From OA to SA

[henrylbh]

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.

Why assumed he tops up SA when he mentioned "$200 top up to my MA for next 20 years".

Never mind whether it's SA or MA, the rate of interest, excluding additional interest, is the same.

The actual question should be whether 200 pm will reach 162k in 20 years.

At prevailing rate of 4%, with SA of 20k, never even with additional interest as the bulk of additional interest will be in MA of 50k. With MA of 50k, it will surpass 162k even without additional interest.

 

[endlssorrow]

Hi can I ask y in month of Jan or July? And not monthly? So u mean save like one year or 6 months then transfer lump sum at a go in either Jan or July?

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.


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


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.

 

[endlssorrow]

Thanks for the formula. I'll give it a try later

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.

 

[endlssorrow]

Huh? So simple? MA got $50k now if roll to next 20 years onwards, it will hit the min retirement sum?

Why assumed he tops up SA when he mentioned "$200 top up to my MA for next 20 years".

Never mind whether it's SA or MA, the rate of interest, excluding additional interest, is the same.

The actual question should be whether 200 pm will reach 162k in 20 years.

At prevailing rate of 4%, with SA of 20k, never even with additional interest as the bulk of additional interest will be in MA of 50k. With MA of 50k, it will surpass 162k even without additional interest.

 

[apatheticme]

Huh? So simple? MA got $50k now if roll to next 20 years onwards, it will hit the min retirement sum?

That's a possibility because of how MA overflows to SA, and whether it happens or not depends on the growth rate of BHS. If you freeze BHS to $52k just like how you freeze FRS, it does look like it will happen. Every year after the first year you get at least 2000 overflowing to SA.

 

[Mecisteus]

Hi can I ask y in month of Jan or July? And not monthly? So u mean save like one year or 6 months then transfer lump sum at a go in either Jan or July?

Can you stop being silly.

If you have the money in OA already, why don't you transfer into SA immediately assuming you don't need the excess? Why must break up the transfers?

The earlier you transfer, the higher is the future value.

 

[BBCWatcher]

Why assumed he tops up SA when he mentioned "$200 top up to my MA for next 20 years".

I assumed that was a typo since Endissorrow also referred to the $162,000 figure (which is actually $166,000 in 2017, the Full Retirement Sum). And as others have pointed out, his MA is already near the Basic Healthcare Sum. But OK, let's assume it wasn't a typo. If you reduce the $200/month I allocated to SA then obviously there's a bigger gap between actual SA and the desired $162,000 target. The MA gets slightly bigger, though, subject to BHS limits.

I don't think CPF rolls over voluntary MA contributions to SA. They just return your voluntary MA contribution if you've hit the BHS, as I understand it. My understanding is that the rollover to SA is only for the compulsory contributions. If I'm wrong on that point, OK, but it doesn't really matter for these purposes.

This is already a weird question we're being asked to answer. I'm just doing the best I can to answer the question asked, even if the question is at least hard to understand....

Huh? So simple? MA got $50k now if roll to next 20 years onwards, it will hit the min retirement sum?

....It's very hard to understand your question. There's no "Minimum Retirement Sum" any more. There are the Basic Retirement Sum, Full Retirement Sum, and Enhanced Retirement Sum. For 2017 those figures are $83,000, $166,000, and $249,000, respectively. And those figures have nothing to do with your Medisave Account. Your MA is capped to the Basic Healthcare Sum, which is $52,000 in 2017.

I also don't understand why you would necessarily aspire to reach the 2016 Full Retirement Sum in 20 years. Last year's FRS is much lower than the FRS will be 20 years from now. There's something called inflation, and Singapore has a bit of it. The same nominal amount of money becomes progressively less valuable over time.

In short, I don't fully understand your question, but I'm trying as best I can in the circumstances to give you some idea of how contributions at the levels you describe would grow at CPF interest rates.

Hi can I ask y in month of Jan or July? And not monthly?

May I ask why you're so focused on monthly contributions? Is it because you cannot afford a voluntary, annual top up of $2,400 (or more) in January, and (for cash flow and affordability reasons) you must stretch out that $2,400 into monthly top ups of $200 per month?

Any pattern of contributions that occurs in earlier months will generate some additional interest. If you cannot afford $2,400 in January, then $1,200 in January and $1,200 is July is still better than $200 per month. If you cannot afford $1,200/$1,200 then $600 in January, $600 in April, $600 in July, and $600 in October is still better than $200 per month. Whatever you can do to pull your voluntary top ups forward in time will generate some additional interest. CPF interest is computed monthly.

If $200 per month is how it must be for affordability and/or cash flow reasons, OK, so be it, but it's very odd to insist on that contribution pattern unless you must have it for real financial reasons.

 

[henrylbh]

This is already a weird question we're being asked to answer.

....It's very hard to understand your question.

In short, I don't fully understand your question, but I'm trying as best I can in the circumstances to give you some idea of how contributions at the levels you describe would grow at CPF interest rates.

Also weird that you choose to answer him as the way he phrased the questions appears he may not fully understand what he is asking Any answers given may just confuse him further.

He could have mixed up SA with MA, but he remarked "exclude those what by xth year, min sum will be $x". He may just want to know whether can reach 162k regardless of any min sum whether for FRS or BHS.

 

[henrylbh]

Can you stop being silly.

I tend to agree.

May be confused by BBC saying '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'

 

[BBCWatcher]

Also weird that you choose to answer him as the way he phrased the questions appears he may not fully understand what he is asking

I think that's a given! That said, MA and SA attract the same interest rate. The one part of Endlssorrow's question that is reasonably understandable is the part dealing with the 20 year results of compound interest and steady contributions. I've answered that part with an example calculation, to give a feel for how the interest works, even if part of the contributions and interest accrue to MA instead of SA. Like any other example, it can be adjusted if Endlssorrow wishes, subject to CPF rules such as MA caps.

Speaking of "steady contributions," why assume that? If today Endlssorrow can only afford $2,400/year in voluntary contributions, why assume that next year, or the year after, or for the next 20 years Endlssorrow can only afford the same nominal $2,400/year? Through my working career to date I've steadily increased savings, in "stair step" fashion. I periodically review that savings flow to see if I can boost it, and fortunately I've been able to "stair step" up instead of down. Down is possible in the future, and expected at some point, but hopefully that'll be far into the future.

 

[badsector]

Thanks for the formula. I'll give it a try later

why not u try using doody's spreadsheet.

 

[endlssorrow]

why not u try using doody's spreadsheet.

Doody? Whose one ? Got link?

 

[dr3amgawd]

Let's say my

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.

i assuming u are talking about SA and your intent is to have a more secure retirement nest egg.

Rather that crunching numbers to find the "optimal" amt/time or whatever to top up your cpf account, just start now and review and adjust your contributions as u go along.

I notice too many posts in various threads on hypothetical questions and assumptions. Instead of trying to min/max in a MMORPG, Just keep the plan simple, do it, be consistent and be flexible. Over time you will see something like this.

Took me some years but I kept at it. Now it just rolls by itself.

We all have different starting points in life but so long as you keep at it, you will get there.

Good Luck

 

[edwinttt1978]

When it comes to a decision like this, people are generally penny wise, pound foolish.

 

[apatheticme]

When it comes to a decision like this, people are generally penny wise, pound foolish.

Please, sir, enlighten us on the pound wise move.

 

[LiteHouse]

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.

My GIRO deduction to contribute to CPF is on 17th of the month. I believe the date was determined by CPF. I don't recall having the option to choose a date.

By the way, BBCWatcher you are spending so much effort and time to type these posts to educate us on CPF. Why?

 

[endlssorrow]

To educate people like me lah
Why lei?

 

[knightdreamer]

Hi can I ask y in month of Jan or July? And not monthly? So u mean save like one year or 6 months then transfer lump sum at a go in either Jan or July?

Actually to max the extra 4-2.5=1.5/12 it is good to transfer at the start. If not quite troublesome to do it every month. I do it when getting bonus

 

[starlight318]

Actually to max the extra 4-2.5=1.5/12 it is good to transfer at the start. If not quite troublesome to do it every month. I do it when getting bonus

Not troublesome if u do it online, I transfer any excess every month after setting aside funds for my mortgage instalment. Feels good to watch the SA balance grow every month.

 

[endlssorrow]

=FV(0.04/12,20*12,200,20000)

can i check the above value represent what?

0.04 is 4%? / 12(the number of months) ?

20*12 is it what ?

that 200 is $200 right?

then that 20000 is $20000? but why $20000?