Hi anon,
ā
You don't have to actually decide whether you want to go for FRS or ERS when you reach 55 y.o. However, if you have the resources to, and you want to go for ERS, you can of course choose to meet your ERS amount when you turn 55. Having ERS at 55 means that you can let your RA monies compound on their own and look forward to a higher CPF LIFE payout (regardless of which plan you choose) at 65.
ā
Let's assume you turn 55 this year and have more than enough money to meet your ERS. CPF will only form your RA with FRS, you have to move the monies yourself if you want to form ERS. If you turn 55 years old this year, your FRS amount is $192K. This is known as your cohort FRS. If you choose to only meet $192K, this amount will compound at 4% yearly and will reach around $284K when you are 65.
ā
Correspondingly, if you wanted to meet ERS, you would need $288K. If you have this amount in your RA, $288K will grow to ~$426K by 65. If you had moved another $96K to have $288K in RA at 55, this money will compound on its own to reach the $426K.
ā
If you didn't top up your RA at 55, and you are turning 65, you would now have to top up ($426K - $284K) which is around $142K to your RA in order to be on par with your peers who already started with ERS in RA at 55, and this top up amount is considerably more than $96K. This $142K is actually the equivalent of growing $96K at 4% a year for 10 years. If I'm certain that I want ERS, I'd just move $96K to RA to reach $288K when I am 55, and let CPF interest take care of the compounding for me.
Hi anon,
ā
You don't have to actually decide whether you want to go for FRS or ERS when you reach 55 y.o. However, if you have the resources to, and you want to go for ERS, you can of course choose to meet your ERS amount when you turn 55. Having ERS at 55 means that you can let your RA monies compound on their own and look forward to a higher CPF LIFE payout (regardless of which plan you choose) at 65.
ā
Let's assume you turn 55 this year and have more than enough money to meet your ERS. CPF will only form your RA with FRS, you have to move the monies yourself if you want to form ERS. If you turn 55 years old this year, your FRS amount is $192K. This is known as your cohort FRS. If you choose to only meet $192K, this amount will compound at 4% yearly and will reach around $284K when you are 65.
ā
Correspondingly, if you wanted to meet ERS, you would need $288K. If you have this amount in your RA, $288K will grow to ~$426K by 65. If you had moved another $96K to have $288K in RA at 55, this money will compound on its own to reach the $426K.
ā
If you didn't top up your RA at 55, and you are turning 65, you would now have to top up ($426K - $284K) which is around $142K to your RA in order to be on par with your peers who already started with ERS in RA at 55, and this top up amount is considerably more than $96K. This $142K is actually the equivalent of growing $96K at 4% a year for 10 years. If I'm certain that I want ERS, I'd just move $96K to RA to reach $288K when I am 55, and let CPF interest take care of the compounding for me.