Reaching 55: The Creation of Your Retirement Account
As a CPF member in Singapore, your 55th birthday is a milestone that triggers important changes to your accounts. The most significant is the automatic creation of your Retirement Account (RA).
Transfer of Funds and Account Closure
When your RA is established, funds from your Special Account (SA) are transferred first, up to the prevailing Full Retirement Sum (FRS). If your SA balance is insufficient to meet the FRS, savings from your Ordinary Account (OA) will then be transferred to top it up. This is done to ensure you have a solid foundation for your retirement payouts under the CPF LIFE scheme. After this transfer, your Special Account will be closed. Any remaining SA savings above the FRS will be moved into your Ordinary Account, where they become withdrawable.
Continuation of Your MediSave Account
Unlike the Special Account, your MediSave Account (MA) does not close at age 55. It remains open and active, continuing to serve its primary purpose: saving for your healthcare expenses. All current regulations regarding the use of MediSave for hospitalisation, insurance premiums, and approved outpatient treatments continue to apply.
Changes to CPF Contributions Post-55
For individuals who continue working past age 55, your CPF contribution rates will decrease. Your employer and employee contribution rates will be adjusted according to your age band. For example, the combined rate for those aged 55 to 60 is lower than for those 55 and below.
Where Do New Contributions Go?
New contributions from your salary will be allocated to your OA, MA, and RA. If you have already set aside the FRS in your RA, new contributions that would have gone to your RA will instead be credited to your OA. This allows you to accumulate more withdrawable savings in your OA. Importantly, your MA continues to receive contributions and can still be topped up voluntarily. However, once your MA reaches the Basic Healthcare Sum (BHS), any further mandatory contributions designated for MediSave will overflow into your RA instead, or your OA if your RA is also full.
Maximizing Your Healthcare Savings with Enhanced Interest
One of the benefits of reaching age 55 is the enhanced interest rate on your CPF savings. While your MA, SA (for those under 55), and RA already earn higher interest rates compared to the OA, a special boost is provided to older members. You will receive an extra 1% interest per annum on the first $60,000 of your combined CPF balances. Furthermore, from age 55, you earn an additional 2% per annum on the first $30,000 and 1% per annum on the next $30,000 of your combined balances, capped at $20,000 for your OA. These higher interest rates can help your savings grow faster, providing a larger sum for your healthcare needs and monthly retirement payouts.
The Basic Healthcare Sum (BHS)
The Basic Healthcare Sum is the ceiling for your MediSave savings. It is a fixed amount for each age cohort when they turn 65, and it is adjusted annually for inflation and healthcare cost growth for younger cohorts. Once your MediSave reaches the BHS, contributions will be redirected to your other CPF accounts. This mechanism ensures your healthcare savings are capped at a level deemed sufficient for basic needs, while excess funds are channelled into other parts of your retirement nest egg.
Comparison of CPF Account Status Before and After Age 55
| Feature | Before Age 55 | After Age 55 |
|---|---|---|
| Account Structure | Ordinary, Special, and MediSave Accounts are all active. | Retirement Account is created; Special Account is closed. Ordinary and MediSave Accounts remain. |
| SA Funds | Used for retirement savings (earns long-term interest), can be transferred to RA. | Transferred to RA up to FRS, with remaining funds going to OA. |
| RA Status | Does not exist. | Created to provide monthly payouts via CPF LIFE. |
| Withdrawal | No general withdrawal of CPF savings. | Can withdraw excess savings above FRS from OA. Up to $5,000 withdrawable even if FRS is not met. |
| Contribution Flow | Allocations directed to OA, SA, and MA. | Allocations directed to OA, RA, and MA. Once FRS is met, RA portion goes to OA. |
| MediSave Cap | Reaching BHS causes overflow to SA. | Reaching BHS causes overflow to RA, then OA. |
Using MediSave for Healthcare after 55
Your ability to use MediSave for various healthcare purposes remains largely the same after age 55. You can use your own or your immediate family member's MediSave to pay for expenses such as:
- Hospitalisation: Subject to withdrawal limits for daily hospital charges and surgical procedures.
- Insurance Premiums: For approved schemes like MediShield Life and Integrated Shield Plans.
- Outpatient Treatments: For specific chronic diseases, vaccinations, and screenings.
- Long-Term Care: The MediSave Care scheme allows monthly cash withdrawals for severely disabled individuals aged 30 and above, from their own or spouse's MA, depending on balance.
Voluntary Top-Ups and Government Schemes
You can still perform voluntary top-ups to your MediSave account to boost your healthcare savings and enjoy tax relief. For eligible seniors aged 55 to 70, the Matched MediSave Scheme provides a government top-up match for cash contributions, further enhancing your savings.
Planning for Higher Payouts
With the closure of the Special Account for those aged 55 and above in early 2025, the focus for higher long-term payouts shifts to the Retirement Account. If you wish to receive higher monthly payouts under CPF LIFE, you can top up your RA up to the prevailing Enhanced Retirement Sum (ERS), using cash or your OA savings. The ERS amount is adjusted annually and represents the maximum amount that can be set aside for higher retirement payouts.
Conclusion
While the 55th birthday marks a change in your CPF account structure, your MediSave account continues to be a crucial component of your healthcare financing. Understanding the changes, such as the creation of the Retirement Account and the overflow mechanism once the Basic Healthcare Sum is reached, is key. By making informed decisions about voluntary top-ups and leveraging enhanced interest rates, you can ensure your healthcare savings are robust for your later years. Visit the official CPF website to view your updated account details and make informed financial decisions for a secure retirement.
