CPF Special Account Closure: What to Do Before 55

The CPF Special Account, a cornerstone of Singapore’s retirement savings framework, is set to be closed for individuals aged 55 and above starting next year. Here’s what you need to know and how to prepare.

Singapore’s CPF scheme currently includes three main accounts—Ordinary, Special, and MediSave. Upon reaching 55, an additional Retirement Account is created, funded by transferring savings first from the Special Account, then the Ordinary Account.

The policy primarily impacts individuals with significantly more than the Full Retirement Sum in their Special Accounts. While the change limits the flexibility of withdrawals, experts note it also aligns with broader retirement goals by enabling higher payouts through CPF schemes.

1. Understand Withdrawal Provisions:

CPF members born after 1958 can withdraw up to 20% of their Retirement Account savings at 65. While the closure of the Special Account reduces liquidity, these provisions still provide access to funds for those who need them.

2. Leverage the Enhanced Retirement Sum:

For CPF members aiming for higher payouts, topping up the Retirement Account to the Enhanced Retirement Sum can be a smart move, provided liquidity needs are carefully considered.

3. Reassess Financial Strategies:

For those planning to withdraw funds from their CPF accounts post-55, reallocating excess amounts to alternatives like short-term cash instruments (e.g., fixed deposits) or lower-risk investments may be beneficial.

Investment options, tailored to your risk appetite and financial timeline, can also help grow funds. For instance, bonds may suit individuals closer to retirement, while diversified portfolios could benefit younger members.

4. Plan for the Long-Term:

Younger CPF members should maximize the compounding benefits of the Special Account’s high interest rates by making early contributions. This strategy ensures that by 55, accumulated savings provide flexibility and financial security.

5. Stay Informed:

The changing CPF rules may lead to the introduction of new financial products by banks and other institutions. Take your time to evaluate these offerings before making decisions.

With the CPF monthly salary ceiling rising to S$8,000 by 2026, younger employees can grow their CPF balances even further. For those comfortable with investments, excess Ordinary Account funds can be allocated to low-cost, globally diversified portfolios to capitalize on long-term market cycles.

Individuals approaching retirement can consider “liability matching,” where investments align with expected cash flow needs. For example:

• Funds for immediate expenses can be allocated to safer assets like fixed deposits.

• Money not required in the short term can be invested in higher-risk options such as equities.

While the closure of the CPF Special Account may initially seem restrictive, it provides an opportunity to rethink financial strategies for retirement. By understanding the changes and exploring available options, CPF members can adapt to ensure their retirement plans remain robust.