CPF Retirement account or CPF Life

Dear Mr. Tan,
For those born before 1954, is it better to:
a) Retain the retirement account or
b) Convert the retirement account into CPF Life?

REPLY
If you convert into CPF Life, you may get a bonus of up to $4,000 (depending on your current earnings and your property value). If you get a good bonus, it is better to convert to CPF Life.

Apart from the bonus, the key difference between the retirement account and CPF Life is that with the latter, a part of your savings is converted into a life annuity payable from age 62. The interest rate earned on your savings varies from 3.75% to 4.25%. This is probably the same as the interest rate credited on your retirement account.

Under the life annuity, your longevity risk is pooled with other annuitants. Those who die younger will leave the balance of their money in the fund to be shared among those who survive longer. (Hopefully, you can be the long survivor).

If you are in poor health, it is better to stay with the retirement account. If you are in reasonably good health (compared to other people of the same age), you should convert into CPF Life (and join the pooling of risk).

You have four options for CPF Life, namely, Basic, Balanced, Plus and Income. These options take away different proportions of your savings to be pooled. The Basic option has the smallest percentage that is pooled. Under the Income option, 100% of the savings is pooled. If you are not sure, take the Balanced option.

Tan Kin Lian