CPF SA

[Andrew833]

Max ma first or sa

For me I go for SA.
If you continue working, MA will be max before you even reach 50.
But your SA need more time to reach FRS.

 

[highsulphur]

For me I go for SA.
If you continue working, MA will be max before you even reach 50.
But your SA need more time to reach FRS.

Same for me

 

[BBCWatcher]

For me I go for SA.
If you continue working, MA will be max before you even reach 50.
But your SA need more time to reach FRS.

OK, but here are important points in reply:

1. MediSave dollars are immediately useful at any age for qualified medical expenses in Singapore. (And for base Integrated Shield plan premiums and for CareShield Life premiums.)

2. MediSave earns exactly the same interest rate and also qualifies for bonus interest.

3. You can get tax relief for MediSave top ups, but it's not limited to $7,000 per year.

4. MediSave top ups must fit within both the CPF Annual Limit and Basic Healthcare Sum, so it's tougher to collect this particular tax relief later in your career. (Possible Additional MediSave Contribution Scheme participation is another reason why tax relief opportunities with MediSave could close earlier than you'd like.)

5. When your MediSave Account reaches the Basic Healthcare Sum, the portion of your compulsory contributions earmarked for MediSave spills over into your Special Account (assuming you're under age 55) until your SA reaches the Full Retirement Sum. But this doesn't work in reverse. In other words, filling your MA is contributing to filling your SA, eventually.

6. Although I don't think this factor is particularly important, there are no age 55+ withdraw eligibility implications with MediSave top ups. Special Account top ups, however, stay in your Retirement Account and stream out as CPF LIFE payouts. They also affect how much of your Special Account you'll be able to "shield" just before your 55th birthday when your Retirement Account is created.

For all these reasons, I recommend prioritizing MediSave early in your working career among CPF tax relief opportunities. You can still do both, of course (a MediSave top up plus $7,000 into your Special Account).

 

[Andrew833]

MA is $60k cap, will never increase. (hope)
SA for FRS is $181K, and the figure is getting larger every year.

1X (MA) vs 3X (SA), your choice

5 years later maybe 1 vs 4

 

[beefjerky]

Your bank deposit is not compounded monthly.

of course it is. if the interest is distributed in feb for jan, then the interest itself will earn interest in march for the feb period.

 

[bossjiaksai]

MA is $60k cap, will never increase. (hope)
SA for FRS is $181K, and the figure is getting larger every year.

1X (MA) vs 3X (SA), your choice

5 years later maybe 1 vs 4

MA has been increasing over the past few years though. Unlikely to not increase given increasing healthcare costs

 

[Kaypohji]

MA will increase. It is stated at their website.

I am estimating the increase to be around 5% every year

 

[maple96]

I am in my mid 20s, at which age is it recommended to pump in to SA? Thanks!

Hack-ceptions from CPFB

What’s a CPF hack-ception?

 

[Andrew833]

MA has been increasing over the past few years though. Unlikely to not increase given increasing healthcare costs

My mistake

 

[celtosaxon]

6. Special Account top ups, however, stay in your Retirement Account and stream out as CPF LIFE payouts. They also affect how much of your Special Account you'll be able to "shield" just before your 55th birthday when your Retirement Account is created.

I had not heard that before. Are you saying the unshieldable $40,000 in SA will grow by the sum of the RSTUs completed? How about OA to SA transfers and spill overs?

 

[rrr2015]

i think BHS will be fixed at 65yo

i don't understand why/what causes healthcare gotta be increasing at 5% rate annually?

MA will increase. It is stated at their website.

I am estimating the increase to be around 5% every year

 

[highsulphur]

i think BHS will be fixed at 65yo

i don't understand why/what causes healthcare gotta be increasing at 5% rate annually?

Your medishield premium have been jumping more than 20% every year in case you haven't noticed

 

[rrr2015]

yeah but i never been good at maths or statistics.

same question that been pondering for inflation. e.g 0.2 increased means 20% for $1 goods but 2% for $10

so does 5% increase in BHS inline with 20% jump in premium?

Your medishield premium have been jumping more than 20% every year in case you haven't noticed

 

[kehyi4]

i don't understand why/what causes healthcare gotta be increasing at 5% rate annually?

From CPF FAQ:
Q What is the Basic Healthcare Sum?
A The Basic Healthcare Sum (BHS) is the estimated savings you need in your MediSave Account for your basic subsidised healthcare needs in old age.

For CPF members below age 65, the BHS will be adjusted annually to keep pace with the expected growth in MediSave use by the elderly. This ensures that the BHS will stay relevant for each cohort when they arrive at retirement age
---

 

[rrr2015]

thanks for sharing. so is this expected growth in medical expenses due to more MA withdrawal but it could be due to increased healthcare costs? am more concerned of latter

From CPF FAQ:
Q What is the Basic Healthcare Sum?
A The Basic Healthcare Sum (BHS) is the estimated savings you need in your MediSave Account for your basic subsidised healthcare needs in old age.

For CPF members below age 65, the BHS will be adjusted annually to keep pace with the expected growth in MediSave use by the elderly. This ensures that the BHS will stay relevant for each cohort when they arrive at retirement age
---

 

[starlight318]

Based on 5% pa increase in BHS, BHS will be 119k by the time I'm 55 and 200k by the time I'm 65!! but since I intend to retire before 50 and if MA interest remains at 4%, my MA will always be below BHS unless I top up w cash. I thk there is no need to have so high balance since there is a cap for each medisave use.

 

[BBCWatcher]

I had not heard that before. Are you saying the unshieldable $40,000 in SA will grow by the sum of the RSTUs completed?

Not quite. As far as I can determine (looking at my online info) there's no shielding impact until the voluntary SA top ups, plus accrued interest on those top ups, add up to more than $40,000 just before your 55th birthday.

Please bear in mind that "shielding" is currently possible. Rules are subject to change, which is one more reason why immediate tax relief is attractive.

How about OA to SA transfers and spill overs?

No, those sources have no impact on the minimum that cannot be shielded.

The "shielding" option and (undesirable) Retirement Account withdrawal option (below the Full Retirement Sum) are reasons why I think it's best to lean into available MediSave tax reliefs first, early in a career, then Special Account tax reliefs second. (Could be in the same years, but in that order of prioritization.) If you top up a Special Account by $7,000 at age 34 versus age 29, the difference in accrued interest by age 55 is roughly $3,323. Thus, per current rules, you could be allowed to shield that much more and/or withdraw that much more. I don't think these are huge factors, but as "tie breakers" they make sense.

 

[reddevil0728]

yeah but i never been good at maths or statistics.

same question that been pondering for inflation. e.g 0.2 increased means 20% for $1 goods but 2% for $10

so does 5% increase in BHS inline with 20% jump in premium?

Actually nothing to do with math of stats? It’s just looking at one number being higher than the other

thanks for sharing. so is this expected growth in medical expenses due to more MA withdrawal but it could be due to increased healthcare costs? am more concerned of latter

Increase in ma withdrawal is a function of increase in healthcare cost.

 

[henrylbh]

It’s an interesting question. Here is my take:

Assuming you can get tax relief for both but had to choose one or the other, I would suggest it depends how close you are to 55. The closer you are to 55 the more you should prioritize on SA... because if you don’t max SA by 55 you can’t maximize the once in a lifetime SA shield maneuver to preserve what is arguably the most valueable account in CPF. Keep in mind that after 55 you can no longer top up SA or transfer OA to SA. This assumes you will have enough OA or cash to meet FRS (or BRS w/PP) at 55.

Not when closer to 55. The earlier the better. Once SA reaches FRS amount early, you are all set. The amount will keep running farther away from the annual FRS amount and with further contributions from work, you gonna have a huge SA to shield at 55. If can afford to top up one go into SA to reach FRS, the better.

 

[Kaypohji]

That’s why I was thinking if I should top up my medisave to enjoy tax relief or use this cash to pay for my hdb loan then transfer oa to sa but I sacrifice tax relief which can be a few thousands added up slowly.

Other than tax relief, sa allows contributions to continue to come in and accumulate but for ma, it will go into OA after both sa and Ma is maxed. So the interest effect is lower than sa.

The "shielding" option and (undesirable) Retirement Account withdrawal option (below the Full Retirement Sum) are reasons why I think it's best to lean into available MediSave tax reliefs first, early in a career, then Special Account tax reliefs second. (Could be in the same years, but in that order of prioritization.) If you top up a Special Account by $7,000 at age 34 versus age 29, the difference in accrued interest by age 55 is roughly $3,323. Thus, per current rules, you could be allowed to shield that much more and/or withdraw that much more. I don't think these are huge factors, but as "tie breakers" they make sense.