CPF Easy Info Thread. :)

[decibel.]

CPF interest to remain unchanged from July to September. What do you guys think will happen after? Will this change our top up strategy?

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[crimsontactics]

CPF interest to remain unchanged from July to September. What do you guys think will happen after? Will this change our top up strategy?

Sent from HUAWEI VOG-L29 using GAGT

Shouldnt change bah interest rate.

Been the same for over 20 years liao.

Sent from . using GAGT

 

[cal3135]

Not change of plan...
continue to HDB accrued interest refund ..
SRS near Dec ...

xs HardwareZone Forums app

 

[Project_Xco]

Do i need to be concerned about cpf accrued interest if I already meet my FRS? If I recall correctly, if i sell my hdb after 55 after setting aside FRS, the accrued interest will be refunded to my OA and I can withdraw as per normal.

 

[cal3135]

Yes u are right..

Do i need to be concerned about cpf accrued interest if I already meet my FRS? If I recall correctly, if i sell my hdb after 55 after setting aside FRS, the accrued interest will be refunded to my OA and I can withdraw as per normal.

xs HardwareZone Forums app

 

[lifeafter41]

there are some people go for frs and more sa.

they then use cash to top up ra to ers.

these people are rich, believe in cpf life and like the flexibility sa offers

That’s a good way to use CPF, provided one has the cash.....
It’s a good position to be in.

 

[celtosaxon]

I think for those who are financially disciplined, priority should almost always go toward retaining the maximum in SA at 55... topping up RA above FRS should take lower priority since you can top up RA anytime, but not SA. SA has a very unique value in CPF, given the high yield, accessibility and no forced withdrawals, ever.

 

[mata_hippo]

does it matter if we transfer to SA (regardless OA>SA or cash top up SA) in the middle of the year (now) VS start of nxt year?

im jus thinking since i'm getting a hse soon and i know how much it's gonna cost and how much downpayment i need
should i jus go ahead transfer the rest into SA alrdy?
maybe leave half to a year worth of OA contribution in the OA

 

[BBCWatcher]

does it matter if we transfer to SA (regardless OA>SA or cash top up SA) in the middle of the year (now) VS start of nxt year?

Sure, it matters. The 4% interest is attractive, and it's computed monthly. Every month your dollars are earning less than 4% (when they could be earning 4%) is a clear loss.

im jus thinking since i'm getting a hse soon and i know how much it's gonna cost and how much downpayment i need
should i jus go ahead transfer the rest into SA alrdy?
maybe leave half to a year worth of OA contribution in the OA

Why not? If you're certain or near certain of the future, then you should manage your OA balance accordingly.(*) Don't forget that OA earns interest, too, so if you want $X of OA to be available on some date next year then be sure to factor in the amount of OA interest that'll be credited on December 31. (CPF interest is computed monthly based on the lowest balance for the month and credited annually. However, there's one notable exception to the lowest balance interest calculation rule: if you transfer OA dollars to SA then the transfer is effectively backdated to the beginning of the month and the interest is credited to SA at the SA rate. OA gets the lowest balance calculation.) Also, as additional OA dollars stream in from compulsory contributions, you can transfer those, too, assuming you've computed your $X OA convergence target correctly.

It's May 25 at the moment, so you have another ~5 days to run the numbers and figure out how much you'd like to transfer in order to qualify for May interest on that amount in SA.

Another possible factor to consider is that when your MediSave Account reaches the Basic Healthcare Sum and your Special Account reaches the Full Retirement Sum then the portion of your compulsory contributions earmarked for MA will spill over into your OA. If you're getting near this point then OA dollars could be streaming in faster than you otherwise might have expected. And then your OA "buffer" should increase, assuming you remain employed.

If your SA is near the Full Retirement Sum and if you'd like to make a top up for tax relief ($7,000 top up) then do that first (via PayNow QR), then an OA to SA transfer after you see your SA top up credited. If you get this order wrong then you fill up your SA to the FRS before you get your last chunk of tax relief for SA top ups.

(*) Some people -- or at least their families -- are loaded with liquid assets, and they really don't need to keep OA dollars as OA. In these happy situations the rational, sensible thing to do is to transfer all OA dollars into SA, to boost interest earning. My household happens to be in this situation.

 

[mata_hippo]

Sure, it matters. The 4% interest is attractive, and it's computed monthly. Every month your dollars are earning less than 4% (when they could be earning 4%) is a clear loss.


Why not? If you're certain or near certain of the future, then you should manage your OA balance accordingly.(*) Don't forget that OA earns interest, too, so if you want $X of OA to be available on some date next year then be sure to factor in the amount of OA interest that'll be credited on December 31. (CPF interest is computed monthly based on the lowest balance for the month and credited annually. However, there's one notable exception to the lowest balance interest calculation rule: if you transfer OA dollars to SA then the transfer is effectively backdated to the beginning of the month and the interest is credited to SA at the SA rate. OA gets the lowest balance calculation.) Also, as additional OA dollars stream in from compulsory contributions, you can transfer those, too, assuming you've computed your $X OA convergence target correctly.

It's May 25 at the moment, so you have another ~5 days to run the numbers and figure out how much you'd like to transfer in order to qualify for May interest on that amount in SA.

Another possible factor to consider is that when your MediSave Account reaches the Basic Healthcare Sum and your Special Account reaches the Full Retirement Sum then the portion of your compulsory contributions earmarked for MA will spill over into your OA. If you're getting near this point then OA dollars could be streaming in faster than you otherwise might have expected. And then your OA "buffer" should increase, assuming you remain employed.

If your SA is near the Full Retirement Sum and if you'd like to make a top up for tax relief ($7,000 top up) then do that first (via PayNow QR), then an OA to SA transfer after you see your SA top up credited. If you get this order wrong then you fill up your SA to the FRS before you get your last chunk of tax relief for SA top ups.

(*) Some people -- or at least their families -- are loaded with liquid assets, and they really don't need to keep OA dollars as OA. In these happy situations the rational, sensible thing to do is to transfer all OA dollars into SA, to boost interest earning. My household happens to be in this situation.

ok thanks understood

if im still quite far from FRS, if can do both OA>SA and 7k top up, will be ideal right?

 

[BBCWatcher]

if im still quite far from FRS, if can do both OA>SA and 7k top up, will be ideal right?

As long as you're maintaining at least adequate liquidity, yes, it's great. Except for dire emergencies qualifying for rare exceptions (a terminal illness diagnosis, for example), your Special Account cannot be tapped until age 55.

For this reason I prefer MediSave Account top ups with tax relief even more since MA also earns 4% interest (and qualifies for bonus interest), and MA funds can be spent on qualified medical care in Singapore, MediShield Life, CareShield Life, and Integrated Shield base plan premiums -- for your own needs and/or for the needs of qualified family members. MA top ups must fit within both the CPF Annual Limit and the Basic Healthcare Sum, but within those limits all MediSave top up dollars are eligible for tax relief.

 

[mata_hippo]

As long as you're maintaining at least adequate liquidity, yes, it's great. Except for dire emergencies qualifying for rare exceptions (a terminal illness diagnosis, for example), your Special Account cannot be tapped until age 55.

For this reason I prefer MediSave Account top ups with tax relief even more since MA also earns 4% interest (and qualifies for bonus interest), and MA funds can be spent on qualified medical care in Singapore, MediShield Life, CareShield Life, and Integrated Shield base plan premiums -- for your own needs and/or for the needs of qualified family members. MA top ups must fit within both the CPF Annual Limit and the Basic Healthcare Sum, but within those limits all MediSave top up dollars are eligible for tax relief.

yup, thanks for the clear and concise explanation so far

im jus a few K away from the BHS, jus wondering if shld just let it max on its own naturally via mthly contributions or max BHS first before doing 7k>SA

im also at the max mthly contribution if that makes a different to the most ideal approach

 

[BBCWatcher]

im jus a few K away from the BHS, jus wondering if shld just let it max on its own naturally via mthly contributions or max BHS first before doing 7k>SA

im also at the max mthly contribution if that makes a different to the most ideal approach

OK, if you're earning enough ($6,000+ gross) to hit the maximum monthly compulsory CPF contribution, then you're at least near the CPF Annual Limit. But you might still have room below the CPF Annual Limit. It depends on whether you earn at least $30,000 (gross) in variable pay or not. For example, let's suppose you're earning $7,000/month (gross), you receive a conventional $7,000 (gross) 13th month bonus, and that's that -- no other bonuses, commissions, or variable pay. In that case you and your employer are contributing 37% on the first $6,000 per month of regular pay and then 37% on the $7,000 of variable pay. That's $29,230 total in employer and employee compulsory contributions. The CPF Annual Limit is $37,740, so you would have $8,510 remaining below the Annual Limit. And if I did my math right that should be 37% of $23,000 ($30,000 minus the $7,000 in variable pay)...and yes, I did my math right.

Anyway, if you're pretty sure you'll have some room under the CPF Annual Limit, then give some consideration to a MA top up with tax relief. When your MA is "full" (has reached the Basic Healthcare Sum) then the portion of your subsequent compulsory contributions allocated to MediSave will first spill over into your Special Account, accelerating the rise in your Special Account (and accumulation of 4% interest). This'll more quickly nail down your future CPF LIFE retirement income (plus possible surplus). Then, once your SA is "full" (reached the Full Retirement Sum), the portion earmarked for MediSave will "double spill" into your Ordinary Account, where it can be used to make regular mortgage payments. The portion of your compulsory contributions earmarked for your Special Account will still flow into your Special Account -- only MediSave works this way when it's at the BHS.

The BHS increases every January 1 until your 65th birthday, so if you expect to have room below the CPF Annual Limit then you may have a little window of time in early January to squeeze in a MA top up with tax relief, to push your MA up to the new BHS.

Anyway, my spouse and I did this (did both, actually: MediSave and Special Account top ups, with tax relief). As a footnote, my household's situation is a bit weird since I'm a U.S. person and the U.S. tax system "claws back" some of the Singapore tax savings I get. So I don't get all the tax relief for these top ups that similarly situated non-U.S. persons get, and I also pay U.S. income tax at standard rates on all CPF interest. Despite all that, I still thought/think it's a good deal for us. It's an even better deal for similarly situated non-U.S. persons.

....And if you want to get really fancy, if you're a two earner or multi-earner household, with more than one person paying income tax, then there's some interesting "part science, part art" involved in how to manage MediSave deductions and top ups. The basic rule is that you want the person in the highest tax bracket who has room below the CPF Annual Limit to pay the qualified medical expenses for the household out of MediSave, and then that person swoops in and tops MediSave back up to the BHS, with tax relief -- and with a gift from the other spouse if necessary to make that top up. In our household that's my spouse who's able to do that. Our insurance agent for our Integrated Shield policy was really puzzled why we wanted to change who makes the premium payments (to switch from my MA to my spouse's MA) until we explained the mechanics.

 

[mata_hippo]

OK, if you're earning enough ($6,000+ gross) to hit the maximum monthly compulsory CPF contribution, then you're at least near the CPF Annual Limit. But you might still have room below the CPF Annual Limit. It depends on whether you earn at least $30,000 (gross) in variable pay or not. For example, let's suppose you're earning $7,000/month (gross), you receive a conventional $7,000 (gross) 13th month bonus, and that's that -- no other bonuses, commissions, or variable pay. In that case you and your employer are contributing 37% on the first $6,000 per month of regular pay and then 37% on the $7,000 of variable pay. That's $29,230 total in employer and employee compulsory contributions. The CPF Annual Limit is $37,740, so you would have $8,510 remaining below the Annual Limit. And if I did my math right that should be 37% of $23,000 ($30,000 minus the $7,000 in variable pay)...and yes, I did my math right.

Anyway, if you're pretty sure you'll have some room under the CPF Annual Limit, then give some consideration to a MA top up with tax relief. When your MA is "full" (has reached the Basic Healthcare Sum) then the portion of your subsequent compulsory contributions allocated to MediSave will first spill over into your Special Account, accelerating the rise in your Special Account (and accumulation of 4% interest). This'll more quickly nail down your future CPF LIFE retirement income (plus possible surplus). Then, once your SA is "full" (reached the Full Retirement Sum), the portion earmarked for MediSave will "double spill" into your Ordinary Account, where it can be used to make regular mortgage payments. The portion of your compulsory contributions earmarked for your Special Account will still flow into your Special Account -- only MediSave works this way when it's at the BHS.

The BHS increases every January 1 until your 65th birthday, so if you expect to have room below the CPF Annual Limit then you may have a little window of time in early January to squeeze in a MA top up with tax relief, to push your MA up to the new BHS.

Anyway, my spouse and I did this (did both, actually: MediSave and Special Account top ups, with tax relief). As a footnote, my household's situation is a bit weird since I'm a U.S. person and the U.S. tax system "claws back" some of the Singapore tax savings I get. So I don't get all the tax relief for these top ups that similarly situated non-U.S. persons get, and I also pay U.S. income tax at standard rates on all CPF interest. Despite all that, I still thought/think it's a good deal for us. It's an even better deal for similarly situated non-U.S. persons.

....And if you want to get really fancy, if you're a two earner or multi-earner household, with more than one person paying income tax, then there's some interesting "part science, part art" involved in how to manage MediSave deductions and top ups. The basic rule is that you want the person in the highest tax bracket who has room below the CPF Annual Limit to pay the qualified medical expenses for the household out of MediSave, and then that person swoops in and tops MediSave back up to the BHS, with tax relief -- and with a gift from the other spouse if necessary to make that top up. In our household that's my spouse who's able to do that. Our insurance agent for our Integrated Shield policy was really puzzled why we wanted to change who makes the premium payments (to switch from my MA to my spouse's MA) until we explained the mechanics.

nice, thanks

 

[decibel.]

nice, thanks

How far are you away from FRS? If you're in late 20s, there's still some buffer time unless you have plans for early retirement. I'm transferring OA to SA frequently for the monthly interest.

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[SBC]

Accursed interest for my mortgage loan is now at 33k.

Just 5 years into this loan.

Each year will add $7800 into this.

 

[BBCWatcher]

Accursed interest for my mortgage loan is now at 33k.
Just 5 years into this loan.
Each year will add $7800 into this.

Why? There’s no better outlet for your $7,800?

 

[kalipo]

Which month is the best month to transfer from OA to SA any different? For higher interest

 

[crimsontactics]

Which month is the best month to transfer from OA to SA any different? For higher interest

Right now is the best time.

CPF interest is counted monthly, with the lowest balance in the month used to calculate the interest.

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[kalipo]

Thank you bro

Right now is the best time.

CPF interest is counted monthly, with the lowest balance in the month used to calculate the interest.

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