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Old 11-04-2019, 08:08 AM   #1149
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Join Date: Jun 2010
Posts: 10,087
your posts on CPF made me wonder if there's anything i can do for my mum. she's recently acquired PR status in sg at the age of 56, so she has literally $0 in all her CPF accounts at the moment. as she doesnt have any income, i feel tempted to top up her CPF account so that i can save some tax benefits, and she might be able to get some cpf pay-out later when she reaches 65 or 70. but tax relief is capped at 7k cpf contribution per year, and i'm the only person working in the family and therefore the only person to top up her cpf. given that she's already past 55 years old, do you think it's still worth it for me to make voluntary contribution to her cpf account?
Yes, absolutely. The $7,000 of tax relief is still valuable to you, and she gets 6% (!) interest on that money.

if i make 7k contribution each year starting this year, it seems that she still wont be able to have enough money to enjoy CPF Life?
No, it’s possible to join CPF LIFE even if you have a really low balance Retirement Account. The monthly payout won’t be much, of course. CPF LIFE participation is mandatory when the balance hits $60,000, unless you apply for and qualify for a waiver (based on having a suitable alternative life annuity).

do you think i should make contributions more than 7k a year to make it worthwhile?
Well, on the first $30,000 she’ll earn 6% interest, and on the next $30,000 she’ll earn 5% interest. Then 4% interest thereafter. And you/she can top up her MediSave Account to the Basic Healthcare Sum and Retirement Account to the Enhanced Retirement Sum. That’s hundreds of thousands of dollars. While her RA is below the Full Retirement Sum you can qualify for $7,000 of tax relief per year. Even if you’re shoving $30K/year into her Retirement Account that’s still several years of tax relief for you.

So yes, I’d be zooming up her balances, even faster than the tax relief limit. It seems like a no brainer since nothing else is going to be that attractive.

If you can afford $30,000 this month, or even $60,000, I’d do that. I mean, 6%! 5%! Wow, that’s something these days. Even 4% is excellent.

One more rule about CPF LIFE. If she terminates her PR status in the future and is not already receiving CPF LIFE monthly payouts, then she won’t be able to join CPF LIFE. In that event she could leave her funds in her CPF subaccounts earning interest. Any withdrawal has to be in one big chunk, all CPF dollars. There are no partial withdrawals allowed for ex-PRs/ex-citizens. The earliest she can start CPF LIFE payouts is age 65, although in my view it’s smarter to wait until age 70 (the default) if financially possible.

Also, she should stop by a CPF office and make a CPF nomination, meaning she designates who will receive her residual CPF assets when she passes. If she doesn’t do that then there’s a trustee fee involved along with some complexity, even if she has a will. (Wills don’t apply to CPF assets.)

I would emphasize her Retirement Account at this point since that’s about her retirement income. Her MediSave Account is at least less important right now. You should probably assume her MediShield Life (or Integrated Shield base plan) premiums using your MediSave Account since you qualify for tax relief and could, conceivably, top up your own MediSave Account if you have room below the CPF Annual Limit.
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