Topping up RA after hitting ERS?

[martin]

I am confused. According to cpf, i can top up to the prevailing ERS. However, every year, with interests earned, my RA is already higher than the prevailing ERS, yet under the my messages, it says i can still top up by $7500? Is this $7500 top up an annual thing regardless how high your RA currently is?

 

[BBCWatcher]

The ERS limit on a Retirement Account is based on principal only. Thus every time the ERS increases you have more room in your RA for top ups.

If you're trying to maximize interest and monthly retirement income then it's best to top up your RA on the last day (or second to last day) of the calendar month when the ERS increases. The last ERS increase occurred on January 1, 2021, so a top up (via PayNow QR) on January 30 or 31, 2021, would have maximized interest. It's now May 6, 2021, so if you plan to make a $7,500 cash top up it's best to do that on May 30 or 31 so that you get whatever bank interest you can earn on $7,500 until then and start earning CPF interest on that amount from June 1. Alternatively your spouse (if you have one) or other qualified family member may be able to transfer OA dollars into your RA, although a transfer takes longer to process. Now is a good time to request such a transfer.

Unless the CPF Board announces a change, the next ERS increase is already scheduled for January 1, 2022.

 

[martin]

The ERS limit on a Retirement Account is based on principal only. Thus every time the ERS increases you have more room in your RA for top ups.

If you're trying to maximize interest and monthly retirement income then it's best to top up your RA on the last day (or second to last day) of the calendar month when the ERS increases. The last ERS increase occurred on January 1, 2021, so a top up (via PayNow QR) on January 30 or 31, 2021, would have maximized interest. It's now May 6, 2021, so if you plan to make a $7,500 cash top up it's best to do that on May 30 or 31 so that you get whatever bank interest you can earn on $7,500 until then and start earning CPF interest on that amount from June 1. Alternatively your spouse (if you have one) or other qualified family member may be able to transfer OA dollars into your RA, although a transfer takes longer to process. Now is a good time to request such a transfer.

Unless the CPF Board announces a change, the next ERS increase is already scheduled for January 1, 2022.

Thanks. Got it.

 

[chrisvdb]

Could someone explain how to calculate max MA cash top-up if I also do the yearly 7k SA cash top-up?

Is it:

37,740 - (total monthly mandatory CPF contribution * 12 + 7k)

or

37,740 - (total monthly mandatory CPF contribution * 12)

 

[chrisvdb]

Could someone explain how to calculate max MA cash top-up if I also do the yearly 7k SA cash top-up?

Is it:

37,740 - (total monthly mandatory CPF contribution * 12 + 7k)

or

37,740 - (total monthly mandatory CPF contribution * 12)

Forgot to add: my MA balance is currently significantly below the BHS.

 

[BBCWatcher]

Could someone explain how to calculate max MA cash top-up if I also do the yearly 7k SA cash top-up?
Is it:
37,740 - (total monthly mandatory CPF contribution * 12 + 7k)

No. You can top up your Special Account to the current Full Retirement Sum in one go if you wish, and as long as you haven’t celebrated your 55th birthday yet. The CPF Annual Limit does not apply to SA/RA top ups.

or
37,740 - (total monthly mandatory CPF contribution * 12)

The usual formula for employed individuals is $37,740 minus the full year’s compulsory contributions (employer plus employee) minus “all three account” Voluntary Contributions. If for example you get a traditional 13th month of salary as a bonus then that counts, too. If you get a pay increase during the year and aren’t already earning at least $6,000/month, that counts. If you lose your job or leave it, and pay stops, that counts.

 

[chrisvdb]

The usual formula for employed individuals is $37,740 minus the full year’s compulsory contributions (employer plus employee) minus “all three account” Voluntary Contributions. If for example you get a traditional 13th month of salary as a bonus then that counts, too. If you get a pay increase during the year and aren’t already earning at least $6,000/month, that counts. If you lose your job or leave it, and pay stops, that counts.

Great, thank you for the prompt response.

If I understand your response correctly, the SA cash top-up (7k in my case) does NOT count for calculating the max MA cash top-up.

So, if I do not do any further voluntary cash top-ups then: max MA top-up = 37,740 - mandatory CPF contribution = ~11k

 

[BBCWatcher]

If I understand your response correctly, the SA cash top-up (7k in my case) does NOT count for calculating the max MA cash top-up.

Correct.

So, if I do not do any further voluntary cash top-ups then: max MA top-up = 37,740 - mandatory CPF contribution = ~11k

I presume your math is correct. Note that if you have absolutely zero variable pay — no bonuses, no commissions, no 13th month, no special award, no profit sharing, just straight salary for 12 months no matter how high — then you’ll have at least $11,100 per year of room below the CPF Annual Limit (5/17ths of $37,740). That could be how you’re getting that figure.

 

[chrisvdb]

Correct.

I presume your math is correct. Note that if you have absolutely zero variable pay — no bonuses, no commissions, no 13th month, no special award, no profit sharing, just straight salary for 12 months no matter how high — then you’ll have at least $11,100 per year of room below the CPF Annual Limit (5/17ths of $37,740). That could be how you’re getting that figure.

Thank you! Very helpful!

 

[MindMatrix]

Don't wait till the last day to make the top-up. There was one time when I encountered my bank's online system having a temporary glitch and I couldn't do the top-up but luckily that problem didn't happen on the last day, I was trying to do the top-up a few days before the end of the month.

 

[Okenba]

Don't wait till the last day to make the top-up. There was one time when I encountered my bank's online system having a temporary glitch and I couldn't do the top-up but luckily that problem didn't happen on the last day, I was trying to do the top-up a few days before the end of the month.

Agree. It's really penny pinching to want a few more days of interest and risk losing out on a whole month of interest as a result. Just take it as part of the cost of transaction.

 

[BBCWatcher]

PayNow QR is ordinarily instant crediting, but "out of an abundance of caution" the morning of the second to last calendar day of the month is enough "buffer time."

Other CPF top up channels, such as AXS, are slower. Use PayNow QR.