CPF interest coming tonight

[tmkedmw]

I was thinking for people who are getting 60k in interest, can they just draw the monthly interest for a living instead of touching the principal?

Prior to 2022, it is possible to withdraw interest every month if u are above 55.
No longer possible as rules change

 

[jackiehuat]

Apparently they don't or else should get a lot more.

do the interest compound monthly? or they just take lowest balance for each month, then they add them all up by applying 2.5 -4%

Interest is not compounded monthly. That is why CPF only credits at the end of the year. Any withdrawal in that month does not qualify for the monthly interest.

 

[grevq80o]

If I understand correctly, the lowest balance (in your use case) is 20K, not 19K. I believe there were discussion on this topic and someone wrote to CPF Board to clarify. I believe the answer is that CPF Board will consider all the inflow and outflow of the month to find the net flow. Inflow need not be ahead of outflow. Just need to be in the same month. So in your case, the net flow for the month is positive 500. Since contribution for that month is ignored, the lowest balance is still 20K.

Really? Lets say have 20K at the beginning of month
, u take out 1000 in the 1st week, then put in 1500 on the last week.
Lowest balance count as 19k? Or 20k like u say?

 

[jackiehuat]

Really? Lets say have 20K at the beginning of month
, u take out 1000 in the 1st week, then put in 1500 on the last week.
Lowest balance count as 19k? Or 20k like u say?

Any withdrawal in that month does not qualify for the monthly interest.

 

[grevq80o]

If I understand correctly, the lowest balance (in your use case) is 20K, not 19K. I believe there were discussion on this topic and someone wrote to CPF Board to clarify. I believe the answer is that CPF Board will consider all the inflow and outflow of the month to find the net flow. Inflow need not be ahead of outflow. Just need to be in the same month. So in your case, the net flow for the month is positive 500. Since contribution for that month is ignored, the lowest balance is still 20K.

I think if input 1500 first then draw out 1000, the lowest balance will be 20500. But if u draw out first, the lowest balance is 19K. That is my understanding

 

[highsulphur]

Really? Lets say have 20K at the beginning of month
, u take out 1000 in the 1st week, then put in 1500 on the last week.
Lowest balance count as 19k? Or 20k like u say?

interest for that month is based on 19k

 

[highsulphur]

If I understand correctly, the lowest balance (in your use case) is 20K, not 19K. I believe there were discussion on this topic and someone wrote to CPF Board to clarify. I believe the answer is that CPF Board will consider all the inflow and outflow of the month to find the net flow. Inflow need not be ahead of outflow. Just need to be in the same month. So in your case, the net flow for the month is positive 500. Since contribution for that month is ignored, the lowest balance is still 20K.

interest will be based on 19k

 

[compro_1975]

How much did you refund back?

Principal was 60k, interest about 7ki think.. din remember the amount, but did not like the idea of me paying a penalty to use the money

 

[semiret]

Interest is not compounded monthly. That is why CPF only credits at the end of the year. Any withdrawal in that month does not qualify for the monthly interest.

That's wrong interests are compounded mthly. But it'll only updated all the interests compounded on 31st of Dec every year. That's was what I was told by CPF staffs.

 

[highsulphur]

That's wrong interests are compounded mthly. But it'll only updated all the interests compounded on 31st of Dec every year. That's was what I was told by CPF staffs.

i think interest are calculated month but since they are only added end of the year, it can be compounded only annually.

 

[70niner]

That's wrong interests are compounded mthly. But it'll only updated all the interests compounded on 31st of Dec every year. That's was what I was told by CPF staffs.

Yes computed monthly, credited yearly....

I think there is still a minor loss of the compounding effect

 

[compro_1975]

Yes computed monthly, credited yearly....

I think there is still a minor loss of the compounding effect

I think the main point is whether the new interest is in the computation of the next month or only earn interest over interest after crediting

 

[Misuta]

Mid 40s. No cash top-up ever; only from work income and compounding. OA all used up for mortgage.

yes, this scenario is a more realistic reference for someone younger like me.

i intend to use my excess OA funds either for investing now, or for property in the future. not intending to top up because the tax relief is negligible and i think i can get much higher long term returns elsewhere.

 

[Misuta]

$17751 my interest, I have $25k OA invested in Endowus funds. Wished I had invested more as the returns are much better than 2.5%

exactly. i've always wanted to invest my OA funds since i started working. i only managed to start investing my OA funds 3 years ago after hitting >20k.

since then, i've invested my incoming OA funds into a global equity index in Endowus. the annualized returns so far i just checked is 19% for the past 3 years.

i'm fully cognizant that this annual 19% returns in the current bull market is not sustainable, and there is a significant likelihood of a pullback in the coming years. but still, i'm still invested in the market because i think an average annual return of 8-10% is still very reasonable for the next 20 or 30 years, which far far outpaces 2.5% or even 4% provided by CPF. i'm used to the volatility.

that's why i don't really understand why there so many here rushing to top up their CPF. just for a few hundred dollars of tax savings, you're locking up your money which is subjected to changing rules and gives a sub-optimal 4% return over the long term. worse still, there are so many who already reached FRS, rush to top MA at the start of the year, overflow to OA then leave their OA idle at 2.5%.

i think this really reflects the general risk aversion of sinkies, especially the older generation. must bao jiak, must min-max, must wait for the bottom. in the end kena analysis paralysis and nothing is done, just get the lowest guaranteed returns.

 

[70niner]

I think the main point is whether the new interest is in the computation of the next month or only earn interest over interest after crediting

My interpretation is no but I could be wrong

Jan interest is computed and recorded somewhere in the system, and does not attract further interest for Feb, Mar etc....

Hence the loss of compounding

 

[KnyghtRyder]

But RA interest not your interest right? The interest is go to the sharing pool?

Yes and no.. depends what plan you choose. The interest you see in your RA account is your interest. The interest that CPF adds to your annuity is the sharing pool.

 

[highsulphur]

i managed to reconcile my SA interest. Basically just take the average of your Dec24 to Nov 25 SA end of month balances. First 60k earns 5%. Balance earns 4%. I got the interest down the cents. This confirms interest are calculated monthly but compounded annually.

The reason why I used Dec24 to Nov 25 is because the month's closing balance normally forms the lowest base for next month's balance.

 

[ask_yip]

Yeah in liao

can add fish liao

 

[KnyghtRyder]

How much is the tax relief after topping up $3.5k cash to MA?

Depends on your income.

 

[snowcrabramyeon]

#2 2.5 to 4% interest for effectively a 30 year bond is peanuts. 30 year bond in US is about 5% yield so yes, ur not very smart

If you are so smart, you wouldn't be comparing Apple to Orange. Don't compare SGD deposits with USD bonds. Want to compare, compare SGD denominated instruments. And OA should not be compared to bonds since you can use OA for many things, including investment if you so wish.