CPF Easy Info Thread. :)

[SBC]

Thanks. Logging off, I going JB soon

Any good buy at JB?

 

[dullthings]

BBC, I understand that withdrawals from RA exclude cash contributions.

For withdrawal from the OA/SA (in yo ur words, the “simple sweep”), what if the voluntary contributions to SA exceed the Full Retirement Sum?

https://www.cpf.gov.sg/members/FAQ/...avings from 55&folderid=12854&ajfaqid=2189257

No, Retirement Account creation on a member's 55th birthday is a very simple "sweep" up to the Full Retirement Sum. Dollars are drawn first from the member's Special Account then, if the Special Account is below the FRS, from the member's OA.

Withdrawals may then be possible, but there's no reservation of $5,000 in the member's Ordinary Account. The 55th birthday "sweep" stops either when the RA is funded to the Full Retirement Sum or when both SA and OA run are fully drained, whichever comes first.


No, the second part is not quite correct. With a sufficient property pledge or charge, you may be able to withdraw more from your Retirement Account from age 55+, but top ups, government grants, and interest earned stay in your Retirement Account then stream out via CPF LIFE.

It's best to consult the CPF Retirement Booklet, available here, to understand the basics of age 55+ withdrawal rules. And, to repeat, "Who cares?" You should be aspiring to have a decent or better lifetime pension from CPF, at least in this forum which is called "Money Mind," not "Poverty Mind." If you're rational and sensible, you shouldn't be planning to reduce the government's terrific pension offer. Focus on getting your future Retirement Account funded at least to the Full Retirement Sum and having plenty of other wealth (in SA/OA among other places). Don't focus on scenarios involving financial desperation and even poverty.

 

[BBCWatcher]

For withdrawal from the OA/SA (in yo ur words, the “simple sweep”), what if the voluntary contributions to SA exceed the Full Retirement Sum?

They cannot. CPF doesn’t allow voluntary SA contributions once the member’s SA reaches the Full Retirement Sum.

OK, yes, hypothetically a Singaporean newborn could receive the whole current FRS into her SA within days of her birth, and interest on her SA is currently outrunning the annual FRS increase. So when she’s 55 her RA will be funded to the then current FRS and with some leftover interest on the voluntary top up kept in her SA. She could then withdraw that leftover interest from her SA, even though it’s interest earned from her generous benefactor’s voluntary top up. Per current rules, and apparently — I don’t think anyone can or has tested this exotic edge case yet. (Has anyone who has turned 55 ended up with a RA automatically swept/funded above the FRS?)

This is part of the reason why I keep saying, “Don’t worry,” or at least don’t worry much. The RA withdrawal rules only ever matter (if they matter) if you’re going to try to reduce your RA below the FRS — a distinctly unattractive proposition you’d rationally highly prefer to avoid. If you think the chances you’ll be gasping for air (financially speaking) at age 55+ are significant, OK, worry about these RA withdrawal rules if you want but worry much more, first, about how you’re going to prevent age 55+ financial hardship so severe that you’d have no better choice but to raid your own, already too modest age 65+ pension. One way: how about an OA to SA transfer, to enjoy 4% instead of 2.5% interest? You are often enjoying tax relief for these top ups, after all, so how about prudently investing the tax relief, too, instead of blowing it on whiskey (for example)?

 

[dullthings]

Thanks BBC! I’m not “worried”, just a habit to be (excessively) prudent and to want to find out more before I commit to things.

Both the SA top ups and SRS accounts are often touted as ways to reduce tax, but there are many conditions attached to them that perhaps not everyone is fully aware of. And these conditions may or not be important, depending on their financial situation at 55/65.

 

[cal3135]

Interesting ... need some strategy to maximise on RSTU tax relief... especially for ppl whom hit FRS in RA after 55yo ..
This a good thread, got to understand more on RSTU.

From cpf web
^ The cap is based on current FRS, rather than the ERS, to keep tax benefits focused on supporting basic retirement needs. Cash top-ups beyond the above caps will not be eligible for tax relief.

your 7k comes back to your oa when you are 55 + 1 day old. withdraw this 7k and plough it back to your ra to earn tax relief.

🍎xsmax HardwareZone Forums app

 

[BBCWatcher]

Both the SA top ups and SRS accounts are often touted as ways to reduce tax, but there are many conditions attached to them that perhaps not everyone is fully aware of.

With respect to CPF SA top ups for tax relief, there doesn’t seem to be much lack of awareness about lump sum withdrawal rules in this particular forum. Sometimes it seems like it’s all anyone wants to talk about!

 

[doody_]

How about those voluntary contributions to SA for tax relief? Don't think they can be blocked from entering RA at 55 right?

 

[maple96]

Dullthings, u started off in this forum asking a very simple question, but because the answers given to u were vague or incorrect, with alot of personal opinions thrown in to divert your attention and create confusion, u continue to seek more answers. What u asked had been discussed many times in this forum, but because some people talk so much, it created more confusion

Let's run thru your questions again:

1.

Hi all, I am a bit unsure about the cash top up to CPF SA. If we contribute $7K annually to SA for tax reduction, and based on the description below, we will not be able to withdraw the voluntary contributions at all in lump sum at age 55 (principal and interest, assuming we already meet the FRS)? If that’s true, how then do we get to withdraw the voluntary SA contributions? Via CPF Life’s annuities?

U asked a very simple question. Simple answer: If u meet FRS at 55, all monies left in OA and SA can be withdrawn under CPF@55 withdrawal rules, regardless of where (source) they come from.

Voluntary contributions, under CPF rules, refer to cash contributions to all 3 accounts (OA/SA/MA) or MA contributions. Direct cash topups to SA is not considered voluntary contribution, it is a RSTU (topup). Own OA to SA transfer is another category. So words or phrases must be used correctly or clarified if u want to get the correct answers, as defined under CPF rules.

2.

BBC, I understand that withdrawals from RA exclude cash contributions.

For withdrawal from the OA/SA (in yo ur words, the “simple sweep”), what if the voluntary contributions to SA exceed the Full Retirement Sum?

When u talk about withdrawals from RA, it can be thru property pledge (ie withdraw above BRS) or withdraw at 65 (pea) (we just stop at these 2 “avenues” for withdraw to avoid confusion). Then u are correct (but the term cash contribution u used is wrong), it exclude monies via direct cash topups to SA or RA for BRS type withdrawals, exclude topups to RA above your FRS for pea.

It is possible for your mandatory and voluntary contributions (all 3 accounts) to SA to exceed FRS. Even if your SA exceed FRS at 55 (mandatory, voluntary contributions all accounts, direct SA cash topups, own OA to SA transfer), any monies left in OA/SA can be withdrawn at 55. Withdrawals from RA already explained in above para.

3.

Thanks BBC! I’m not “worried”, just a habit to be (excessively) prudent and to want to find out more before I commit to things.

Both the SA top ups and SRS accounts are often touted as ways to reduce tax, but there are many conditions attached to them that perhaps not everyone is fully aware of. And these conditions may or not be important, depending on their financial situation at 55/65.

U are correct. It is not easy to decipher the CPF rules at the website. I have to write in to CPFB to get clarifications, only then reading the rules at the website becomes clear, for those situations where I am interested to find out. I find answers, does not necessary mean I will take that route. But it is good to know the answers to explore "opportunities" and it might help others in my network. Unlike someone who only preach one route to rome

4.

With respect to CPF SA top ups for tax relief, there doesn’t seem to be much lack of awareness about lump sum withdrawal rules in this particular forum. Sometimes it seems like it’s all anyone wants to talk about!

U just need to read the vague and incorrect answers provided below, u will understand why there is so much confusion. Someone asked if all monies in SA are RSTU (topup) monies, can it be withdrawn, read the answers and tell me is it rubbish? He himself is not clear, and continues to write to create confusion!

At age 55, correct. (There’s another potential withdrawal opportunity at age 65.)

In your scenario, no.

The age 60 v. 55 part doesn’t matter for these purposes. Voluntary top ups to her RA are still voluntary top ups, so (apparently — it’s a little unclear above the FRS) they must be paid out via CPF LIFE. There’s still the 20% age 65 withdrawal opportunity, though.

5.

How about those voluntary contributions to SA for tax relief? Don't think they can be blocked from entering RA at 55 right?

If it is clear, why is there another question on SA topup monies but termed as voluntary contributions to SA?

Can u stop CPFB from transferring such monies (RSTU) into RA at 54+?

Someone or two already answered this previously, I think it was Junior Lion and another forumer.[/COLOR]

 

[dullthings]

Maple, thank you. Goodnight...

 

[bjornng]

Hey guys! I've been looking at topping up my parents CPF instead of giving them monthly allowance, 1st for better interest and 2nd for tax relief. My dad is 65 and my mom is 56. I understand that topping up will both go into their RA, which my dad will get through monthly payouts (not sure how does it work, will the amount change as more top ups go into his RA?) & my mom will not see it till 65. I'm wondering, does it make sense to top up, or should I continue giving them monthly allowance? What are the factors I should consider?

 

[Value.Matrix]

Hey guys! I've been looking at topping up my parents CPF instead of giving them monthly allowance, 1st for better interest and 2nd for tax relief. My dad is 65 and my mom is 56. I understand that topping up will both go into their RA, which my dad will get through monthly payouts (not sure how does it work, will the amount change as more top ups go into his RA?) & my mom will not see it till 65. I'm wondering, does it make sense to top up, or should I continue giving them monthly allowance? What are the factors I should consider?

The minimum amount that can be withdrawn from RA is $250 a month for RSS. If they did not hit 40k/60k in RA, they are under RSS scheme.

Every July, CPF board will check and adjust the amount of payout depending on how much js inside the RA. Anything more than 60k should be able to get more than $250.00.

To reduce tax, of course better to top up. But if you are giving them $500 cash, for your dad, its ok to split $250 to CPF (or heck just lump sum $3,000 in Jan) and $250 in cash if you are cash strapped.

For your mum, you might want to do SA shield if you got enough money. Else, its a tough decision.

 

[SBC]

My OA is slightly over 100k now.

Hope to grow by at least 18k by end of next year.

 

[BBCWatcher]

If either parent hasn’t yet maxed out his/her bonus interest then that’s the parent who should get top ups first. Decide quickly though since the deadline is fast approaching for 2019 top ups (tax relief with Year of Assessment 2020).

Generally speaking, top ups are a very smart way to support parents financially.

 

[Ang Moh Dua Ki]

I would like to make a voluntary contribution to my MA account, mainly for the purpose of tax relief. I am far from the Basic Healthcare Sum - amount currently in my MA is below 20k. I have contributed around 37k to my CPF this year, 7k to my SA account and 30k in normal contributions. What is the maximum amount I can contribute to my MA account and get tax relief on? I will also note I am not in any danger of hitting the 80k total tax relief cap. Thanks!

 

[Value.Matrix]

I would like to make a voluntary contribution to my MA account, mainly for the purpose of tax relief. I am far from the Basic Healthcare Sum - amount currently in my MA is below 20k. I have contributed around 37k to my CPF this year, 7k to my SA account and 30k in normal contributions. What is the maximum amount I can contribute to my MA account and get tax relief on? I will also note I am not in any danger of hitting the 80k total tax relief cap. Thanks!

Apparently need you to understand.

(1) the annual limit is $37,740. It INCLUDES any medisave and mandatory or Voluntary contribution.

(2) Cash top to SA via RSTU is NOT included in the annual limit.

Hence, if you contribute through RSTU for the 7k, its not counted towards rhe annual limit.

Hence you can contribute another $7,740, provided as above.

 

[seowyian]

Apparently need you to understand.

(1) the annual limit is $37,740. It INCLUDES any medisave and mandatory or Voluntary contribution.

(2) Cash top to SA via RSTU is NOT included in the annual limit.

Hence, if you contribute through RSTU for the 7k, its not counted towards rhe annual limit.

Hence you can contribute another $7,740, provided as above.

Many people (myself included, until CPF officer explained to me) confuse "topup" and "voluntary contribution". It may help to treat them as 2 separate scenarios, treated differently and independently by CPF.

 

[BBCWatcher]

When determining how much room you have below the CPF Annual Limit, don't forget to include any remaining compulsory contributions from payroll that are yet to be credited. There's still probably a December compulsory contribution in the pipeline, and also don't forget about possible contributions from variable pay (bonus, commission, etc.)

Don't wait too long to make this calculation and top up decision, though. As I write this, you only have a couple business days left to make a top up through most channels in order to be credited within 2019, the deadline for tax relief in Year of Assessment 2020. The absolute latest deadline is, apparently, if you physically hand a paper check to a CPF customer service officer before 10:00 a.m. on Tuesday, December 31, 2019. But that would be cutting it way too close.

If you end up a bit over the CPF Annual Limit that's probably not much of a problem in these circumstances since you're not close to Basic Healthcare Sum yet. Sometime in February (or thereabouts) CPF will refund any overage, without interest. So if you lose the equivalent of some bank interest on, say, $100 (or whatever), that's not really a problem. In these circumstances, if there's some uncertainty, you can safely err a little on the high side.

 

[Bizaxx]

Hi,
Would appreciate some advise on voluntary contribution. I’ve just gotten my PR last month, therefore the mandatory contribution is virtually none. Question, if I contribute 50k into MA before year end, will I get the full 50k tax relief for 2019? Is it permissible? Thanks in advanced

 

[Value.Matrix]

Hi,
Would appreciate some advise on voluntary contribution. I’ve just gotten my PR last month, therefore the mandatory contribution is virtually none. Question, if I contribute 50k into MA before year end, will I get the full 50k tax relief for 2019? Is it permissible? Thanks in advanced

You cannot contribute more than $37,740 annual cpf limit to MA.

I would suggest Seek other alternatives for your remaining money, maybe through SRS or CPF RSTU of cash top up to SA (treated seperately from VC).

 

[BBCWatcher]

Would appreciate some advise on voluntary contribution. I’ve just gotten my PR last month, therefore the mandatory contribution is virtually none.

You have a terrific tax savings and investment opportunity then. Let's explore!

Question, if I contribute 50k into MA before year end, will I get the full 50k tax relief for 2019? Is it permissible? Thanks in advanced

You are not allowed to plow $50K into your MediSave Account in one go. Your MediSave top up must fit within both the CPF Annual Limit ($37,740) and the Basic Healthcare Sum ($57,200 in 2019, and $60,000 in 2020), otherwise the excess (if you even manage to deposit it) will be returned to you without interest.

So, if you want to max out your MediSave-related tax relief and zoom your MediSave Account up to the max as quickly as possible -- both great ideas for newly minted PRs who have plenty of funds available to invest -- then you could do this:

1. Right now deposit as much as $36,660 into your MediSave Account. How did I get that number? Well, if you earn at least $6,000 per month and have no variable pay coming/paid in your November and December, 2019, paychecks, then as a first year PR your compulsory contributions should be $540 per month (employer plus employee) or $1,080 for the two months (November and December). Subtract $1,080 from the CPF Annual Limit, and you get $36,660 of room below the CPF Annual Limit in 2019. I say make your top up "right now" because there are only a very few business days left in 2019 as I write this, and I literally mean that -- you haven't much time to get this top up credited within 2019 since CPF takes a couple or a few business days to process the deposit, depending on the channel. If you're not sure how to use the electronic channels to make such a large top up, then don't struggle. Just mail or bring a paper check to CPF by Thursday of this week (December 26, 2019). Use CPF Form VC/1 to make a voluntary MediSave top up.

If you have already deposited some amount of money into your MediSave Account -- in order to handle your MediShield Life premium, for example -- then subtract whatever amount you've already deposited from the $36,660 figure I've given above. Also adjust for any variable pay, but the maximum total compulsory contribution on any late year variable pay in 2019 will be $2,700 (9% of $30K), so your adjustment will not be more than that.

2. On January 23, 2020, make another MediSave top up, to drive your MediSave Account balance up as high as $60,000. Your compulsory contributions should be far enough below the CPF Annual Limit in 2020 in order to be able to do that or at least come very close. (Your compulsory contributions in 2020 will be a maximum of $540 for 10 months and $1,440 for 2 months, i.e. $8,280, plus a maximum of $7,200 on any variable pay. That's a total of $15,480, and that's the maximum in your case. $37,740 minus $15,480 leaves at least $22,260 below the CPF Annual Limit. Add that to the $36,660 you're probably able to deposit now, and that gets you to at least $58,920.) If you feel more comfortable depositing "only" $22,260 in January, great, do that, and you'll soon enough reach the Basic Healthcare Sum anyway.

3. Deposit $7,000 into your Special Account right now, since that qualifies for tax relief, too.

4. Deposit another $7,000 into your Special Account on January 23, 2020, which also qualifies for tax relief.

5. Do steps #1, #2, #3, and #4, and starting on February 1, 2020, you will qualify for maximum bonus interest since you will reach at least $60,000 in your MA+SA.

6. If you have a qualified family member who is also a CPF member, then you may have an additional $7,000 of tax relief opportunity now and another $7,000 in January. Please post a follow up if that's the case.

7. If you have any funds lying in your new Ordinary Account, consider transferring them all, now and every month they stream in, to your Special Account. If you don't need OA dollars for housing -- because you have other sources of funds, which is probably the case if you're able to plow tens of thousands into your new CPF accounts for tax relief -- then that'd be the smart move since SA earns 4% (actually 5% right now since you're in bonus interest territory) while OA only earns 2.5% (3.5% in bonus interest territory).

Congratulations, and have fun.