Contribution to Parents CPF

[BBCWatcher]

- can we top up to my parent's MA account...

Yes.

...and enjoy tax rebate?

No, but they can enjoy 4+ percent Medisave Account interest.

You're better off just paying the medical bills directly (with a rebate credit or debit card) if the funds are going to be immediately withdrawn. But if the funds are going to stay in the Medisave Account for at least one full calendar month then a top up is great to get the interest (although a rebate credit or debit card might still win if it's just a month or two).

You can often get up to $7,000 of tax relief if you top up a Special or Retirement Account, but the recipient cannot have too much income.

If your parent is living in your household and has limited income you may be able to take the Parent Relief.

If this is going to be a common problem (deductibles and co-insurance) then you could look at whether it'd make sense for them to get an Integrated Shield plan to lower those amounts, and if they would qualify. Also stick to public hospitals and clinics and consider ward downgrades (e.g. B1 instead of A).

Lushiris also has a good idea, if you can assume your parents' MediShield Life premiums.

 

[lazybee]

Thanks for all the answers, LiteHouse, lushiris and BBCWatcher. I will consider all options.

Haiz. I guess illness comes to everyone eventually. I just wanna to minimise the costs involved.

I guess the best way is to pay the bills using my own medisave and then top up for the tax rebate.

 

[oceanicmanta]

You can often get up to $7,000 of tax relief if you top up a Special or Retirement Account, but the recipient cannot have too much income.

to elaborate ...
Cash Top up SA/RA can get up to $14k relief, & cash topup for parents' SA/RA not subject to income limit .. but cash topup for spouse is subject to income limit, including non-taxable income such bank interest income

 

[leo leon]

There's no magic, I'm afraid. Putting more money in their RA (cash, with a tax deduction if you qualify), and their buying more CPF LIFE annuity, is how their monthly payout can increase. CPF LIFE Standard pays more but offers less (or no) bequest.
t
At their age 81 you also ought to consider whether simply giving them cash directly is better. CPF should be able to tell you how much their monthly payout would increase for a given amount of RA top up. You can compare that with just giving cash to them every month.

Reducing current and future expenses has exactly the same financial impact -- one dollar of spending avoided is one less dollar of income required -- so of course it's worth looking for those opportunities.

If they have home equity they can tap then that's a potential option.

Hi, tks . to be honest , I under ccs paying monthly credit card repayment loan structure and near bankrupt.
what I left is only cpf money thru out my working life and I have no saving at all and I got 3kids to worry about.
so pls advise me what should or can I do with my current cpf.
tks

 

[henrylbh]

I intend to transfer 129k from my OA to my father RA before end of Jan. In doing so, I will certainly lose interest of $268.75 for Jan.

If his RA is credited in Jan, the amount will start to earn interest from Feb.

But if his RA is credited in Feb, he will lose interest of $430 (at 4%) in Feb as the top up will only start earning interest from Mar.

Therefore, I thought the timing of topping up is important - don't top up close the month end as the deduction is instant while the credit may be early next month.

In view of the above understanding, I asked whether arrangement can be made for my OA to be deducted and my father RA to credited on the same day on the first of the month so that no interest is lost in the process.

CPFB replied that 'in general, any CPF contribution (including refund into your account) received at any time in a month will start earning interest in the following month. Deductions will not earn interest for the month'. The word 'anytime' is so so important that contribution credited on the first of the month will still not earn interest in that month!!!

Like that, no way to not lose interest in the process of transferring $ from one account to another?

 

[elnewbie]

I think the best case is to just ensure his RA gets credited by end January by initiating the process now in view of CNY holidays.

I intend to transfer 129k from my OA to my father RA before end of Jan. In doing so, I will certainly lose interest of $268.75 for Jan.

If his RA is credited in Jan, the amount will start to earn interest from Feb.

But if his RA is credited in Feb, he will lose interest of $430 (at 4%) in Feb as the top up will only start earning interest from Mar.

Therefore, I thought the timing of topping up is important - don't top up close the month end as the deduction is instant while the credit may be early next month.

In view of the above understanding, I asked whether arrangement can be made for my OA to be deducted and my father RA to credited on the same day on the first of the month so that no interest is lost in the process.

CPFB replied that 'in general, any CPF contribution (including refund into your account) received at any time in a month will start earning interest in the following month. Deductions will not earn interest for the month'. The word 'anytime' is so so important that contribution credited on the first of the month will still not earn interest in that month!!!

Like that, no way to not lose interest in the process of transferring $ from one account to another?

 

[chopra]

Henry: jin smelly hor.
Elnewbie: he's saying there's no way not to lose interest

 

[BBCWatcher]

A cash top up now, credited in January, would not miss any interest (except for a January fraction of the 0.1% p.a. that cash might be getting now).

 

[orange_sky]

A cash top up now, credited in January, would not miss any interest (except for a January fraction of the 0.1% p.a. that cash might be getting now).

Nope. The interest on your top up in Jan will start accruing only from February

 

[oceanicmanta]

Like that, no way to not lose interest in the process of transferring $ from one account to another?

this applies to transfer from OA to own SA ?

interest kena makan

 

[BBCWatcher]

Nope. The interest on your top up in Jan will start accruing only from February

Please re-read what I wrote. You're not disagreeing with me.

 

[BBCWatcher]

this applies to transfer from OA to own SA ?

Even if it did, you'd pull ahead rapidly, within the second full month after transfer. Here's how that math works....

$1000 transferred OA to SA
Assume mid-month transfer, no bonus interest, under age 55, "worst case" interest computation
OA interest = $25/year = ~$2.08/month
SA interest = $40/year = ~$3.33/month

Month 0 (transfer month) = lost $2.08 = cumulative total $-2.08
Month 1 = $3.33-$2.08 = $1.25 = cumulative total $-0.83
Month 2 = $1.25 = cumulative total $+0.42

And this is the point henrylbh ought to keep in mind. Cash top ups are better (for potential tax relief also), but an OA to SA/RA transfer executed mid-month will start to pull ahead within the second full month. So a January transfer will go into the black (interest earning) within the month of March. In the abstract it'd be nice if it were even better than that, but it is what it is.

This interest computation pattern suggests:

(a) If you're going to transfer OA to SA/RA, do it in the early part or middle of the month. (Actually, if it's within your own accounts, try doing it online on the first day of the month. That might work since the conversion happens within a few seconds, and maybe that'll outsmart CPF's computer. Or maybe not, but it's worth trying.)

(b) If you're going to withdraw any funds, do it on the first day of the month. Then you might get a bit more interest from the bank receiving those funds.

(c) Cash top ups should be executed near the end of the month (but not too close to the end -- you want them credited in the same month), to maximize bank interest earnings.

 

[orange_sky]

Please re-read what I wrote. You're not disagreeing with me.

Your post wasn't clear. Anyway cash interest nowadays can be as high as 1.55%.
Regardless I think no point hesitating over one month interest if you are in for the long haul

 

[leo leon]

will this year min sum increase from $161k to $180k?
if will then I have to quickly transfer my available cpf to my parents RA..
may I also check if my dad have $52k now in his RA, how much monthly payout he will receive? he 81yrs old

 

[BBCWatcher]

will this year min sum increase from $161k to $180k?

The Full Retirement Sum (FRS) increased from $161,000 to $166,000 on January 1, 2017. So it's already $166,000. The next increase is expected on January 1, 2018, and expected to be to $171,000. The Basic Retirement Sum (BRS) is half of these figures.

if will then I have to quickly transfer my available cpf to my parents RA..

It's possible topping up your parent's RA is a good idea (and even better with cash), but there's no requirement to do so. Many people have RAs with less than the BRS or FRS.

may I also check if my dad have $52k now in his RA, how much monthly payout he will receive? he 81yrs old

Then he's under the "old" Retirement Sum Scheme, not CPF LIFE, I assume. Has he asked CPF? They should be able to calculate that.

Note that if he isn't collecting a monthly benefit already then, starting in January, 2018, he'll automatically receive one. CPF is changing the rules so that "old program" members age 70 and older will automatically receive monthly RSS benefits. I'm not sure if elderly members can opt-out of these automatic benefits; the details aren't going to be announced until later this year. I suspect not, that these will be mandatory annuity distributions.

 

[leo leon]

The Full Retirement Sum (FRS) increased from $161,000 to $166,000 on January 1, 2017. So it's already $166,000. The next increase is expected on January 1, 2018, and expected to be to $171,000. The Basic Retirement Sum (BRS) is half of these figures.


It's possible topping up your parent's RA is a good idea (and even better with cash), but there's no requirement to do so. Many people have RAs with less than the BRS or FRS.


Then he's under the "old" Retirement Sum Scheme, not CPF LIFE, I assume. Has he asked CPF? They should be able to calculate that.

Note that if he isn't collecting a monthly benefit already then, starting in January, 2018, he'll automatically receive one. CPF is changing the rules so that "old program" members age 70 and older will automatically receive monthly RSS benefits. I'm not sure if elderly members can opt-out of these automatic benefits; the details aren't going to be announced until later this year. I suspect not, that these will be mandatory annuity distributions.

tks, cpf board only said used up in 5yrs ..
I am thinking of selling away my current hdb house so I will have cpf returns to my OA of about 200k so that I can quickly do top up to my dad, mum, in-laws and they can each have monthly payout of $1000 each right?

 

[orange_sky]

tks, cpf board only said used up in 5yrs ..
I am thinking of selling away my current hdb house so I will have cpf returns to my OA of about 200k so that I can quickly do top up to my dad, mum, in-laws and they can each have monthly payout of $1000 each right?

then where would stay? Another property?

 

[oceanicmanta]

will this year min sum increase from $161k to $180k?
if will then I have to quickly transfer my available cpf to my parents RA..
may I also check if my dad have $52k now in his RA, how much monthly payout he will receive? he 81yrs old

my dad will also be 82 tis yr

from CPFB, $27.4 in RA , he gets $500 a month for around 5yrs
so for $52k. estimate its around $1000 a month for 5yrs

 

[BBCWatcher]

then where would stay? Another property?

Orange_sky asks a good question.

tks, cpf board only said used up in 5yrs ..

Right, under the "old" program it's a 20 year payout. So if he started withdrawing at age 66 then that timeline makes sense.

It's good that you're thinking ahead a bit. Assuming he's in good health, and assuming he's doing OK with his current income stream, doing something soon lets him take advantage of 5 years of interest.

I am thinking of selling away my current hdb house so I will have cpf returns to my OA of about 200k so that I can quickly do top up to my dad, mum, in-laws and they can each have monthly payout of $1000 each right?

I'm not sure. They could ask CPF for payout estimates, though.

How close are you (and any co-owners) to age 64? If you're close then you could consider HDB's Lease Buyback Scheme if otherwise eligible. That'd let you stay in the unit but raise cash from it. The cash would land in your RA and boost your annuity income, which you could then distribute as you wish. And you can still sell later on if you need to. Even if you qualify you should still check the financial numbers to see if it makes sense.

Another potential option if you have some cash on hand is to ask NTUC what they would charge to buy a life annuity for your 81 year old father, to provide him a NTUC guaranteed monthly income for the rest of his life. You'd tell them what monthly benefit amount it ought to be (X), and when that benefit should start to be paid (Y), and they would quote you a purchase price (Z). The lower the X, and the farther into the future Y, the smaller the Z amount. Reducing the death benefit to $0 (or as near as possible) would also reduce the price (Z).

 

[henrylbh]

will this year min sum increase from $161k to $180k?
if will then I have to quickly transfer my available cpf to my parents RA..
may I also check if my dad have $52k now in his RA, how much monthly payout he will receive? he 81yrs old

On 1 Jan this year, min sum has increased to $166k.

For balance of $52k, his estimated monthly payout is about $950 over a period of 5 years..