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Why do some people want to empty their CPF accounts early when it will hurt them later?

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Give me all my CPF at 55, some cry.

FULL WITHDRAWAL AT 55

If you want a full withdrawal at 55 and expect to spend $500 a month, you will need to have $180,000 to last you till you are 85.

If you double that expenditure to $1000 a month, you will need to have $360,000 in your CPF at 55 to last you until you are 85.

If you think you should have $2000 a month because you want a comfortable life with a holiday thrown in as well, you will need to have $720,000 in your CPF at 55.

How many people can achieve this at 55?

LEAVE IT TO GROW AND DRAWDOWN AT 65

Here’s how much you need to have in your CPF savings at 55 for the same quantum of monthly payout under CPF LIFE.

To enjoy a monthly payout of $500 from CPF LIFE, you need just $60,000 in your retirement account when you reach 55.

That’s just one-third of the $180,000 you would need if the full withdrawal takes place at 55. And the monthly payout that you receive is for life!

Similarly, for a $1000 monthly payout, the amount of savings you need to have at 55 is $131,000, much lower than the $360,000 you would need if you do a full withdrawal at 55.

Some people love it so much they actually top up their retirement account up to an enhanced retirement sum so that they may enjoy a big and comfortable monthly payout for life.

This is why CPF is rated so highly in the world.  An independent panel of experts at the Melbourne Mercer Global Pension Index has rated Singapore’s CPF the best retirement scheme in Asia for its adequacy, sustainability and integrity.

CPF LIFE makes it possible for Singaporeans to enjoy the kind of returns they would never be able to generate for themselves.

SO WHY DO SOME PEOPLE STILL INSIST ON A FULL WITHDRAWAL OF CPF AT 55 WHEN IT ACTUALLY HURTS THEM LATER?

Straits Times’ Invest Editor Tan Ooi Boon gave 2 reasons.

1. Poor understanding of the scheme because they listen to people who are similarly ignorant. They do not bother to check on their own. They follow the wrong herd thinking that it is prudent to withdraw at 55 when it is not.

According to CPF Board, half of the people who withdrew from their CPF at 55 did it only to deposit the money in banks where interest rates are way below CPF rates.

2. They have illogical fears that if they leave any money behind in the CPF, they will not see it as the Government will allegedly come up with more reasons to deprive them of their money.

Adequate saving for retirement, not a luxury but a necessity

Having sufficient funds for retirement is a necessity as people live longer lives, and as our society ages rapidly with a smaller working population to support a growing pool of seniors.

It has taken the government much effort to create the schemes of today that are so pro-retirement.

Don’t listen to the wrong people and be blind to the benefits of CPF and CPF LIFE.

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