A reader, Louis Tan, emailed to ask about the implications of the government raising the retirement age from, say, 62 to 65, 67 or 68 years. Yes, this signals to Singaporeans that they are expected to work longer before retiring. Apart from that, does it really mean anything?Well, yes. It affects your CPF money.
How does the CPF work? You do not get to withdraw all your CPF money when you turn 55. First you must set aside a "Minimum Sum" and leave it in a "Retirement Account" with the government. At age 55, the only CPF money you can immediately withdraw is any excess you have, above the Minimum Sum.
When will you start getting your Minimum Sum back? When you reach the official retirement age. And then only in monthly instalments stretched over 20 years.
This is basically to ensure that in your old age, you can at least afford to buy your own rice and water, so that you do not become a nuisance to the government. Hopefully, you will die within 20 years of your retirement age, before your Minimum Sum runs out. Then the PAP government will not be responsible for your basic subsistence needs.
Now, what happens if the retirement age is raised? Obviously you'll have to wait longer before getting your Minimum Sum monthly instalments. For example, suppose the retirement age is raised from 62 to 68 years. You'll have to wait till you're 68 years old, before you can get your monthly cheque.
Since it is a long wait between your 55th and your 68th birthday, you will feel more motivated to continue working after you turn 55. Otherwise you may not have enough savings to last until your 68th birthday.
How much is the Minimum Sum? Currently it stands at $94,600. It will be slowly raised through the years, until it reaches about $120,000 in the year 2013 ($120,000 figure has not been adjusted for inflation).
If at the age of 55, your total CPF money is less than the then-prevailing Minimum Sum, then you get to withdraw nothing at all. Another reason to keep working.