Definition:
The Full Retirement Sum (FRS) is a pivotal component of Singapore’s Central Provident Fund (CPF) system, designed to ensure Singaporeans have sufficient savings for a comfortable retirement. It represents a target amount that CPF members are encouraged to accumulate in their Retirement Account (RA) by the age of 55 to receive stable monthly payouts from age 65 onwards.
Key Points:
- Targets: The CPF system outlines three retirement sum targets – the Basic Retirement Sum (BRS), the Full Retirement Sum (FRS), and the Enhanced Retirement Sum (ERS). Each target corresponds to different levels of monthly payouts, with the FRS offering a balance between the BRS and ERS.
- Amounts for 2023: For instance, in 2023, the BRS is set at S$99,400, the FRS at S$198,800, and the ERS at S$298,200. These figures are adjusted annually to account for inflation and changing retirement needs.
- Withdrawal Conditions: Upon reaching the FRS, members without property can withdraw S$5,000 or any excess amount above the FRS, whichever is higher. Property owners can withdraw any amount exceeding the BRS in their RA.
- CPF LIFE: The CPF LIFE scheme is a life annuity plan that provides lifelong monthly payouts based on the amount set aside in the RA. Members can use tools like the CPF LIFE Payout Estimator to gauge their future monthly payouts.
- Flexibility and Exemptions: Members have the flexibility to exceed these sums for higher payouts or may qualify for partial or full exemptions under certain conditions, such as having a lifelong pension scheme or a private annuity plan, subject to CPF Board’s approval.
Importance of FRS:
Achieving the FRS is crucial for ensuring that individuals have a reliable and sufficient income stream during their retirement years. It helps to mitigate financial stress and provides peace of mind, knowing that basic living expenses can be covered. Additionally, the FRS serves as a benchmark for retirement planning, encouraging individuals to start saving early and make informed decisions about their retirement finances.
Planning for FRS:
To reach the FRS, individuals are advised to:
- Start saving early to take advantage of compound interest.
- Maximize their CPF contributions and consider voluntary top-ups to their Special Account (SA) or Retirement Account (RA).
- Invest wisely within their risk tolerance to grow their retirement savings.
- Use government schemes like CPF LIFE and the Enhanced Retirement Sum Topping-Up Scheme (ERTU) for additional benefits.