Referring to a report in Channel NewsAsia that ‘6 in 10 tapped into CPF funds after 55’, prominent socioeconomic commentator Chris Kuan said that the headline was dodgy. He pointed out that “not 6 in 10 tapped into CPF funds (i.e. withdraw from age 55) but 6 in 10 of those eligible.”
Upon turning 55 years old, members can withdraw their CPF savings, after setting aside their Full Retirement Sum or Basic Retirement Sum with sufficient CPF property charge/pledge in their Retirement Account. Members who turned 55 from 2013 (i.e. born in 1958 or after) also have the option to withdraw a lump sum of up to 20% of the savings in their Retirement Account from their payout eligibility age (includes the first $5,000 that can be withdrawn at 55).
Kuan said the information series by CNA should “at least tell us how many are eligible and how many are eligible without pledging their HDB”.
He added: “An interesting finding is of the 40% of those who withdraw spend their monies on immediate needs and a relatively high proportion (no figures) of these have poorer health status which suggest withdrawals were made to meet medical expenses. It does present a horrible choice – fixing your health at the expense of retirement adequacy.
“51% of those who withdrew put their monies in bank deposits. I can understand the need for liquidity but withdraw your CPF as and when you need to so that you continue to earn the rates, Just 2.3% put their monies into annuities. And yet in a NTUC survey reported today by the ST, 67% of parents worried they would not have enough money to last through retirement, due to the life expectancy of 83 years. That’s what CPF LIFE and annuities are meant to do.
“And then many are reported to have withdrawn their CPF to pay for children’s education but in the same NTUC survey, the youngsters are worried that their parents spent too much and wish that they don’t at the expense of their retirement because the youngsters will have to help their parents out. That means you may wish to sacrifice your own retirement adequacy to ensure a good life for your children but at the same time , it is also a burden on them if you do so.
“The other thing is very worrisome is that parents hoped to build their retirement nest eggs once the children have grown up but that is also the time when the parents are most vulnerable to job losses. Cumulatively… financial literacy seems to be a problem and the family as a first pillar of social policy do come at a cost.”
Send in your scoop to email@example.com