FRS or ERS?

[Okenba]

I plan to top up ers (once) when I reach 55 to max the compounding effect since it is a 'large' sum compounded over 10 years.
I would like to ask if it is worth it to top up the 'smaller' sum yearly (from 56 yo onwards) since the quantum is smaller and duration is also shorter (to 65 yo), as such it wouldn't have made such a great difference from the ROI point of view. Since I will likely not see the entire top up amount in my life time, I thought I would just top up once max at 55 yo.

If one were to top up ers at 55, what would be the best time to do so? Immediately when RA is formed or wait till early of the year?

You are right. The annual top ups will never have as great an ROI as the initial ERS you put in. But likely the ROI will still be very good compared to other annuities.
And I guess the impt question is what you think of the additional payout.
I.E. If the additional payout is impt to you or not.

I did some calculations for payouts that start from 70, and ERS at 55 is actually very comparable to FRS at 55 + annual top up to FRS.

Another advantage of keeping at FRS is also the available tax relief for yourself or your family when you top it up every year.

As for which plan, you don't have to decide on that until you want your payout to start.

 

[BBCWatcher]

I plan to top up ers (once) when I reach 55 to max the compounding effect since it is a 'large' sum compounded over 10 years.
I would like to ask if it is worth it to top up the 'smaller' sum yearly (from 56 yo onwards) since the quantum is smaller and duration is also shorter (to 65 yo), as such it wouldn't have made such a great difference from the ROI point of view. Since I will likely not see the entire top up amount in my life time, I thought I would just top up once max at 55 yo.

Just compare late January RA top ups (assuming the ERS is raised on January 1) to your next best alternatives available at those points in time. If CPF RA/CPF LIFE wins, great!

Do you have any next best alternative(s) in mind?

If one were to top up ers at 55, what would be the best time to do so? Immediately when RA is formed or wait till early of the year?

Neither. Within — but at the end of — your 55th birthday month.

 

[BBCWatcher]

Another advantage of keeping at FRS is also the available tax relief for yourself or your family when you top it up every year.

(On edit: The information in this post is not correct. Please read downthread.)

Afraid not. Once your RA reaches the Full Retirement Sum the tax relief opportunity closes. The "tax relief FRS" is based on the FRS when you celebrate your 55th birthday. But you still have some tax relief opportunity available for Voluntary Contributions to MA.

 

[qhong61]

Vote wisely. Put the right people into the government.

Who is wisely?

 

[BrandonnC]

For my own case, I will be 55 yo next year. I will shield my SA account and the funds for RA will come from OA. Most likely will get FRS and opt for basic or standard. You never know what will hit you before you reach 65 yo. Prefer to have more liquidity during this interim period. Meanwhile, can continue to top up yearly to prevailing FRS rates.

May I ask, should your transfer from OA to RA be done before the shielded funds are returned to SA?
Else, money would need to be released from SA first and not OA, right?

 

[royalmix]

Afraid not. Once your RA reaches the Full Retirement Sum the tax relief opportunity closes. The "tax relief FRS" is based on the FRS when you celebrate your 55th birthday.

FALSE! "FAKE NEWS!"

 

[Okenba]

Afraid not. Once your RA reaches the Full Retirement Sum the tax relief opportunity closes. The "tax relief FRS" is based on the FRS when you celebrate your 55th birthday. But you still have some tax relief opportunity available for Voluntary Contributions to MA.

Has someone tried it before or is it mentioned somewhere?

 

[jywy2005]

May I ask, should your transfer from OA to RA be done before the shielded funds are returned to SA?
Else, money would need to be released from SA first and not OA, right?

I think you have to leave a min sum in SA. The rest you can use to invest,. If I am not wrong, on your birthday, the RA account will be automatically formed with the funds in your OA and SA.

 

[anddrool]

Has someone tried it before or is it mentioned somewhere?

Yes. There will be tax relief for RA cash top up even after reaching 55.
If you top up parent's RA, there will be tax relief as well.

 

[dork32]

I plan to top up ers (once) when I reach 55 to max the compounding effect since it is a 'large' sum compounded over 10 years.
I would like to ask if it is worth it to top up the 'smaller' sum yearly (from 56 yo onwards) since the quantum is smaller and duration is also shorter (to 65 yo), as such it wouldn't have made such a great difference from the ROI point of view. Since I will likely not see the entire top up amount in my life time, I thought I would just top up once max at 55 yo.

If one were to top up ers at 55, what would be the best time to do so? Immediately when RA is formed or wait till early of the year?

do you find the 4% interest attractive? if no, then take your time to top up.

you top up earler, you get to earn more interest and hence a higher payout.

 

[dork32]

Yes. There will be tax relief for RA cash top up even after reaching 55.
If you top up parent's RA, there will be tax relief as well.

relief is for topup below frs

 

[anddrool]

relief is for topup below frs

Yes. Tax relief is only for top up below cohort FRS.

 

[henrylbh]

Afraid not. Once your RA reaches the Full Retirement Sum the tax relief opportunity closes. The "tax relief FRS" is based on the FRS when you celebrate your 55th birthday. But you still have some tax relief opportunity available for Voluntary Contributions to MA.

Age of recipients	Limit on cash top-up amount for computing tax relief
For recipients aged 55 years and above	(a) Top-up to Retirement Account (RA) under RSTU scheme Current Full Retirement Sum (FRS) – Retirement Account (RA) savings** ** RA savings refers to the cash set aside in the RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn

 

[henrylbh]

FALSE! "FAKE NEWS!"

But there are people like s0crates who believe and like the fake news

 

[BBCWatcher]

(On edit: The information in this post is not correct. Please read downthread.)

OK, here’s more complete information about how top ups to RA work….

1. The ERS (limit on CPF Retirement Account top ups) is based on principal only. Any time the ERS is raised you can add funds to any Retirement Account.

2. The FRS (the IRAS limit on tax relief for top ups to a Retirement Account) is based on principal plus interest. Once your RA reaches the FRS the interest (>4%) will outrun the FRS increase(s) at least starting from the second FRS increase.

3. You can check IRAS’s Web site here for details. See the “Mr. Ong’s mother” example for a little more insight.

4. When your RA is below the FRS and you have compulsory contributions (payroll) or a VC3A you should see inflow into your RA. If you’re trying to be clever with RA-related tax relief you should take this inflow into account. Also take into account the fact this portion of compulsory contributions won’t be as liquid as if it were landing in SA (where it’d be completely, immediately liquid).

 

[royalmix]

OK, here’s more complete information about how top ups to RA work….

1. The ERS (limit on CPF Retirement Account top ups) is based on principal only. Any time the ERS is raised you can add funds to any Retirement Account. IRRELEVANT WITH IRAS TAX RELIEF FOR ABOVE 55 TOPUPS TO RA

2. The FRS (the IRAS limit on tax relief for top ups to a Retirement Account) is based on principal plus interest. Once your RA reaches the FRS the interest (>4%) will outrun the FRS increase(s) at least starting from the second FRS increase. FALSE/FAKE NEWS! HENRY'S POST IS EVIDENCE OF YOUR CONTINUED FAKE NEWS AND DENIAL OF YOUR MISTAKES!

3. You can check IRAS’s Web site here for details. See the “Mr. Ong’s mother” example for a little more insight.

4. When your RA is below the FRS and you have compulsory contributions (payroll) or a VC3A you should see inflow into your RA. FALSE/FAKE NEWS! If you’re trying to be clever with RA-related tax relief you should take this inflow into account. Also take into account the fact this portion of compulsory contributions won’t be as liquid as if it were landing in SA (where it’d be completely, immediately liquid). FALSE/FAKE NEWS!

You should stop posting FALSEHOODS!

 

[BBCWatcher]

You should stop posting FALSEHOODS!

What specifically do you disagree with? Based on what authoritative reference?

 

[Okenba]

OK, here’s more complete information about how top ups to RA work….

1. The ERS (limit on CPF Retirement Account top ups) is based on principal only. Any time the ERS is raised you can add funds to any Retirement Account.

2. The FRS (the IRAS limit on tax relief for top ups to a Retirement Account) is based on principal plus interest. Once your RA reaches the FRS the interest (>4%) will outrun the FRS increase(s) at least starting from the second FRS increase.

3. You can check IRAS’s Web site here for details. See the “Mr. Ong’s mother” example for a little more insight.

4. When your RA is below the FRS and you have compulsory contributions (payroll) or a VC3A you should see inflow into your RA. If you’re trying to be clever with RA-related tax relief you should take this inflow into account. Also take into account the fact this portion of compulsory contributions won’t be as liquid as if it were landing in SA (where it’d be completely, immediately liquid).

Henry has already posted the relevant section you make refrence to in (3).
I've bolded and underlined the important bit on RA savings.

Age of recipients	Limit on cash top-up amount for computing tax relief
For recipients aged 55 years and above	(a) Top-up to Retirement Account (RA) under RSTU scheme Current Full Retirement Sum (FRS) – Retirement Account (RA) savings** ** RA savings refers to the cash set aside in the RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn

FRS top-up for Tax relief purposes = Current FRS (not cohort FRS) - RA savings.
Where RA savings excludes interests earned.
Mrs Ong's mother doesn't even address this, as her RA is already above FRS even before computing for interest.

 

[BBCWatcher]

OK, thanks Okenba. I stand corrected.

 

[s0crates]

But there are people like s0crates who believe and like the fake news

I understand wrongly also la I had the same understanding as BBCW.

Thanks for pointing out. Learned something today hehe