Planning for retirement can be overwhelming, especially when you’re thinking about having enough money to last your entire life.
Like many Singaporeans, I’ve gone through the process of figuring out what retirement looks like financially, and trust me – CPF LIFE is a game changer for lifelong income.
In this post, you’ll learn:
- What CPF LIFE is and how it works
- Who’s eligible and how much savings you need
- How to choose the best CPF LIFE plan for your needs
- Whether or not you should opt out of CPF LIFE
Stick around to learn how CPF LIFE can give you peace of mind – no matter how long you live.
What is CPF LIFE?
CPF LIFE is a government-backed programme that provides you with a monthly income for life once you’ve retired.
Run by the Central Provident Fund (CPF) Board, it’s designed to make sure you don’t run out of money in your old age – something many people understandably worry about.
The name itself says it all: CPF Lifelong Income for The Elderly.
It’s actually a replacement for the earlier Retirement Sum Scheme (RSS), which was quite similar but only provided payouts for a limited period.
As life expectancy in Singapore has gone up – currently averaging around 84 years – it became clear that people needed something more robust to ensure financial security throughout their entire lives.
Who is eligible?
Here’s who is eligible for automatic enrolment into CPF LIFE:
- You must be a Singaporean citizen or permanent resident.
- You should be born on or after 1 January 1958.
- You need to have at least $60,000 in your CPF retirement savings by the time you turn 65.
If you meet these criteria, you’ll automatically be enrolled in CPF LIFE, ensuring you receive lifelong payouts for your retirement.
How does CPF Life work?
CPF LIFE works by using the money in your CPF Retirement Account (RA) to provide you with monthly payouts for life.
It’s a simple and effective way to ensure a steady income in your retirement years.
Here’s how it happens: when you turn 55, part of your CPF savings is transferred into your RA.
These savings are then set aside and eventually used to fund your CPF LIFE payouts.
Once you hit 65, your CPF LIFE plan kicks in, converting the money in your RA into regular monthly income.
What’s really helpful is that CPF LIFE gives you the flexibility to choose from 3 different plans, based on your needs and preferences.
The Standard Plan gives you steady fixed payouts throughout your life.
If you’re looking for steady income and are okay with leaving a small bequest for your family, this plan might be the best fit.
The Basic Plan, on the other hand, offers lower monthly payouts that progressively gets lower, but leaves more money for your family when you pass on.
The rationale here is that retaining funds in RA will earn more interest as compared to the rest.
So, if you want to balance your income with a bit more security for your loved ones, this could be a good option.
Lastly, the Escalating Plan provides payouts that start smaller but increase by 2% every year.
This is particularly useful if you’re concerned about inflation and want your income to keep pace with rising living costs over time.
Types of CPF Life plans and payouts available
The table below shows how your CPF LIFE payments are covered.
| Basic | Standard | Escalating | |
| How it’s paid for | From age 65 to 70, between 10% to 20% of your RA is deducted and put into the Lifelong Income Fund. | At the point you choose to start receiving payouts (between 65 and 70 years old), 100% of RA balance is paid into the Lifelong Income Fund. | At the point you choose to start receiving payouts (between 65 and 70 years old), 100% of RA balance is paid into the Lifelong Income Fund. |
| How this affects your payouts | Your payouts are paid out from your RA until one month before age 90, after which your payouts continue to be paid from the Lifelong Income Fund. | Your payouts will be made from the Lifelong Income Fund (interest inclusive), and will remain stable throughout your life. | Your payouts will be made from the Lifelong Income Plan (interest inclusive). They will, initially, be lower but will increase by 2% per annum. |
| Payout Pattern | Monthly payouts begin low, and decrease further when your combined CPF account balances fall below S$60,000. | Monthly payouts are steady for life. They do not get increased or decreased | Monthly payouts start at a relatively lower amount, but increase by 2% annually. |
| Purpose of Plan | To leave behind an inheritance for your loved ones. | To provide retirees who are comfortable spending less as inflation rises with a fixed payment every month. | To protect you against inflation. |
How much CPF savings do I need to join CPF LIFE?
There’s actually no minimum sum required to join CPF LIFE.
However, the amount in your CPF Retirement Account (RA) will directly affect how much you receive in monthly payouts.
If you have a lower balance in your RA, your payouts will understandably be lower as well.
So while there’s no barrier to joining, it’s important to know that building up your CPF savings will give you more income to rely on during retirement.
Essentially, the more you save, the more you’ll get each month.
How much will I receive in payouts with CPF Life when I retire?
The amount you receive depends on which CPF Retirement Sum you meet, accurate as of September 2024:
| Retirement Account Savings at 55 | Your monthly payouts for life from 65 onwards | ||
| Basic plan | Standard Plan (Default) | Escalating Plan | |
| Basic Retirement Sum (BRS): S$102,900 | $730 to $800 | $880 | $690 to $1,260 (Increases at 2% every year) |
| Full Retirement Sum (FRS): S$205,800 | $1,440 to $1,510 | $1,650 | $1,300 – $2,370 (Increases at 2% every year) |
| Enhanced Retirement Sum (ERS): S$308,700 | $2,150 to $2,220 | $2,430 | $1,920 – $3,480 (Increases at 2% every year) |
How are CPF Life payouts calculated?
CPF LIFE payouts are calculated by looking at a few key factors: the balance in your CPF Retirement Account (RA), your age when you start receiving payouts, the specific CPF LIFE plan you choose, and life expectancy.
Essentially, the more you have in your RA and the later you start your payouts, the higher your monthly income will be.
The plan you pick also plays a significant role — whether it’s the Standard, Basic, or Escalating plan, each offers different payout levels.
To get a clearer idea of what you can expect, you can use the CPF LIFE Estimator.
This handy tool helps you estimate your potential monthly payouts based on your current savings and retirement goals.
It’s a useful way to plan ahead and see how different choices might affect your retirement income.
How to choose the right CPF LIFE plan?
Choosing the right CPF LIFE plan is all about understanding your personal financial needs and future goals.
Start by assessing your current financial situation and how much you’ll need during retirement to maintain your desired lifestyle.
Then, take the time to understand the 3 CPF LIFE plans — Standard, Basic, and Escalating.
It’s also wise to think about your health and life expectancy.
If you expect to live a longer life, it might be worth choosing a plan that provides increasing payouts to keep up with future costs.
Speaking of which, inflation is another key factor to think about.
Prices tend to rise over time, so a plan like the Escalating one, which adjusts for inflation, could be helpful.
Additionally, consider your other retirement resources.
If you have other income streams such as a retirement plan, you may have more flexibility in your CPF LIFE plan choice.
Don’t forget to plan for your family’s future as well.
If leaving behind a bequest is important, the Basic plan might be more suitable as it leaves a larger amount for your loved ones.
If you’re unsure or need more personalised advice, it’s always a good idea to talk to a financial advisor.
They can help you weigh your options and choose the CPF LIFE plan that best supports your retirement goals.
4 ways to increase CPF LIFE payouts
RA Top Ups
You are encouraged to top up your RA through the Retirement Sum Topping-Up (RSTU) Scheme, especially since higher payouts are dependent on the more savings you have inside.
If you’re below the age of 55, you can make voluntary top-ups to your CPF Special Account (SA) – because the RA formed at age 55 takes savings from your SA, followed by your Ordinary Account (OA).
Deferring your CPF Life Payouts
This simply means not taking your payouts at age 65 but at a later age!
If you feel like you do not have an immediate need for the money, or you wish to continue working past the retirement age and take home a salary – you should consider deferring your payouts so you can increase your payout amounts!
This deferment means you’ll continue to earn more interest in your CPF savings, with up to 6% risk-free interest every year.
And what’s more, each year of deferment increases your payout amount by ~7%.
You may be wondering if it’s such a good deal – what’s the catch?
Well, the catch is that you can only defer these payouts until you reach age 70.
Nevertheless, you’ll still be earning a total increase of up to 35% if you start your payouts at 70!
We did some calculations to see if it’s worth deferring.
Our first set of calculations ranges between 1-3 year deferments:
As seen above, you would officially get more payouts (let’s call this breakeven year) after your 80th birthday if you deferred for a year.
In fact, for every year you defer, you add the same amount of years to break even if you didn’t defer at all.
You can see the breakeven year for years 4-5 below:
This excludes any opportunity costs you incur within your deferred years.
As of 2024, the average life expectancy of Singaporeans is 84 years old.
Assuming you live a longer life than most, perhaps up to 87, you might not enjoy the increment in your CPF LIFE payouts for long.
But if you’re prudent and take the life expectancy of 84 years old…
We’re not saying this should be the only factor you decide on whether you should defer, but it’s definitely something worth considering.
Take it as you may.
Monetising Your Home through LBS
This essentially means using the value of your property through the Lease Buyback Scheme (LBS) to top up your CPF RA, which in turn leads to higher CPF LIFE payouts.
You do this by selling off the few remaining years of your lease of your
- 3-room or smaller flat to receive up to $30,000 of LBS Bonus,
- 4-room flat to receive up to $15,000 of LBS Bonus, or
- 5-room flat to receive up to $7,500 of LBS Bonus respectively
For households with a single owner, he/she will use the LBS bonus to top up his/her RA to the current age-adjusted Full Retirement Sum (FRS).
For households with ≥ 2 owners, each of them will use his/her share of proceeds to top up his/her RA to the current age-adjusted Basic Retirement Sum (BRS) – which is $102,900 as of 2024.
However, this is only applicable to those who own an HDB flat and are eligible under these criteria:
| Age | Flat owners must have reached the eligibility age of 65 |
| Citizenship | At least one owner must be a Singapore Citizen |
| Income | Gross monthly household income of ≤ $14,000 |
| Flat type | All flat types except short-lease flats, HUDC, and Executive Condominium units |
| Property Ownership | No concurrent ownership of second property |
| Minimum Occupation Period | All owners have been living in the flat for at least 5 years |
| Minimum Lease | At least 20 years of lease to sell to HDB |
Private Annuity Plans
This simply means getting other annuity plans for external insurance providers, instead of CPF LIFE that can provide you with a higher amount of payouts!
You can check out our list of the best retirement annuity plans in Singapore here, but the Dollar Bureau team personally prefers the Manulife RetireReady Plus, Singlife Flexi Life Income, and the NTUC Income Gro Retire Flex Pro.
However, there are several implications to choosing such private annuity plans in comparison. So, choose wisely!
| CPF LIFE | Private Annuity Plans | |
| Interest Rate | Highest, guaranteed and risk-free interest rate of up to 6% | Guaranteed and non-guaranteed returns, but some private annuity plans may provide a higher overall return – depending on factors |
| Risk | Government-backed, risk-free | Not 100% risk-free |
| Duration of Payouts | Payouts last a lifetime | Payouts are over fixed periods or a lifetime |
| Premium Payments | Premiums are paid with CPF savings and are technically more affordable | Premiums are not paid by CPF savings and are not as affordable
Additional cash outlay or SRS funds |
| Flexibility | Not flexible or customisable, given that it is a universal scheme for CPF LIFE members | Flexible, where payout periods, payout eligibility age, payout currencies, and withdrawal conditions can all be customised |
Of course, this really isn’t an apple-to-apple comparison as private annuity plans are supposed to complement your CPF LIFE.
Can I opt out of CPF Life?
Yes, you can opt out of CPF LIFE, but only under specific circumstances.
You may choose to be exempted if you have a pension or private annuity plan that provides the same or higher payouts than CPF LIFE.
This ensures that you’re not forced into the scheme if you already have a comparable alternative for retirement income.
However, you’ll need to meet certain criteria and provide proof of your other retirement arrangements to be eligible for exemption.
It’s a decision worth considering carefully, as CPF LIFE guarantees lifelong payouts, offering peace of mind in retirement.
What happens if you do not meet the BRS?
If you do not meet the Basic Retirement Sum (BRS), you can still join CPF LIFE, but your monthly payouts will be lower.
The BRS is not a strict requirement for joining the scheme, so you’ll still be able to receive payouts based on the amount you have in your CPF Retirement Account.
However, it’s a good idea to top up your savings if possible, as this will help boost your monthly income and give you more financial security in your retirement.
Is CPF LIFE enough for retirement?
CPF LIFE provides a steady monthly income, but whether it’s enough for your retirement depends on your lifestyle and financial needs.
CPF LIFE is designed to cover basic living expenses, but for many people, it might not be enough to maintain the lifestyle they desire in retirement.
It’s important to consider other retirement savings and investments to supplement your CPF LIFE payouts.
By combining CPF LIFE with personal savings, investments, or other income sources, you can create a more comprehensive plan to ensure financial security throughout your retirement.
Is CPF LIFE income taxable?
No, CPF LIFE payouts are not taxable.
The income you receive from CPF LIFE is considered a return on your own retirement savings, so it is not subject to income tax in Singapore.
This means you can enjoy your monthly payouts without worrying about deductions, giving you more financial freedom during your retirement.
Conclusion
In a nutshell, CPF LIFE is a vital part of Singapore’s retirement system, ensuring you have a steady income for life after retirement.
We’ve covered how the programme works, who’s eligible, and how much savings you’ll need to get started.
You also now know about the different plans available – Standard, Basic, and Escalating – and how to choose the one that’s best for you based on your needs, health, and other retirement resources.
While CPF LIFE is designed to offer peace of mind, it’s not a one-size-fits-all solution.
If you’re feeling unsure or have more questions about which CPF LIFE plan is right for you, don’t worry – you’re not alone!
Retirement planning can feel complicated, but you don’t have to figure it all out by yourself.
If you need more guidance, feel free to connect with one of our trusted financial advisor partners.
They can help you make sense of it all, and the best part is — it’s completely free!
