CPF Top up questions

[starlight318]

Thanks.
How about the interest for MA credited in Jan 18?(52k + interest)
Will it reduce the top up amount?

If im not wrong the interest will overflow to SA ( or OA if FRS reached) since its credited on 31 dec.

 

[henrylbh]

testerjp wrote:

1: Since FRS/BRS increases with inflation.
Will the payout amount also be adjusted and go up with inflation?

Yes, of course.

Payout depends on how much you have at start of payout date (which you have option to choose between 65 and 70) and the CPF Life plan you choose.

Monthly payout is 'fixed' but never guaranteed as it depends on interest rate direction, longevity of participants etc but never on inflation.

If you need one that goes up with 'inflation' you need to opt for escalating plan which give a much lower payout at the start and increases 2% each year.

 

[BBCWatcher]

PMonthly payout is 'fixed' but never guaranteed as it depends on interest rate direction, longevity of participants etc but never on inflation.

Yes, that's correct, agreed. Once you've locked in your CPF LIFE payout plan, the plan runs (including, as an example, the CPF LIFE Escalating Plan). But the input into that plan -- the Basic/Full/Enhanced Retirement Sums and (for low to medium wage workers) wages, with associated compulsory contributions -- increase with inflation, more or less. CPF interest rates are also pegged to market interest rates, which in turn are sensitive to inflation. If inflation picks up (rather a lot), then CPF interest rates should increase, too.

 

[kehyi4]

If I've 166k now, can I still request to join the basic plan for the cpf life instead of standard??

Yes, with a property pledge, you can choose Basic Retirement Sum-level CPF LIFE, and as late as age 70. ...

Actually, i think testerjp is asking about CPF Life Basic Plan vs Standard Plan, rather than BRS vs FRS

Simple answer: yes, you can opt for Basic Plan

CPF Info here:
https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life
https://dollarsandsense.sg/standard-basic-plan-need-understand-cpf-life-plans-deciding/

 

[testerjp]

Yes what I wished to know was if I've $166k at 55 now. And it's combined to form the RA.
Instead of going for the standard plan, can i opt for the basic plan.
Also can I withdraw the rest of the money beyond the BRS.



Another thing.
I know the payout won't adjust according to inflation once it's locked in when it's decided which plan to go into.

But I like to know.

If the frs today is 166k, monthly payout is 1270.

20 years from now and say the frs had already been adjusted to 300k.
Will the monthly payout offered by cpf be increased according to inflation or will still be likely to stick to $1270?

 

[BBCWatcher]

Yes what I wished to know was if I've $166k at 55 now. And it's combined to form the RA. Instead of going for the standard plan, can i opt for the basic plan.

You only choose your desired CPF LIFE plan (Standard, Basic, or Escalating) just before your payouts start. That can be just before your 70th birthday -- as late as that. Yes, you can choose your payout plan...but you don't choose at age 55.

If CPF LIFE introduces a new plan, then CPF may allow individuals already receiving CPF LIFE payouts to switch plans. That's exactly what CPF is allowing during 2018, when participants will have the option to switch to the CPF LIFE Escalating Plan, if they wish.

Also can I withdraw the rest of the money beyond the BRS.

OK, first you make a property pledge. Without making a property pledge, you must stay at least at FRS-level CPF LIFE (assuming you have FRS level funds). Then you add any SA/RA top-ups you've made to the BRS. BRS+SA/RA top-ups equals your minimum participation level -- or the FRS, if the FRS is lower than BRS+top-ups. (Made no voluntary top-ups to your SA/RA, and you've made a property pledge? Then BRS-level CPF LIFE is allowed.) All non-Medisave funds above your minimum participation level can be withdrawn at age 55....

....Of course, you shouldn't withdraw from what is a very special, high yielding, on demand savings account. That's not financially sensible. Only withdraw (and only partially) if you actually need those cash funds for immediate needs.

There are some very silly people that withdraw everything they can from CPF at age 55...then put the money in a bank account earning 0.1% interest, maybe even with no deposit insurance. Dumb!

If the frs today is 166k, monthly payout is 1270.
20 years from now and say the frs had already been adjusted to 300k.
Will the monthly payout offered by cpf be increased according to inflation or will still be likely to stick to $1270?

Before your entry, the payout amount will be adjusted for three major factors: inflation (yes, absolutely, to ratchet up right along with the BRS/FRS/ERS), market investment returns (basically what Temasek and GIC investments earn, over the long term), and life expectancies (how long are CPF LIFE participants actually living). The government reserves the right to adjust CPF LIFE payouts slightly and gradually, even after you start receiving payouts, to account for the last two factors (market investment returns and life expectancies).

 

[The_Davis]

If im not wrong the interest will overflow to SA ( or OA if FRS reached) since its credited on 31 dec.

Interest confirmed to be excluded from the equation for max BHS scenario?

 

[henrylbh]

I know the payout won't adjust according to inflation once it's locked in when it's decided which plan to go into.

But I like to know.

If the frs today is 166k, monthly payout is 1270.

20 years from now and say the frs had already been adjusted to 300k.
Will the monthly payout offered by cpf be increased according to inflation or will still be likely to stick to $1270?

Payout is 'fixed' based on what you have at start of payout date.

Payout (starting between 65 and 70) based on 166k at 55 and payout based on 300k at 55 got nothing to do with inflation.

 

[henrylbh]

Before your entry, the payout amount will be adjusted for three major factors: inflation (yes, absolutely, to ratchet up right along with the BRS/FRS/ERS), market investment returns (basically what Temasek and GIC investments earn, over the long term), and life expectancies (how long are CPF LIFE participants actually living). The government reserves the right to adjust CPF LIFE payouts slightly and gradually, even after you start receiving payouts, to account for the last two factors (market investment returns and life expectancies).

Payout will never be adjusted for inflation.

Payout is based on what you have at start of payout date and it's fixed and will only be adjusted according to mortality experience and interest rates (and change of government ).

Only FRS amount at 55 takes into account inflation and standard of living.

 

[kehyi4]

CPF Life payout is not "fixed"

From CPF Life FAQ:

Q - Will there be a yearly review of my CPF LIFE payouts under all the CPF LIFE plans?

A - The yearly review will take effect in July taking account the following:
* Changes in mortality experience. If more people live longer than expected, the monthly payout might be lower, and vice versa.
* Changes in interest rates. If interest rates are higher than expected, the monthly payout might be higher, and vice versa.
* Transactions which affect your Retirement Account balance, for example, refund of money arising from selling property, top-ups.

As with all CPF LIFE plans, payouts may be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual.

We will inform you two to three months before we make any adjustments to your monthly payout.

 

[testerjp]

A little disturbing. Rather than increasing payout proportionally from the always rising frs.

It might reduce payout instead.

Think top up to Ma only is safer, and just aim brs.

 

[BBCWatcher]

A little disturbing. Rather than increasing payout proportionally from the always rising frs.

No, no, no. You got it right the first time.

If you consider the annual increase in the FRS to be due to inflation (and that's a reasonable way of understanding it), then (up until entry) the payouts increase with inflation, too. They ratchet right up along with the FRS -- exactly proportional, ceteris paribus.

 

[testerjp]

So from this"

Top up Medisave account with Tax relief should be :
Contribute to my medisave (Tax Deductible)

CorrecT?

 

[BBCWatcher]

Yes, correct.

 

[The_Davis]

Interest confirmed to be excluded from the equation for max BHS scenario?

Upz anyone can confirm?

 

[maumu]

Upz anyone can confirm?

i had the same question and when I asked IRAS they said the interest is not considered when it comes to the max limit/cap. in other words, just make sure you have space to top up $7000 before reaching $166k to enjoy the full tax relief.

 

[The_Davis]

i had the same question and when I asked IRAS they said the interest is not considered when it comes to the max limit/cap. in other words, just make sure you have space to top up $7000 before reaching $166k to enjoy the full tax relief.

my question was for bhs; your reply seems to be for SA?

 

[BBCWatcher]

Well, feel free to log into your account on January 1. If CPF thinks you've got $2,500 of Medisave top-up room, and if you expect to have at least that much room below the CPF Annual Limit next year, go for it.

That's only about 9 days away, as I write this.

 

[kehyi4]

Upz anyone can confirm?

I can confirm this.

I was at max BHS on 31 Dec 2016. Come 2017 (on 4 Jan 2017 to be precise), the total interest earned in MA was auto-transferred out, leaving only 2016 BHS in my MA

That means CPF applied 2016 BHS instead of 2017 BHS even after 2016 MA interest was credited

This is probably good news for those looking to top up MA for tax relief - you have the full increase of BHS (2.5k for 2018) to play with

(for me, alas, my mandatory contrib will most likely exceed CPF Annual Limit in 2018... on second thought, that's probably a good thing )

 

[BBCWatcher]

(for me, alas, my mandatory contrib will most likely exceed CPF Annual Limit in 2018... on second thought, that's probably a good thing )

Compulsory contributions cannot exceed the CPF Annual Limit, but they can reach it. It takes a minimum of $102,000 (usually more) of gross annual income from work in Singapore to hit the CPF Annual Limit. You’re absolutely right: that’s a good place to be.