CPF SA

[Okenba]

Hi all. Refer to my above quoted plan. I have extra $100K cash which I do not need for the time being. Can I use this $100K to do voluntary refund HDB loan? Any benefits or should I change my above plan and deposit this $100K cask into RA instead of doing RSTU in step 3 above. Thank you.

Are you married? Are you working?

If married, how much can you put into your spouse's SA/RA? (If your spouse is abv 55, you can transfer your OA to their RA.)
If not working, you can do voluntary contribution into all 3 CPF accounts, of which about 30% will end up in SA.

 

[lordofthering]

Hi my mum has 10k in her CPF OA+SA and 30k in her CPF RA. she is 61 this year.

She want me to help deposit 200k into her CPF so she can enjoy the CPF life when she is 65. May I know is do I need to make a choice whether to top up her OA/SA/RA? or no need to choose? If need to choose, which one should I choose

 

[BBCWatcher]

Hi my mum has 10k in her CPF OA+SA and 30k in her CPF RA. she is 61 this year.

She want me to help deposit 200k into her CPF so she can enjoy the CPF life when she is 65. May I know is do I need to make a choice whether to top up her OA/SA/RA? or no need to choose? If need to choose, which one should I choose

For CPF LIFE that’s a top up to her RA, and that’s easy. The limit is the Enhanced Retirement Sum, and unless something very strange happened she still has plenty of room below the ERS to handle $200K or even more. She might qualify for some matching funds and/or bonus interest. She and/or her qualified family members might qualify for some tax relief if carefully executed. Specifically, if there are some initial, separate top ups of $7,000 per person then those qualified givers (which could include herself if she’s paying income tax) can win some tax relief. Then the remainder can be immediately placed.

Let’s suppose for example she has two children, you and a sibling, both in the 7% income tax bracket. If she hands you each $6,800 (let’s suppose), then you each immediately deposit $7,000 into her RA while she’s below the Full Retirement Sum, you each get 7% of $7,000, i.e. $490, back in income tax savings next year. Everybody wins, except IRAS and the government’s coffers.

 

[Trader11]

I am average guy. I calculated I can reach FRS at 36 by transferring all oa to sa.....is this a wise move?

 

[reddevil0728]

I am average guy. I calculated I can reach FRS at 36 by transferring all oa to sa.....is this a wise move?

transfer now or what?

 

[Trader11]

transfer now or what?

Transfer every month

 

[reddevil0728]

Transfer every month

Wise move or not. Depends on whether you need any OA at all?

 

[Trader11]

Wise move or not. Depends on whether you need any OA at all?

Don't need oa for now

 

[reddevil0728]

Don't need oa for now

I think going to the extreme of transferring in full also not very wise in case you need it for rainy day.

maybe every month transfer a certain percentage?

then every now and then when OA is at a certain amount can consider lump sum transfer a bigger amount but continue to leave some in OA?

 

[duhduhduh]

I am average guy. I calculated I can reach FRS at 36 by transferring all oa to sa.....is this a wise move?

You do not need to buy house? or you already have a house now?

If you have a house passed down to you then I think possible. Else you shoud keep the funds should you purchase a property?

 

[reddevil0728]

You do not need to buy house? or you already have a house now?

If you have a house passed down to you then I think possible. Else you shoud keep the funds should you purchase a property?

Actually using cash is better.

but should always have some backup in case lose job no cash income.

can do loan repayment with CPF OA

 

[Value.Matrix]

I am average guy. I calculated I can reach FRS at 36 by transferring all oa to sa.....is this a wise move?

I would say use your OA funds to invest instead of putting it into the SA blackhole first (unless you have emergency funds of 100k outside, and wish to take less risk). This is because buying a house require a 10% deposit, and the upper end of it is really... high.

wise or not, nobody can tell you until you really know what's your objective in doing so. You would need to cough out more funds from else where for housing purpose, and you used up the amount, you can do tax relief through RSTU.

The good thing is, once you have FRS, your OA monies can be transferred to your parents, and your mortgage, if you start from age 36 can be partially subsided by MA overflow to OA.

 

[Trader11]

I would say use your OA funds to invest instead of putting it into the SA blackhole first (unless you have emergency funds of 100k outside, and wish to take less risk). This is because buying a house require a 10% deposit, and the upper end of it is really... high.

wise or not, nobody can tell you until you really know what's your objective in doing so. You would need to cough out more funds from else where for housing purpose, and you used up the amount, you can do tax relief through RSTU.

The good thing is, once you have FRS, your OA monies can be transferred to your parents, and your mortgage, if you start from age 36 can be partially subsided by MA overflow to OA.

Here's my plan:
Finish mortgage payment by 40 with cash
Transfer OA to SA every month until 36
Invest the rest of capital

 

[Value.Matrix]

Here's my plan:
Finish mortgage payment by 40 with cash
Transfer OA to SA every month until 36
Invest the rest of capital

(1) I would rather drag the mortgage payment if its HDB, since you can't reverse mortgage or refinance it (once its below $300,000) easily.
(2) if your plan is for mortgage, it makes sense to use OA monies to pay off HDB (since it only earns 2.5%, but loan is 2.6%) after you hit FRS, because if you hit FRS, MA contribution will overflow to OA once both FRS and BHS reached limit (so you are using interest from MA to pay for mortgage too), and you are unable to transfer to SA after FRS is reached.
(3) accrued interest is a double edge sword, but i would keep that option open (since if i have a windfall suddenly, i can payback anytime), and do RSTU (if there is tax advantage) / VC3A (higher priority if no tax advantage) or even invest cash. But if your willingness to take risk is low, go for VC3A, then transfer OA to SA first, until it cannot be transferred, then use OA monies to transfer to parents RA (1st priority, since can reduce allowance given to parents) / spouse SA (2nd priority since money is also stuck until 55) while keeping some for mortgage payment.
(4) investing with cash imho should be done young first, since you got higher ability to take risk (longer horizon to retirement, more liquid, and compounding for investment work better than putting into SA).

But of course, if you have $500,000 capital already... then what i say is not useful because you have too much money on hand (but if you transfer OA to SA, means not much).

 

[reddevil0728]

(1) I would rather drag the mortgage payment if its HDB, since you can't reverse mortgage or refinance it (once its below $300,000) easily.
(2) if your plan is for mortgage, it makes sense to use OA monies to pay off HDB (since it only earns 2.5%, but loan is 2.6%) after you hit FRS, because if you hit FRS, MA contribution will overflow to OA once both FRS and BHS reached limit (so you are using interest from MA to pay for mortgage too), and you are unable to transfer to SA after FRS is reached.
(3) accrued interest is a double edge sword, but i would keep that option open (since if i have a windfall suddenly, i can payback anytime), and do RSTU (if there is tax advantage) / VC3A (higher priority if no tax advantage) or even invest cash. But if your willingness to take risk is low, go for VC3A, then transfer OA to SA first, until it cannot be transferred, then use OA monies to transfer to parents RA (1st priority, since can reduce allowance given to parents) / spouse SA (2nd priority since money is also stuck until 55) while keeping some for mortgage payment.
(4) investing with cash imho should be done young first, since you got higher ability to take risk (longer horizon to retirement, more liquid, and compounding for investment work better than putting into SA).

But of course, if you have $500,000 capital already... then what i say is not useful because you have too much money on hand (but if you transfer OA to SA, means not much).

1 & 2) Actually would only make sense if change to bank loan and for the mortgage interest to be <2.5% right. So if want to drag, then change to bank loan, then pay cash, and don't use OA.

 

[Trader11]

1 & 2) Actually would only make sense if change to bank loan and for the mortgage interest to be <2.5% right. So if want to drag, then change to bank loan, then pay cash, and don't use OA.

If drag then need to pay interest rate to bloody hdb

 

[Trader11]

(1) I would rather drag the mortgage payment if its HDB, since you can't reverse mortgage or refinance it (once its below $300,000) easily.
(2) if your plan is for mortgage, it makes sense to use OA monies to pay off HDB (since it only earns 2.5%, but loan is 2.6%) after you hit FRS, because if you hit FRS, MA contribution will overflow to OA once both FRS and BHS reached limit (so you are using interest from MA to pay for mortgage too), and you are unable to transfer to SA after FRS is reached.
(3) accrued interest is a double edge sword, but i would keep that option open (since if i have a windfall suddenly, i can payback anytime), and do RSTU (if there is tax advantage) / VC3A (higher priority if no tax advantage) or even invest cash. But if your willingness to take risk is low, go for VC3A, then transfer OA to SA first, until it cannot be transferred, then use OA monies to transfer to parents RA (1st priority, since can reduce allowance given to parents) / spouse SA (2nd priority since money is also stuck until 55) while keeping some for mortgage payment.
(4) investing with cash imho should be done young first, since you got higher ability to take risk (longer horizon to retirement, more liquid, and compounding for investment work better than putting into SA).

But of course, if you have $500,000 capital already... then what i say is not useful because you have too much money on hand (but if you transfer OA to SA, means not much).

I want to clear my obligations to HDB early

 

[BBCWatcher]

1 & 2) Actually would only make sense if change to bank loan and for the mortgage interest to be <2.5% right. So if want to drag, then change to bank loan, then pay cash, and don't use OA.

Not exactly. Even when you're currently on a HDB loan you usually have the future possibility of switching to a bank loan, and you also have the chance of "winning" the Home Protection Scheme lottery and for your survivor to get a free flat (or a portion of a free flat). If you pay down the loan ahead of schedule you're just reducing or eliminating your chance of "winning" that particular lottery. It's not enough of an interest rate gap to be attractive, in my view.

 

[reddevil0728]

If drag then need to pay interest rate to bloody hdb

That’s why only make sense if on bank loan.

 

[BBCWatcher]

I want to clear my obligations to HDB early

Why?