HWZ Forums

Login Register FAQ Mark Forums Read

To transfer CPF to homemaker wife, or not?

Like Tree137Likes
Reply
 
LinkBack Thread Tools
Old 11-03-2017, 10:23 PM   #1
Member
 
Join Date: Oct 2009
Posts: 233
To transfer CPF to homemaker wife, or not?

Trying to seek the opinion of this group's members...
My wife is not working (so practically has almost nothing in her CPF). I'm wondering, whether or not I should transfer some of my CPF to her.
Some of my consideration points :
1) If I accumulate only in my own CPF, let's say the retirement payout in the future is $2000 for me to share with her. But if I transfer my CPF to her, and each of us get $1000 in the future, then the outcome is just the same ?
2) If I (as sole breadwinner) passed away, she will also get my CPF, so whether or not I transfer to her, doesn't make difference ?
3) If anything, transferring to her CPF will win with the extra 1% interest rate because mine is already >$60k now.
4) Obviously if a divorce ever happens, it totally makes a difference, so no need to discuss about that point here.

Is there anything else to be considered in this situation ? Thanks for sharing!
liemsc is offline   Reply With Quote
Old 11-03-2017, 10:59 PM   #2
Master Member
 
Join Date: Jun 2010
Posts: 3,990
My wife is not working (so practically has almost nothing in her CPF). I'm wondering, whether or not I should transfer some of my CPF to her.
Almost without a doubt, yes.

1) If I accumulate only in my own CPF, let's say the retirement payout in the future is $2000 for me to share with her. But if I transfer my CPF to her, and each of us get $1000 in the future, then the outcome is just the same ?
First of all, no, it doesn't work that way, for at least three reasons. First, CPF bonus interest applies to the first $60K, and some additional bonus interest starting at age 55 on the first $30K. If you have already passed those thresholds then the household is missing out on some bonus interest. Second, the CPF LIFE annuity payouts are "skewed" in favor of the lower payout annuities. Meaning, the initial dollars you put in are slightly more powerful -- and generate slightly more annuity income -- than subsequent dollars. Third, what happens if you predecease her, as is statistically likely if you are equal in age or older?

2) If I (as sole breadwinner) passed away, she will also get my CPF, so whether or not I transfer to her, doesn't make difference ?
Yes, but only before you start collecting CPF LIFE annuity payouts. The annuity stream does not transfer to a surviving spouse, although sometimes a portion of the CPF LIFE premium does.

3) If anything, transferring to her CPF will win with the extra 1% interest rate because mine is already >$60k now.
Yes, and that's very important.

4) Obviously if a divorce ever happens, it totally makes a difference, so no need to discuss about that point here.
Yes and no. In the hopefully unlikely event of a divorce there's still a financial settlement of some kind based on both household and individual assets.

You should also consider topping up her Special Account if you are in a nonzero tax bracket and if you can afford it. That would provide you (and thus the household) with tax relief. As long as her income is below $4,000 you should be eligible for that tax relief.
BBCWatcher is online now   Reply With Quote
Old 11-03-2017, 11:58 PM   #3
Member
 
Join Date: Oct 2009
Posts: 233
Wow, just the first reply only, and I find it so insightful already!
Thanks @BBCWatcher. From your explanation, it does seem better to do the transfer.
Looking forward to more inputs from the others..
liemsc is offline   Reply With Quote
Old 12-03-2017, 09:25 AM   #4
Master Member
 
Join Date: Jun 2010
Posts: 3,990
You should also consider topping up her Special Account if you are in a nonzero tax bracket and if you can afford it. That would provide you (and thus the household) with tax relief. As long as her income is below $4,000 you should be eligible for that tax relief.
I should have mentioned that if her income is substantially higher -- if she's in a nonzero tax bracket -- then it makes sense to give her the $7K to top up her own Special Account (and more if she can top up her own Medisave Account with tax relief) so that she can claim her own tax reliefs. You described her as a "homemaker," but it is possible for homemakers to have substantial taxable incomes.

As a simple "rule of thumb," it's a good idea to take advantage of whatever tax reliefs you and your spouse can, first. Then you can decide whether other steps have merit. For example, if you are in the 15% tax bracket, and if she has less than $4,000 of taxable income, then you could top up your own account ($7K) and hers ($7K). That'll cut your income tax bill by $2,100. You can then transfer the funds over your bonus interest limit into her account, to boost household bonus interest. Medisave top-ups may also be possible, but I wouldn't make those first unless you can also claim some tax relief on them. Once you've both hit the bonus interest maximums then you can return to "business as usual" (with top ups to claim tax relief if you can do it). If you cannot afford $14K top-ups then some tax relief is better than none, so consider a lesser amount. In this scenario, I'd probably top up her account first, before yours, since she can still get bonus interest.

There are some other ways spouses can financially optimize between themselves, but this is one good, important way (CPF).

As a reminder, since you have dependents, if you cannot self-insure (most people cannot) then it's a really good idea to protect their financial futures with three forms of insurance, in adequate amounts: simple term life insurance, disability income insurance, and medical insurance. Life insurance pays a benefit to survivors upon death; term life insurance means that the coverage extends to a specific age or date, usually something like age 60, to give you enough time to build retirement savings and self-insure. Since there's a maximum policy age, and since most people live longer than that age, term insurance is much more affordable. Disability income insurance means that the household receives a monthly benefit for as long as you cannot work (and generate an income), as the policy defines it. Some "life insurance" policies include limited coverage for such events, but in Singapore's insurance market it's best (in my view) not to confuse or combine the two -- that they are separate products, even if the same carrier issues them. One caution on the disability income insurance is that, last I checked, only one carrier will pay benefits if you happen to be working/staying outside Singapore. Medical insurance is "interesting" in the age of MediShield Life and Medisave Accounts, but I think the upgrade to an Integrated Shield "B1" public hospital plan is worth it. (And maybe "A" if you can afford it.) Whatever you decide, having adequate medical insurance helps make sure, if at all possible, you stay healthy (and productive) and don't break the bank in the process. Your employer may or may not provide some or all of these insurance coverages, to some degree, as long as you're employed.

If you've got those "big three" bases well covered I think you're doing better than most.

Last edited by BBCWatcher; 12-03-2017 at 09:38 AM..
BBCWatcher is online now   Reply With Quote
Old 12-03-2017, 10:13 PM   #5
Member
 
Join Date: Oct 2009
Posts: 233
BBCWatcher, really appreciate your effort to elaborate so much in my thread. Some of your points on the top-ups / tax relief are indeed new "a-ha" for me, and I can make sense of most of them. However I'm still curious about the Medisave top-ups, hopefully you could explain a bit more on that.

For a bit of more background info, my wife is currently in the zero tax bucket. As for the protection part, I would think we're quite decently covered (I've got all 3 items that you mentioned : medisave integrated shield, income protection <GE PaySecure>, as well as some term policies).
So I'm now trying to look more into optimizing the growth of the retirement funds.

Btw - I'm not a believer in whole-life policies or endowment plans, so not having any of those. I have a little bit of equities which have not been performing that great (should have heed the advice of just buying ETF).
liemsc is offline   Reply With Quote
Old 12-03-2017, 11:06 PM   #6
Member
 
Join Date: Jun 2010
Posts: 490
Liemsc,
How much do you really intend to transfer into your spouse's CPF RA? To reach her FRS?
What is the amount that you are willing to part with in order to put it into her cpf account?
culture_counter is offline   Reply With Quote
Old 12-03-2017, 11:52 PM   #7
Member
 
Join Date: Oct 2009
Posts: 233
Liemsc,
How much do you really intend to transfer into your spouse's CPF RA? To reach her FRS?
What is the amount that you are willing to part with in order to put it into her cpf account?
Nope.. definitely not FRS. Not even BRS. Even I myself haven't reached my FRS Thinking of transferring some part of my SA to her SA, and then a bit of top-ups periodically as suggested by BBCWatcher.
Any suggestion in this case ? Thanks in advance.
P.s: I'm assuming your question is about "now", rather than "eventually" ?

Last edited by liemsc; 12-03-2017 at 11:54 PM..
liemsc is offline   Reply With Quote
Old 13-03-2017, 07:07 AM   #8
Master Member
 
Join Date: Jan 2010
Posts: 4,001
do you intend to withdraw from your cpf at 55? if so, whatever that is transferred to your wife cannot be withdrawn.
dork32 is offline   Reply With Quote
Old 13-03-2017, 08:28 AM   #9
Member
 
Join Date: Oct 2009
Posts: 233
do you intend to withdraw from your cpf at 55? if so, whatever that is transferred to your wife cannot be withdrawn.
Yes, I'm aware of that. But if I am to have comparable payout amount, even if I don't transfer to her, I will have to keep it in my account anyway (rather than withdraw it), right?

Btw, while on this topic : I notice that the withdrawable amount at age 55 is "Your Ordinary and Special Account savings after setting aside the applicable Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) with sufficient property charge/pledge". I can't find much info in CPF website about this property pledge ; what exactly does it mean ? Does it mean that if the property is sold one day, some amount have to be repaid to the govt ? What if it's never sold? What if my account can reach FRS but my wife's account can only reach BRS, how will it work with the property pledge ?
liemsc is offline   Reply With Quote
Old 13-03-2017, 09:42 AM   #10
Master Member
 
Join Date: Jan 2010
Posts: 4,001
Yes, I'm aware of that. But if I am to have comparable payout amount, even if I don't transfer to her, I will have to keep it in my account anyway (rather than withdraw it), right?
you can withdraw balances above 83k if you pledge your home. your wife is not working. it is very difficult to hit 83k for her just by transferring to her along.

eg, if you have 153k in oa + sa. by right you can withdraw 70k at age 55.

but if you transfer 30k to her, your oa +sa left 123k. her oa+sa now have 30k. you can only withdraw 40k.

the question is do you need this extra 30k cash at 55 or do you want a higher stable monthly payout when you hit 65.
dork32 is offline   Reply With Quote
Old 13-03-2017, 09:48 AM   #11
Master Member
 
Join Date: Jan 2010
Posts: 4,001
Y Does it mean that if the property is sold one day, some amount have to be repaid to the govt ? What if it's never sold? What if my account can reach FRS but my wife's account can only reach BRS, how will it work with the property pledge ?
if you sell your property, you pay back 83k into cpf and keep the rest as cash. never sold no need to pay back forever. you hit frs, you can withdraw 83k. your wife hit brs she cannot withdraw.
dork32 is offline   Reply With Quote
Old 13-03-2017, 10:25 AM   #12
Master Member
 
Join Date: Jun 2010
Posts: 3,990
it is very difficult to hit 83k for her just by transferring to her along.
Much less difficult if topping up her account at a $7K/year pace every January. Even with the increase in the BRS, top ups alone would probably get her there in about 15 years.

the question is do you need this extra 30k cash at 55 or do you want a higher stable monthly payout when you hit 65.
Please keep in mind if she gets nothing (or very little), she gets nothing. And it's extremely rare for both spouses to die on the same day.

In my view you maximize the tax reliefs and bonus interest first. That's free money, well worth collecting. Grow the household assets as fast as possible, first. Then you start worrying about the second order issues, like wondering about how much you want to withdraw at age 55. ("Zero" is a good answer.)
BBCWatcher is online now   Reply With Quote
Old 13-03-2017, 12:45 PM   #13
Member
 
Join Date: Jun 2010
Posts: 490
Nope.. definitely not FRS. Not even BRS. Even I myself haven't reached my FRS Thinking of transferring some part of my SA to her SA, and then a bit of top-ups periodically as suggested by BBCWatcher.
Any suggestion in this case ? Thanks in advance.
P.s: I'm assuming your question is about "now", rather than "eventually" ?
Yes, now or eventually are all interlinked.
It's a big sacrifice. You would have to think very carefully and weigh the consequences based on the present (up to 55 years) as well as future needs (i.e. at 65 years old).
culture_counter is offline   Reply With Quote
Old 13-03-2017, 03:44 PM   #14
Master Member
 
Join Date: Jan 2010
Posts: 4,001
Much less difficult if topping up her account at a $7K/year pace every January. Even with the increase in the BRS, top ups alone would probably get her there in about 15 years.
you think everyone so powerful can top up 7k a year?


Please keep in mind if she gets nothing (or very little), she gets nothing. And it's extremely rare for both spouses to die on the same day.
what are you tokking? i am tokking about withdrawal at 55.


In my view you maximize the tax reliefs and bonus interest first. That's free money, well worth collecting. Grow the household assets as fast as possible, first. Then you start worrying about the second order issues, like wondering about how much you want to withdraw at age 55. ("Zero" is a good answer.)
in my view, it is not free money. The money that is locked up forever. for that they give you 1 extra %.

also, when i withdraw at 55, it is cold hard cash. you can use it buy car, buy house, feed china mei mei. the money that is transferred to your wife is just a number that is stated on the cpf statement.
dork32 is offline   Reply With Quote
Old 13-03-2017, 03:49 PM   #15
Master Member
 
Join Date: Jan 2010
Posts: 4,001
be careful with bbc. he is a very big fan of cpf. he will ask everyone to put as much money in as possible and back it up with his grandma stories.

for your info, bbc mentioned that he is the brs type of person. in other words, he is going to transfer the min of 83k into the cpf life. and there he goes asking everyone to transfer money into the sa.

i put the advantages (more cpflife payout) and disadvantages (less withdrawal amount). you decide which is better for yourself.
dork32 is offline   Reply With Quote
Reply
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Terms of Service for more information.


Thread Tools

Posting Rules

Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are On