CPF Top up questions

[Thoreldan]

I am always amazed by the logic of some people.

SRS has higher risk and lower yield than CPF and similar lock on fund as CPF, yet people feel safer to put money into SRS.

I challenge anyone with at least a degree to tell me why CPF is a blackhole with valid reasons. Why can't Singapore government pay for CPF? The government has more than enough...

The same group of people who yelled 'return my cpf' whenever cpf board posted something on its fb page.

 

[JetStorm]

I am always amazed by the logic of some people.

SRS has higher risk and lower yield than CPF and similar lock on fund as CPF, yet people feel safer to put money into SRS.

I challenge anyone with at least a degree to tell me why CPF is a blackhole with valid reasons. Why can't Singapore government pay for CPF? The government has more than enough...

Ok maybe calling it a blackhole might be exaggerating it. But I personally do not like the change in goal post all the time.

For me it is not about lack of confidence in the cpf but more of how to maximise cpf returns and tax reliefs, while leaving enuff to pay off my housing loan and still enough cash to fund my investments until i hit retirement age.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[fr33d0m]

Ok maybe calling it a blackhole might be exaggerating it. But I personally do not like the change in goal post all the time.

For me it is not about lack of confidence in the cpf but more of how to maximise cpf returns and tax reliefs, while leaving enuff to pay off my housing loan and still enough cash to fund my investments until i hit retirement age.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

change is the constant. Nothing stays the same... but to each and his own.

How about your preference to SRS over CPF?

 

[tangent314]

Ok maybe calling it a blackhole might be exaggerating it. But I personally do not like the change in goal post all the time.

The change in goalposts have all been reasonable reaction to changes in circumstances.

People used to work until age 55 then die around age 65. Times have changed and we cannot run CPF on the same assumptions as the old days.

 

[JetStorm]

change is the constant. Nothing stays the same... but to each and his own.

How about your preference to SRS over CPF?

Agree on that. No one strategy fits all.

For my preference over srs to cpf... it is more of 3 birds kill one stone bah... flexibility with the ability to early withdraw (with a tax), serve as the local equities portion of my 3 fund portfolio & tax relief up to $15.3k

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[fr33d0m]

Agree on that. No one strategy fits all.

For my preference over srs to cpf... it is more of 3 birds kill one stone bah... flexibility with the ability to early withdraw (with a tax), serve as the local equities portion of my 3 fund portfolio & tax relief up to $15.3k

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

CPF allows early withdrawal, too. Renounce citizenship and move out of SG and west malaysia. If situation warrants withdrawal of CPF, I am pretty sure that you don't want to live in SG or anywhere around SG.

 

[JetStorm]

CPF allows early withdrawal, too. Renounce citizenship and move out of SG and west malaysia. If situation warrants withdrawal of CPF, I am pretty sure that you don't want to live in SG or anywhere around SG.

True if I have enuff cash on hand for the MM2H program... Which I don't.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[BBCWatcher]

True if I have enuff cash on hand for the MM2H program... Which I don't.

Not yet, but double tax advantaged 5% interest compounded annually is often quite attractive in boosting household wealth.

 

[dork32]

CPF allows early withdrawal, too. Renounce citizenship and move out of SG and west malaysia. If situation warrants withdrawal of CPF, I am pretty sure that you don't want to live in SG or anywhere around SG.

but if i wish to remain as a sg guy and want to withdraw, then how?

srs is the answer.

 

[BBCWatcher]

but if i wish to remain as a sg guy and want to withdraw, then how?
srs is the answer.

Only if you think a Retirement Account funded to some level above the then current Basic Retirement Sum, but not more than the then current Full Retirement Sum, is such a big problem you cannot possibly cope with across your long-term financial trajectory.

That's really far fetched for most people reading this forum. We're not talking about a huge amount of money here relative to age 65+ financial aspirations and needs, and you're very well compensated for parking this relatively small amount a little earlier than otherwise. Moreover, once your MA and SA reach their respective BHS and FRS targets, compulsory contributions into MA "double spill" into OA, increasing the monthly flow into OA. OA is liquid for housing and education in Singapore, and it's also reasonably investable in the CPF Investment Scheme. MA is also fairly liquid, for medical spending in Singapore.

It's a very good deal the government is offering here, especially nowadays. I'm delighted to accept this offer, and that's even with U.S. income tax owed/paid on the employer's contribution share and on all CPF interest.

 

[fr33d0m]

but if i wish to remain as a sg guy and want to withdraw, then how?

srs is the answer.

if you remain sg, what's the likely scenario that you would like to withdraw but does not destroy wealth?

remaining in SG but withdrawing SRS is dumb. You are giving your money away.

 

[nautilus]

Just an update, I’ve just received my CPF MA refund letter for contribution above annual limit in 2019. Seems that they didn’t forget.

 

[highsulphur]

Just an update, I*********ve just received my CPF MA refund letter for contribution above annual limit in 2019. Seems that they didn*********t forget.

Hah same for me. First time it happenrd for me. Guess it will happen again next Feb for me

 

[dork32]

if you remain sg, what's the likely scenario that you would like to withdraw but does not destroy wealth?

remaining in SG but withdrawing SRS is dumb. You are giving your money away.

did not deny that withdrawing from srs for fun does not make financial sense.

srs provides some liquidity. if my cash hits 0, cpf cannot save me. srs and ah long can save me. which is better?

you saw that guy that transferred from oa to sa? if you are not careful, you may get into this scenario

 

[dork32]

Only if you think a Retirement Account funded to some level above the then current Basic Retirement Sum, but not more than the then current Full Retirement Sum, is such a big problem you cannot possibly cope with across your long-term financial trajectory.

That's really far fetched for most people reading this forum. We're not talking about a huge amount of money here relative to age 65+ financial aspirations and needs, and you're very well compensated for parking this relatively small amount a little earlier than otherwise. Moreover, once your MA and SA reach their respective BHS and FRS targets, compulsory contributions into MA "double spill" into OA, increasing the monthly flow into OA. OA is liquid for housing and education in Singapore, and it's also reasonably investable in the CPF Investment Scheme. MA is also fairly liquid, for medical spending in Singapore.

It's a very good deal the government is offering here, especially nowadays. I'm delighted to accept this offer, and that's even with U.S. income tax owed/paid on the employer's contribution share and on all CPF interest.

this is not far fetch. like i said, there is someone who transferred oa to sa. some years later he cannot afford to pay his home loan. in some trouble now.

 

[BBCWatcher]

like i said, there is someone who transferred oa to sa. some years later he cannot afford to pay his home loan. in some trouble now.

No, the person who made that initial report simply forgot to ask his wife what her CPF balances are. Lo and behold, when he did ask, she already has 20 months of mortgage servicing available from her Ordinary Account. She's working, and so as long as she has employment income it'll be even more than 20 months.

That couple is still probably going to have to sell their home (a fairly pricey private condo) and retreat to more affordable HDB housing. They're living well beyond their means given their newfound circumstances. However, they have at least a year to adjust their housing. The need to make that adjustment has nothing to do with a lack of liquidity.

Nobody is arguing against maintaining adequate liquidity, and that particular household has it. It's also really not smart to cling to too much liquidity when you're losing out on significant wealth accumulation. There's nothing magical, special, or particularly scientific about CPF's default allocation percentages. If they don't work for you -- and for many households they don't work optimally -- then you're free to make and should make an allocation adjustment via OA to SA transfers.

A much, much more common way that households get in trouble with a lack of liquidity is they accelerate repayment on their low cost mortgages. That's particularly true with HDB units.

 

[dork32]

No, the person who made that initial report simply forgot to ask his wife what her CPF balances are. Lo and behold, when he did ask, she already has 20 months of mortgage servicing available from her Ordinary Account. She's working, and so as long as she has employment income it'll be even more than 20 months.

That couple is still probably going to have to sell their home (a fairly pricey private condo) and retreat to more affordable HDB housing. They're living well beyond their means given their newfound circumstances. However, they have at least a year to adjust their housing. The need to make that adjustment has nothing to do with a lack of liquidity.

Nobody is arguing against maintaining adequate liquidity, and that particular household has it. It's also really not smart to cling to too much liquidity when you're losing out on significant wealth accumulation. There's nothing magical, special, or particularly scientific about CPF's default allocation percentages. If they don't work for you -- and for many households they don't work optimally -- then you're free to make and should make an allocation adjustment via OA to SA transfers.

A much, much more common way that households get in trouble with a lack of liquidity is they accelerate repayment on their low cost mortgages. That's particularly true with HDB units.

whether the person has enough liquidity is not for me or you to answer. he is the one that has to decide if he is comfortable with what he has.

he mentioned he prefers srs for its iiquidity. it does makes sense.

you do not have the entire picture. based on your lack of information, prescribing a one size fits all text book solution is not the way to go

 

[dork32]

the correct way to give answer is this:

putting money into cpf will give you a better return if you are looking at 55 and beyond. You are losing liquidity if you are looking use the money to fund your next car purchase, property purchase, business investment before 55

SRS gives very miserable returns. money sitting in srs hardly earns you anything. you will be forced to invest if you dont want to let inflation erode away your savings.

However SRS allows early withdrawal with the penalty of 5% + income tax. The penalty is high. You should try not to withdraw your SRS unless you really need the money.

and let the guy decide which is better for himself.

 

[BBCWatcher]

whether the person has enough liquidity is not for me or you to answer.

It wasn’t me who attempted a universal answer. I said it was “far fetched” that most readers of this forum would be materially liquidity constrained if they transferred even one dollar from OA to SA, and that’s true. Far fetched doesn’t mean impossible.

putting money into cpf will give you a better return if you are looking at 55 and beyond. You are losing liquidity if you are looking use the money to fund your next car purchase, property purchase, business investment before 55

That’s not the whole story. For those readers who reach both the Basic Healthcare Sum and the Full Retirement Sum — and that’ll happen to some readers in their 30s or perhaps even earlier — the portion of their compulsory contributions ordinarily earmarked for MA will spill over into OA. That is, they reach a point when the inflow into OA is “supercharged,” above and beyond what ordinarily flows into OA. Again, this can happen way before age 55, and it happens that much sooner with some combination of OA to SA transfers, MA top ups, SA top ups, earlier attainment of maximum bonus interest, and the higher interest plus compounding. Once you have a bigger monthly inflow into OA you have more mortgage servicing power (more liquidity for housing), not less.

What I’ve just described is part of how this system works, too. Many (not all) readers can exploit what I’ve just described. For example, there are many readers who are delaying marriage or not getting married, and they then buy under the HDB Singles Scheme at age 35. This pattern is common and getting more common. A lot of these individuals can follow the pattern I’ve described, do really well, and have absolutely no liquidity concerns in the world.

There’s also the “HDB sweep,” when HDB sucks all OA dollars above $20,000 and pushes them into HDB leasehold equity, which you cannot even borrow against, when you take a HDB loan. These individuals have a really powerful incentive to transfer some dollars, and the sooner the better.

SRS gives very miserable returns. money sitting in srs hardly earns you anything. you will be forced to invest if you dont want to let inflation erode away your savings.

Yes, and unlike all of the traditional CPF accounts most investments are not principal guaranteed (except the very lowest yielding ones). That’s another reason why you’d really rather avoid a premature withdrawal. SRS funds need ample time to grow.

 

[fr33d0m]

did not deny that withdrawing from srs for fun does not make financial sense.

srs provides some liquidity. if my cash hits 0, cpf cannot save me. srs and ah long can save me. which is better?

you saw that guy that transferred from oa to sa? if you are not careful, you may get into this scenario

There are many more options than SRS or Ah Long. Credit cards, savings, borrow from friends/relatives...