Using CPF to fund your retirement

CPF is a savings system that helps you actively build security for your housing, healthcare, and retirement needs.

At its core, CPF operates based on shared responsibility: you build up your own savings in your CPF accounts, employers provide monthly contributions to your accounts, and the government maintains a fair and sustainable system, growing your savings with stable interest rates.

Let’s unpack how CPF helps you meet life’s key needs with confidence.

The three CPF accounts you should know

When you start working, you will accumulate savings in three accounts:

• Ordinary Account (OA): For housing, insurance, and investment, with interest rates of up to 3.5% p.a. Using this wisely means more for your retirement later.
• MediSave Account (MA): For hospitalisation expenses, and approved medical insurance, with interest rates of up to 5% p.a. Using your MA savings helps to reduce your cash outlay, though some out-of-pocket expenses may still be required depending on your treatment and coverage.
• Special Account (SA): For old age, and investment in retirement-related financial products, with higher interest rates of up to 5% p.a. to help boost your retirement funds.

When you turn 55, your Retirement Account (RA) is created, and savings from your SA are transferred to your RA. Your SA is then closed. The RA earns higher interest rates of up to 6% p.a. to help your retirement funds grow to provide you with monthly payouts in retirement.

Example: CPF in action

You earn $3,000 a month. 20% (or $600) is saved in your CPF accounts. Your employer adds another 17% (or $510) - this is in addition to your wages, not carved from it! That’s $1,110 every month saved in your CPF accounts.

Over one year, that’s over $13,000 saved and quietly earning up to 5% p.a. interest in the background while you go about your life.

At 4% per year, your CPF savings can double roughly every 18 years. That means if you set aside $1,000 at age 20, it could grow to over $4,000 by the time you're 56, and even more if you leave it untouched till retirement. Plus, CPF gives you a bonus 1% on the first $60,000 across your accounts, which helps your money grow a little faster in the early stages.

Can you do more to maximise your CPF savings? Absolutely! We’ll cover that in the coming chapters!