Question 2

Mark Lee is a typical law-abiding Singaporean who is currently aged 53 and is fast approaching age 55. He has been working as a computer engineer with a local bank for the past 28 years and is still single. Mark enjoys travelling, outdoor sports and leads a relatively carefree life. His parents both died a few years ago and he received a substantial inheritance of $500,000. After working continuously for the past decades, Mark has also accumulated substantial savings. Mark is currently living in a luxurious studio apartment located in the central business district. He bought his home many years ago when property prices were still relatively low and has completely paid off the mortgage loan on his home. Other than the credit card bills which he pays off well within the credit period, Mark does not have any debt outstanding. With the inheritance and past years of savings, Mark's retirement is financially secured. He is certain that he will be able to live relatively comfortably, even if he were to retire right away. However, Mark still enjoys the challenges at work and the company of his colleagues, and is determined to work for as long as he can.

Despite contributing to CPF for the past many years, Mark has never bothered with the details and benefits of CPF. Like many Singaporeans, Mark simply assumes that he does not need to bother with the CPF monies until retirement as there are strict regulations with regards to the usage of monies in the CPF accounts. Now that he is fast approaching age 55, an age where CPF monies can now be withdrawn, he is beginning to seek a better understanding of the rules governing the withdrawal of CPF monies. Mark has approached you, a financial planner, to clarify some of his queries on the withdrawal of CPF monies.

(a) Describe what happens to a CPF member's Ordinary and Special Account savings when he turns 55.

(8 marks)

(b) Analyse if Mark can withdraw all his Medisave funds when he reaches age 55. Is there a limit as to how much members are required to set aside in their Medisave Account at age 55?

(5 marks)

(c) As Mark is single and has no dependents, he is concerned with the non-withdrawable CPF balances which are set aside. Describe to Mark what happens to a member's CPF balance when he dies, and explain what he needs to do to ensure that his intended beneficiaries receive his CPF monies .

(10 marks)

(d) Mark enjoys working and foresees that he will be working even after age 55. Describe to Mark the implication for CPF members who continue to work after age 55.

(5 marks)

(e) If Mark has total cash balances of $120,000 in his CPF Ordinary and Special Accounts at age 55 and $200,000 have been withdrawn for housing, analyse how much CPF monies Mark can withdraw from his CPF accounts. Assume the prevailing CPF minimum sum when he turns age 55 is $139,000.

(6 marks)

(f) Mark would like to know the options available to CPF members for utilising the minimum sum in the Retirement Account. Analyse and explain to Mark the options available to CPF members for utilising the minimum sum in the Retirement Account.

(6 marks)

(g) With a poor understanding of the benefits under CPF LIFE, Mark is still uncertain whether he should opt for CPF LIFE when he turns age 55 or whether he should stick to the Minimum Sum Scheme. As Mark's financial planner, analyse the key features of CPF LIFE and discuss the difference between the current Minimum Sum Scheme and CPF LIFE.

(10 marks)