By JEREMY LEE
Published 28 AUGUST, 2018 UPDATED 28 AUGUST, 2018
https://www.todayonline.com/about-6-10-withdraw-cpf-savings-when-they-turn-55-cpf-board
SINGAPORE — About six in 10 members (58 per cent) aged between 55 and 70 have withdrawn cash from their Central Provident Fund (CPF) savings since turning 55. The median amount withdrawn was S$9,000, and the average amount was $33,000.
Releasing an analysis of CPF withdrawal trends on Tuesday (Aug 28), the CPF Board said the information was obtained from a Retirement and Health Study involving face-to-face interviews with 7,200 members aged between 55 and 70.
The survey was conducted to find out what CPF members did with their funds, if they cashed them out. Under existing rules, when CPF members turn 55, they may withdraw part of their CPF savings in a lump sum.
Those who made cash withdrawals do so for three main purposes:
More than half (51 per cent) left the funds with banks and finance companies, without using them specifically, as there was no immediate need. The median amount deposited was S$8,000.
The second-biggest group (40 per cent) used the cash for household expenses and to pay off loans. These respondents had more children on average compared with those in the other groups, and some spent the withdrawals on their children's education. The median amount used for household expenses was S$5,000, and the median amount used for loan payments was S$6,000.
About 20 per cent used the funds to pay for big purchases like vacations or home renovations. Notably, a larger proportion of these individuals were still employed when they took the survey, compared with the other groups. The median amount used for overseas vacations was S$5,000, and the median amount used for home renovations was S$10,000.
Of the four in 10 CPF members who chose not to withdraw their savings, the CPF Board said they may have done so to enjoy higher CPF interest rates compared with those from banks.
It advised members to consider the trade-off between withdrawing their funds to meet current needs and leaving them in their CPF accounts to accumulate interest.
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Not good financial sense to withdraw CPF savings, put it in banks to earn lower interest
By GAN KOK TIONG
Published 10 SEPTEMBER, 2018 UPDATED 11 SEPTEMBER, 2018
I refer to the report "About 6 in 10 withdraw CPF savings when they turn 55: CPF" (Aug 28), on how 58 per cent of those aged between 55 and 70 have withdrawn cash from their Central Provident Fund (CPF) savings since turning 55 and that 51 per cent of these people left the money with banks and financial institutions instead of having specific uses for them upon withdrawal.
I find these numbers puzzling, given that the interest rates offered by banks pale in comparison to that of the CPF Board.
Furthermore, CPF members aged 55 and above can earn an extra 1 per cent more in interest rate on top of the legislated minimum rate of 2.5 per cent per annum.
In contrast, the three-month average of major Singapore banks' interest rates stands at 0.24 per cent.
Besides having liquidity and a perceived ability to manage one's hard-earned money, it does not make much economic and financial sense to switch to a less rewarding financial portfolio. It is worse if the money withdrawn is kept "under the bed", as if money in hand is worth two in a bush.
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Distrust of CPF: More effort needed to educate members
Published 14 SEPTEMBER, 2018 UPDATED 14 SEPTEMBER, 2018
A letter from a reader, "Not good financial sense to withdraw CPF savings, put it in banks to earn lower interest" (Sept 10), attracted many comments from Facebook users, with a majority disagreeing with the letter writer's point that it is better to enjoy the higher interest rates of Central Provident Fund savings rather than to withdraw them and put them in a bank. However, there were also a handful who believe the majority are distrustful of leaving too much money in CPF because they are not fully aware of its potential as a financial tool.
People have no confidence in keeping their money in CPF because of the changes in regulation. Now I can take it, but then next day, I can't. So better to withdraw and put money in the bank. Josh Sim
Sometimes, it's not all about return of investment. It's about how you want to have liquidity to sensibly do the things you have always wanted to do now that you are older. What's the point of having so much money in CPF but end up having a lousy lifestyle? KC Hammy
Whether 1 per cent or 4 per cent, still would not be sufficient to fight inflation. Lim Foong Fee
High interest, so what? How long are you going to live? Just withdraw and spend it. Jeffrey Lim
Not good financial sense to keep savings with CPF and feel so rich by looking at it and yet can't use it when you need it. It's about liquidity. Lawrence At Work
How do you know what those 58 per cent do with their money after withdrawing from the CPF and depositing into the bank? Why does the report assume that they do not invest from the bank? DeLeviathan At Sg
I decide what I want to do with my money, be it a "bad decision" of putting my savings "in the bank at lower interest"... and not have a "nanny" deciding on my behalf. Rabocse Mae Enileda
I told my friend… at the end of the day, (a higher CPF interest rate of) 4 per cent of nothing will be nothing, and 1 per cent of something is still something. I took whatever I could and put it under my own control, to be used any time I want. Gabriel Khoo
Better than the changing rules and regulations with tedious paperwork and shifting goal posts, and we are unable to withdraw (from CPF). Money in hand and in bank feels more secure. Brendan Tan
It is our money, let us decide what we want to do with it. We are not kids who need you to tell us the pros and cons of what to do with our money. Vimala Suppiah
At least CPF contributors can see their money physically at last even though the interest rate is low in banks, after forcefully saving for years. Nadarajah Kulanthaiappan
Cash in hand is better than having it in CPF. Who knows when the Government may set a new policy that the money can no longer be withdrawn at age 55, and it becomes 65... no matter if bank's interest rate is low or high... Money in our own hands is safe. Aloysious Stephen Yip
Always good to have control over your money. Everything else is secondary. John FC
It's a psychological thing. CPF restricted access to the savings for half of our lives… such illogical decisions (by those who withdraw) will still persist to serve a psychological need — the need to control. Mu Chan
For them to withdraw CPF money and deposit it into a bank with lower interest rate, what do you think the reason could be? They have lost trust in CPF or they don't understand what they are doing? Paul Hui
If trust is the issue, then take out a portion, not all. Partial risk management… I think there is a lot of misinformation out there about CPF resulting in some citizens having misconceptions about CPF. It is one of the best "get rich" tool out there and people are missing this wealth because of the misinformation…
I think there are two camps of people here:
1. One that desires liquidity and freedom to spend over their desire to be richer.
2. One that wants high return rates for their money to make them richer.
There is no right or wrong, just different lifestyles. Loo Cheng Chuan
I think those who withdraw their available CPF amount do it because they don't want to go through the "troublesome" process of withdrawal. Yet I must say it's a safeguard that we cannot do without. Mark Leong
What you can't touch, you can't spend. After retirement, it's bad money management that lands retired people in hot water. Mason Jason
My mama is already 70 years old and she did receive half of her money from CPF after she retired and the rest of the money went to her Retirement Account. Since she doesn't need the money, we don't allow her to withdraw it because the interest rate in CPF is higher. But now she is enjoying monthly payouts. Priscilla Toh
If you have the time and wisdom to do your investment, then yes, you should withdraw. But if you are going to withdraw the entire sum just to put it in the bank, then it is really unwise. Chang Fong Chua
I am above 55, still working, have more than the required minimum sum needed by CPF, have not withdrawn a single cent, because it is safe and provides good return. Wilfred Lee
A lot of people do not know that leaving your withdrawable CPF in your Retirement Account earns 4 per cent interest annually. You can still choose to withdraw any amount you need monthly and it's so easy now with PayNow enabled. There is a lot of education to be done to educate the general public about these. However, there will also be a small minority who oppose the Government and choose to put their money in a savings account with a bank or under their pillows. Poon Ann Poh
I am baffled why people are averse to CPF. I didn't withdraw when I retired and reached 55 years old. Instead, every January, I transfer the maximum amount allowed from my Ordinary Account to my Retirement Account. Every year, I enjoy a total of more than S$10,000 in interest and it keeps compounding. I have opted for CPF Life payouts at 70 instead of 65 just to earn more interest and a higher payout sum. Toh Ong
Between the ages of 55 and 70, you can withdraw what's over the minimum sum anytime. If you really do not need the money, then keep it in CPF to earn better interest compared to leaving it in a bank account. Monthly payouts from the minimum sum will start at the age of 65. But if you don't need monthly payouts, then you can tell CPF to hold on until 70 to start the monthly payouts. If that's the case, your monthly payouts starting from the age of 70 will definitely be higher than if the payouts start at 65. CPF is a very good retirement tool… Your CPF money does ultimately belong to you. Even if you die early, your money will still go to your nominated beneficiary, and not kept by CPF or the Government. So in that way, you can still say that your CPF money still belongs to you. Kim Foong Foo
*Comments were first posted on TODAY's Facebook page and TODAY Readers Facebook group. They are edited for language and clarity.
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