevity risks as compared to the Retirement Sum Scheme (which some of us may still remember).
Statistics According to a 2018 report by the Department of Statistics, 1 in 2 Singaporeans aged 65 today is expected to live beyond 85 years of age. Previously in 1990, the average Singaporean lifespan was 76.1 years. So we are living longer. Hence, having an income that will last as long as one lives has become more important than ever.
You will have to join CPF Life if you’re Singapore citizen or PR born in 1958 or after, and have $60,000 or more in your RA when you turn 65.
On the 55th birthday, CPF will create a Retirement Account (RA) for you and savings from your Special Account (SA) and Ordinary Account (OA), up to the Full Retirement Sum (FRS), will be transferred to your RA to form your retirement sum. The savings in your RA will provide you with monthly pay-outs based on CPF LIFE plan that you choose. For higher pay-outs, you may also top up to your RA up to the Enhanced Retirement Sum (ERS).
There are basically 3 Retirement Account Savings you can set aside. They are the Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS). For each of these sums, there are 3 CPF LIFE Plans that is available and they are known as the CPF LIFE Standard Plan, CPF LIFE Basic Plan and CPF LIFE Escalating Plan.
Each CPF Life Plan provides a different combination of trade-offs between the amount of monthly pay-outs and the bequest you will leave for your beneficiaries. (ie. The Basic Plan will give a lower monthly pay-outs and a higher Bequest compared to Standard Plan.)
If one has a lot of dependents, CPF LIFE Basic Plan may be more suitable.
Retirement Sum Table & CPF LIFE Plans (correct as at Dec 2022)
Source: Be Ready with CPF
(Click image above to enlarge)