This is one of the biggest changes in CPF announced in today’s budget for 2024. My phone was flooded with tons of questions about this change, so it would be good if I could provide my thoughts here:
1)Basically, this change is meant to close the CPF SA shielding loophole. You can no longer get a 4.05% SA interest without a lock-in, as CPF SA will be closed after age 55.
2)If you still wish to get a 4.05% return, you have to move from SA to RA and meet the new Enhanced Retirement Sum (which is $426k for the year 2025).
3)However, once you park your money in RA, it will be subjected to the CPF LIFE payout scheme. You’ll have to wait until age 65 to receive the payout, essentially locking your money to age 65 to get the 4.05% return.
4) The return for RA is 4.05%, but the return for CPF LIFE is not 4.05%, this is very critical! The funds in the RA account will be used to join CPF LIFE, and the monthly payouts from CPF LIFE will depend on factors like how long you live. If you have no dependents, the bequest payout from CPF LIFE may not be relevant, potentially resulting in a lower total payout compared to the money parked in the RA account.
5)Overall, this is not welcome news for CPF holders. The biggest uncertainty lies in the fact that the CPF structure may still change over the years. By the time I reach age 55, the payout structure from CPF may not be the same as it is now.
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