From OA to SA

[sgdividends]

You all still make regular transfer/cash contribution to SA?

I transferred a lump sum years back and that's it.

Regular transfer as there is tax savings .

 

[highsulphur]

Regular transfer as there is tax savings .

regular cash top up you mean

 

[sgdividends]

regular cash top up you mean

Yes top up

 

[endlssorrow]

Top up with cash monthly to SA or accumulate to large sum of say 12months?
I believe should be monthly right coz each month small interests will roll over to next and next month

 

[sgdividends]

Top up with cash monthly to SA or accumulate to large sum of say 12months?
I believe should be monthly right coz each month small interests will roll over to next and next month

If don't need the money then top up in late January each year best bang for buck.

Tax savings on the 7k the same for monthly or one lump sum but top up early u start to earn SA interest earlier

 

[endlssorrow]

If don't need the money then top up in late January each year best bang for buck.

Tax savings on the 7k the same for monthly or one lump sum but top up early u start to earn SA interest earlier

If I top up monthly cash $200, will it be very significant for the growth in another 30 years ?

 

[Lost_Found]

Anyone can guide how to trf from OA to MA, there is no option for this on the online trf page.

 

[BBCWatcher]

If I top up monthly cash $200, will it be very significant for the growth in another 30 years ?

I don't fully understand your question. You will earn more interest if you make your top ups earlier rather than later. So $200/month generates somewhat less interest than $2,400 deposited in January, for example. The math is quite complicated to figure out the difference, and it requires more information that you haven't supplied, notably what interest rate your cash would be earning outside CPF.

....But the reason you're topping up $200/month is surely because you cannot afford any more than that, right? Otherwise you'd top up $2,400 (or more) each January. And that's fine. You do the best you can to maximize CPF interest, and that means making your top ups as soon as you're able (toward the end of the month, but not right at the end of the month, in order to maximize any external interest you might be receiving).

 

[henrylbh]

You do the best you can to maximize CPF interest, and that means making your top ups as soon as you're able (toward the end of the month, but not right at the end of the month, in order to maximize any external interest you might be receiving).

How much difference does it make in term of cents gain/loss when you top up $200 monthly or $2,400 one go at any time of the month?

 

[highsulphur]

How much difference does it make in term of cents gain/loss when you top up $200 monthly or $2,400 one go at any time of the month?

about $44 difference in the first year. and more later

 

[henrylbh]

about $44 difference in the first year. and more later

Sorry you don't get what I mean. I am talking about the difference when deciding which day of the month to deposit.

It makes little difference to deposit it "toward the end of the month, but not right at the end of the month, in order to maximize any external interest you might be receiving"

 

[BBCWatcher]

It makes little difference to deposit it "toward the end of the month, but not right at the end of the month, in order to maximize any external interest you might be receiving"

I don't think that was the question, but OK, let's pick a simple example to answer this other question. If you have your pending CPF top up funds deposited in a CIMB StarSaver account then they're earning a flat 0.8% interest rate. You'll lose about 80% of that interest on any money you're using to top up CPF if your top ups are at the beginning of the month versus near the end of the month. So you'll lose about $15/year of bank interest on a $200/month pace, in this scenario ($200 * 12 * 0.8% * 80%). This explains why topping up near (but not exactly at) the end of the month is financially prudent, if that was the question.

If anyone feels that $15 isn't much money, you're welcome to send me that $15. Of course, adjust that $15 upward for >$200/month top ups.

 

[BBCWatcher]

Hmm I still find it weird to be able to earn an extra month interest of SA..Defies logic ..

Not really. Unlike outside funds, OA funds are already at work at CPF. It'd be pretty awful if you lost a whole month of interest in the month when you transfer OA funds to SA -- funds that are already working, earning interest. That one month loss of interest would discourage such transfers to some extent.

CPF had basically two realistic choices: credit OA level interest during that transfer month, or credit SA level interest. They chose the latter, which is nice.

 

[henrylbh]

I don't think that was the question, but OK, let's pick a simple example to answer this other question. If you have your pending CPF top up funds deposited in a CIMB StarSaver account then they're earning a flat 0.8% interest rate. You'll lose about 80% of that interest on any money you're using to top up CPF if your top ups are at the beginning of the month versus near the end of the month. So you'll lose about $15/year of bank interest on a $200/month pace, in this scenario ($200 * 12 * 0.8% * 80%). This explains why topping up near (but not exactly at) the end of the month is financially prudent, if that was the question.

If anyone feels that $15 isn't much money, you're welcome to send me that $15. Of course, adjust that $15 upward for >$200/month top ups.

The way I see -

Whether you deposit $200 or $2,400 at beginning of month or “toward the end of the month, but not right at the end of the month” the deposit in CPF will only start to earn interest the following month.

If you deposit $200 at beginning of the month instead of say 26th of the month (to ensure that it is credited on time to start earning interest the following month), you lose interest from 1st to 25th of the month as the $200 could be earning 0.8% (in your example) till the day you deposit it into CPF. That’s only $200x0.8%/365X25 = 11c. If the deposit is $2,400 the loss is only $1.32

 

[BBCWatcher]

Hmmmm, maybe I missed a decimal point there somewhere. Or I got months and years mixed up.

OK then, send me the $1.31 of lost interest in this scenario. I'll take it!

If you're arguing that worrying about lost interest due to suboptimally timed CPF top ups is not a huge concern, I agree, it's not huge. But it's not zero either, and you might as well optimize the timing of your CPF top ups now that you know how to optimize. Free money is still free money, even if it's a worth an extra cup of coffee (or kopi) per year. And goodness knows this forum is chock full of people looking for every financial advantage.

If your plan is to make regular monthly CPF top ups then I think CPF offers an automatic monthly GIRO deduction option. Let me find that.... Yes, here it is. Does anyone know when CPF processes these automatic deductions? Is it on, say, the 28th day of the month? Last day? If CPF is doing something sensible and processing those deductions at the end of the month, then GIRO is the way to go if you want a monthly approach. I personally prefer making a once per year top up in late January, but I know not everyone can do that.

 

[henrylbh]

Hmmmm, maybe I missed a decimal point there somewhere. Or I got months and years mixed up.

OK then, send me the $1.31 of lost interest in this scenario. I'll take it!

I agree, it's not huge. But it's not zero either

you win lor since you forgot when you implied.

3. For OA to SA/RA transfers (one individual to another), it doesn't really matter too much when you make that transfer, but I would recommend not doing it during the last week of the month. Just to make sure the deduction and the credit both occur in the same calendar month, which is the best you can do.

 

[BBCWatcher]

you win lor since you forgot when you implied.

That's yet a different situation. For a CPF-to-CPF transfer between individuals (OA to SA/RA), you're going to lose at least one month of interest. There's nothing you can do about it. So make the transfer any time of the month but, out of an abundance of caution, not very close to the end of the month lest CPF apply the deduction in one month and the credit in the next month. (I don't think that happens very often, if at all, but, just in case it might, try to stay away from the last few days of the month.)

Bank interest is ordinarily computed daily in Singapore. A different situation can yield a different optimization strategy, and it does here.

 

[endlssorrow]

Let's say my

Ordinary Account (OA) is $20,000.
Special Account (SA) $20,000.
Medisave Account (MA) $50,000.


If exclude CPF deduction from my salary, plainly using cash of $200 top up to my MA for next 20 years, will i able to hit the min sum of $162,000.

Please exclude those what by xth year, min sum will be $x.
We just take it as $162,000

so is like $200 * 12 * 20= $48,000 is the main capital already.
So technically i dont think the compound of 4-5% can hit right?

unless CPF deduction is $600 from salary.. then can hit. Right?

 

[BBCWatcher]

Let's say my....
Special Account (SA) $20,000....
If exclude CPF deduction from my salary, plainly using cash of $200 top up to my MA for next 20 years, will i able to hit the min sum of $162,000.

No. Excluding compulsory CPF contributions, if your SA starts with $20,000, if you top up $200/month every month for 20 years, and if you earn 5% interest on every dollar (which is too high since some of those dollars will earn 4%), you'd end up with about $134,557 in your SA after 20 years. It'll actually be less than that since the 5% bonus interest only applies to the first $60,000 of combined balances, so...no. It won't be $162K.

So technically i dont think the compound of 4-5% can hit right?

Correct. In fact, the interest would have to be about 6.3% to reach $162,000 in 20 years in this scenario.

unless CPF deduction is $600 from salary.. then can hit. Right?

Sure, if the SA contributions are bigger then $162,000 or more is achievable.

If you top up $2,400 in January instead of topping up $200 per month in January and in every other month, and if everything else is the same (20 years, 5% interest, $20,000 initial SA balance) then instead of $134,557 you hit about $136,392 -- about $1,835 more. (It won't be quite that much since 5% interest doesn't apply to all the dollars, but it'll be some extra dollars.) It costs you a bit of lost bank interest if you pull your top ups forward to January like that, but you still come out ahead. Not everybody can afford to make their top ups in January, but if you can, you should. If you cannot quite manage $2,400, but you could manage $1,200 in January and another $1,200 in July, that still helps some. The earlier you can make top ups (consistent with any tax relief goals), the better.

 

[apatheticme]

Let's say my

Ordinary Account (OA) is $20,000.
Special Account (SA) $20,000.
Medisave Account (MA) $50,000.


If exclude CPF deduction from my salary, plainly using cash of $200 top up to my MA for next 20 years, will i able to hit the min sum of $162,000.

Please exclude those what by xth year, min sum will be $x.
We just take it as $162,000

so is like $200 * 12 * 20= $48,000 is the main capital already.
So technically i dont think the compound of 4-5% can hit right?

unless CPF deduction is $600 from salary.. then can hit. Right?

Also, you can't keep contributing to MA. It's capped to BHS. Assuming when it maxes out, then you switch to topping up SA, then it's approximately BBCWatcher's numbers. I don't know what he used, but in Excel/Google sheets you can use something like =FV(0.04/12,20*12,200,20000) to estimate.

Also, from the numbers he gave, you can tell it does not take much above the $200 monthly to hit $162k. Coupled with the fact that MA contributions overflow to SA, and additional interests on OA goes to SA, you probably won't even need to depend on mandatory SA contributions to hit your $162k target.