CPF Retirement Sum Scheme

[karakorum1999]

I think you meant the 7k cap for tax relief for top-up to RA (or SA below 55). Dont think there is a cap imposed on maximum cash top up.

Also, for top-up to SA of recipient below 55, recipient need to earn less than 4k annual income before you can get tax relief for these top-up I think.

Yes, that’s what I meant. Which is why I said the cap is on the max top up that the donor can enjoy for tax savings. Maybe double emphasis confuses.. lol

 

[BBCWatcher]

Thanks! So for my siblings and I, we can do top up (7k * 3) to help increase the amount of payout as well?

As another posters have indicated as well, yes, you and your siblings can do exactly that. Please note that the $7,000 "limit" is only the annual tax relief limit. If you want to deposit $12,000 * 3 for example, you can. Her RA balance is fairly low, so there's a lot of room for tax relief.

I should also mention that it appears your mother is eligible for the Matched Retirement Savings Scheme, or could be. I think the deadline is before her 70th birthday, and there's $600 of free matching dollars at stake. Please do check that out.

Then the death bequest amount remains: the same (CPF LIFE premium that you have paid less the total payouts you have received, and also without the interest)?

Yes, with CPF LIFE the member and her nominee(s) are guaranteed to receive at least as much as she had in her RA at entry. And she's also guaranteed monthly payouts for life, however long it lasts.

As long as it does not meet FRS?

The twin CPF LIFE guarantees do not vary with funding level. If she has the Enhanced Retirement Sum at entry, the same guarantees apply.

And also the top-ups we do, does it earn interest as well?

Yes, although the final outcome depends on how long she lives. The interest helps pay for the lifetime payout guarantee.

Since she does not need the payout, keep redepositing the payouts into her RA and her subsequent payouts will be higher and higher each year. She can keep doing that even after 95, if she is still alive.

That's right, although to be clear classic RSS has been reconfigured to run to age 90. I don't think that changes when payouts are deferred to age 70, as in this mother's case. But if you see otherwise, please let us know. Redeposits might eventually extend beyond age 90, but I don't think that happens until well into the future.

There is no real need to gamble with CPFL since you and your siblings can keep funding her retirement and she will still get her payouts and redepositing them without losing a cent of her RA.

But that's a gamble. It's not a given that these 3 adults can continue to support their mother. Let's suppose for example that one of the siblings falls on hard times -- a health or disability crisis, for example -- and becomes a dependent of the other siblings. Then the mother could suffer if she has a fairly ordinary lifespan. If she's in poor health now, sure, the classic Retirement Sum Scheme can make a lot of sense. But otherwise CPF LIFE is the opposite of a gamble. It's risk reducing. It's longevity insurance.

 

[myrick]

So this means that we can top up any figure we like but the tax relief is cap at $7k right?

 

[reddevil0728]

So this means that we can top up any figure we like but the tax relief is cap at $7k right?

Yes.

but there’s still a constraint on the account not being more than FRS

 

[duhduhduh]

Hi BBC, thank you for your insights

Revisiting this again.

To be honest, have no idea whether to go with CPF LIFE or classic RSS. but our intention is still the same, to re-deposit the monthly payout back to CPF

 

[henrylbh]

To be honest, have no idea whether to go with CPF LIFE or classic RSS. but our intention is still the same, to re-deposit the monthly payout back to CPF

It appears you have other sources to fund your retirement need and don't really need the monthly payout or it's more than your retirement need. You have up to age 70 to decide whether to opt for CPFL. Not many here have a choice.

Under RSS, you get back no more and no less than what you have at any point of time you up lorry. Under CPFL, you are taking a bet by paying a premium so as to get it (or more) if you live pass a certain age (break even point at 93?). But if you up lorry earlier like 80, you going to lose a lot and lesser as you approach break even point. Take CPFL if you're sure of getting more than what you put in.

 

[zoneguard]

You have up to age 70 to decide whether to opt for CPFL. Not many here have a choice.

Last entry age for those born before 1958 to opt for CPF LIFE is one month before their 80th birthday.

 

[henrylbh]

Last entry age for those born before 1958 to opt for CPF LIFE is one month before their 80th birthday.

So let RSS start at 70 and see how life goes on to just before 80 and then decide whether can bet on CPFL. But the payout by then would be a big drop compare to RSS.

 

[BBCWatcher]

One caveat: "recycling" payouts back into your CPF Retirement Account isn't an unlimited privilege. The current Enhanced Retirement Sum is the limit, and the ERS takes into account payouts. You don't necessarily get to put back in what came out.

If you're an aggressive recycler (i.e. the ERS will be biting) then one possibility to reduce the impact of the ERS is to choose the CPF LIFE Escalating Plan since that plan uniquely "backloads" nominal payouts with its 2%/year increasing payout slope. I think that'd work.

 

[mummynew]

Would appreciate advice:

My sibling is above 55 yo.

She has about $200K endowment policy maturing soon.

She heard that can use this cash to repay part of the amount she withdrew from CPF for her HDB. Once repaid this $200K, then she will have this $200K in her OA for her to withdraw freely while earning at least 2.5% interest. (*she has hit her FRS.)

Is the above correct? (I not familiar and so worry she does it wrongly).

 

[henrylbh]

Would appreciate advice:

My sibling is above 55 yo.

She has about $200K endowment policy maturing soon.

She heard that can use this cash to repay part of the amount she withdrew from CPF for her HDB. Once repaid this $200K, then she will have this $200K in her OA for her to withdraw freely while earning at least 2.5% interest. (*she has hit her FRS.)

Is the above correct? (I not familiar and so worry she does it wrongly).

If sibling already had the minimum sum or FRS in her RA at age 55, then no issue of withdrawing any amount and at any time from the CPF SA, followed by OA. Otherwise, sibling needs to make good shortfall in RA before withdrawal is allowed.

 

[mummynew]

If sibling already had the minimum sum or FRS in her RA at age 55, then no issue of withdrawing any amount and at any time from the CPF SA, followed by OA. Otherwise, sibling needs to make good shortfall in RA before withdrawal is allowed.

Many thanks Henry.

Meaning she can repay the $200K and any cash that she subsequently may have along the months, then withdraw her monthly expenses as and when she needs with no limits?

 

[BBCWatcher]

Yes, provided she has funded her Retirement Account at least to the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge) -- as Henry mentioned.

She has at least four additional options to consider, not necessarily in order and not mutually exclusive:

1. She can top up her Retirement Account. Those dollars will earn at least 4.0% interest (not 2.5%), and they will boost her future monthly retirement income for life (and/or residual to her CPF nominees, if any residual remains). She can start those monthly payouts as early as age 65 and no later than age 70. There is some potential tax relief and/or matching funds available, depending on her situation and RA balance.

2. She can make a Voluntary Contribution to her MediSave Account. Those dollars will earn at least 4.0% (not 2.5%) and can be used at any time for qualified medical expenses and insurance premiums in Singapore (CareShield Life, MediShield Life, Integrated Shield base plan premiums) for self and eligible family members. Any residual will also go to her CPF nominees upon her demise. This VC must fit within both the CPF Annual Limit and the Basic Healthcare Sum. This VC is eligible for tax relief (self).

3. She can make an "All Three Account" Voluntary Contribution, which must fit within the CPF Annual Limit. This VC will be allocated across her Special, Ordinary, and MediSave Accounts. If her MediSave Account has reached the Basic Healthcare Sum then that portion will typically land in her Ordinary Account. This VC will earn >2.5% interest because some of the dollars will land in her Special Account. If she's self-employed this "all three" VC is eligible for tax relief.

4. She may have any or all of the above 3 options but with top ups/voluntary contributions to family members' CPF accounts.

Note that the CPF Annual Limit is calendar year annualized, and we're getting near the end of 2021. So she has a CPF Annual Limit this year (2021), and then she gets a new one on January 1, 2022. Also the Basic Healthcare Sum (MA limit) and Enhanced Retirement Sum (RA limit) will be next raised on January 1, 2022. She can take these January 1 effects into account to see if it makes sense to do some things now (in 2021) and then some more things in January, 2022.

 

[mummynew]

4. She may have any or all of the above 3 options but with top ups/voluntary contributions to family members' CPF accounts.

Note that the CPF Annual Limit is calendar year annualized, and we're getting near the end of 2021. So she has a CPF Annual Limit this year (2021), and then she gets a new one on January 1, 2022. Also the Basic Healthcare Sum (MA limit) and Enhanced Retirement Sum (RA limit) will be next raised on January 1, 2022. She can take these January 1 effects into account to see if it makes sense to do some things now (in 2021) and then some more things in January, 2022.

Thanks BBC for your detailed explanation! (took me sometime to digest the options)

 

[culture_counter]

If sibling already had the minimum sum or FRS in her RA at age 55, then no issue of withdrawing any amount and at any time from the CPF SA, followed by OA. Otherwise, sibling needs to make good shortfall in RA before withdrawal is allowed.

What if his sister's MA is only half of the prevailing ceiling for MA, despite fulfilling FRS at 55, can she still take out freely any cash in excess of FRS from her SA and OA?

 

[BBCWatcher]

What if his sister's MA is only half of the prevailing ceiling for MA, despite fulfilling FRS at 55, can she still take out freely any cash in excess of FRS from her SA and OA?

Yes. Her MA could be zero, and it still wouldn't matter in terms of ability to withdraw from RA, SA, and OA.

 

[culture_counter]

Yes. Her MA could be zero, and it still wouldn't matter in terms of ability to withdraw from RA, SA, and OA.

New rules?

 

[hwmook]

New rules?

No, all along is like that. MA is never a requirement.

 

[culture_counter]

No, all along is like that. MA is never a requirement.

No need to topup MS ceiling limit first before you can withdraw SA/OA freely?

 

[hwmook]

No need to topup MS ceiling limit first before you can withdraw SA/OA freely?

No, your medisave can be zero and it doesn't matter, only RA account matter.