Later Drawdown Age = Fatter Payout If ....

Source : TODAY, Wednesday, August 22, 2007

Having a later drawdown age for your Central Provident Fund (CPF) minimum sum could mean a fatter payout later — provided you continue working longer, too.

The drawdown age is now 62 and will go up gradually from 2012 to age 65 by 2018. Also, people who work until age 65 will enjoy higher Workfare bonuses, higher CPF returns and legal assurance that they will be offered re-employment.

All this makes a “big difference”, said Manpower Minister Ng Eng Hen.

Take a 57-year-old worker today, who will be the first affected by the deferred drawdown age. Say, he earns $1,200 a month and stops working at 62. Under current rules, he would have a retirement account (RA) balance of about $44,000 — which would pay out $320 a month for 17 years until he turns 79.

But if he works for one more year, even if at a lower $1,000 salary, the income plus 12 months of higher CPF returns would hike his RA balance to $49,000 – enough for $340 a month for 19 years until he is 82.

And if he works until 65 and only starts drawing his minimum sum then, he will have a balance of $59,000 in his account — $390 a month for 20 years until he turns 85.

“We have not (even) included the additional Deferment Bonus and Voluntary Deferment Bonus, which we will announce later,” said Dr Ng. CPF members in their 50s, who will be among the first affected by the changes, will get a one-off bonus — as will those aged 58 and older who voluntarily delay drawing down their minimum sum.