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Thinking of topping up CPF-SA with $130K.

Sunday, December 11, 2016

Hi Marcus,

Firstly, you are still young! You still have 20 years before you hit 55. Time is still on your side and your own calculation proves it. ;)

What you are thinking of doing (i.e. $130K lump sum contribution to you CPF-SA) is called a Minimum Sum Top Up (MSTU). This is meant to help us meet our retirement adequacy. My understanding is that it (together with interest earned) cannot be withdrawn for any other purpose. At age 55, the money will go to our CPF-RA and we will get a monthly payment for life from age 65.

I would suggest doing a gradual top up to the SA over a number of years. This is because the first $7K of top up each year will allow you to enjoy income tax relief. Unless you do not pay income tax or pay very little income tax, this makes good sense. 

Enjoy many years of income tax relief in this way? Sounds good to me.

So, now, you have ($130K - $7K) $123K left. You might want to put the money in some fixed deposits with promotional interest rates for 12 months. There are many offers available. Go take a look. Next year, take $7K out for MSTU and lock the rest up again in fixed deposits. 

Why fixed deposits? 

You have already decided that this is money you want to use to help fund your retirement. So, I feel that it is best not to take too much risk with it.

Actually, if you believe in having an annuity that will pay you for life from age 65, you could also opt for ERS which is 50% more than FRS. You decide when you are 55. 

Then, let's say the FRS by then is $261K as per your estimate, ERS should be $391K. This will grow to a much larger figure, compounding for 10 years, at age 65. Your monthly annuity payout will be a larger number then.

If your CPF-MA has yet to hit the ceiling, you could consider making a voluntary contribution to it. You could max it out and you, the recipient, will receive income tax relief too. 

Of course, savings in the CPF-MA will also enjoy 4% per annum in interest. In the following year, interest earned would flow into the CPF-SA if your CPF-SA has yet to hit the prevailing FRS. Otherwise, it goes into the CPF-OA.

Your plan is definitely viable and, so, remember, it doesn't matter what others (including AK) might say. Not all of us are comfortable with taking on more risk and I would go along with those who are risk averse to a point. 

To a point? 

As long as your plan is able to meet your financial needs now and in the future, it is should be good enough.

Best wishes,

To read about the BRS, FRS and ERS, go to:
Changes to the CPF.

Related posts:
1. Did CPF Top Ups and denied lump sum payment.

2. Mom stunned by what happened to her CPF-RA money.
3. Worried you won't live to enjoy all your CPF savings?
Our national annuity scheme:


AK71 said...

From my FB wall:

Raymond Ng:
"Why not consider buying an annuity from insurance company? He can start compounding his wealth immediately. Take time to find out which insurance give you the return. Your benchmark is CPF-SA 4%."

"Definitely an idea but CPF Life is still the best annuity there is. It is not just the base 4% compound interest but also the guaranteed monthly payment for life.

"I should clarify by saying that CPF Life's monthly payout is made up of a 100% guaranteed sum while private annuities' monthly payouts could be made up of two sums, a guaranteed sum and a non-guaranteed sum.

"It would make sense to max out CPF Life first. Get the ERS if we really believe in annuities. Then, if we want more, supplement with private annuities."

AK71 said...

From my FB wall:

Samuel Goh:
"If he does VC and transfer to SA instead of MS contribution, then he'll be able to withdraw excess at 55 instead, and at the same time he can top up his medisave this way as well."

"There is an annual contribution cap. Cannot put in $130K all at once. And no income tax relief which is a waste."

Samuel Goh:
"oh ya thats true, but can put in ~37k per year. actually if he is self employed, the 37k is tax relief as well"

Unknown said...

Hi AK,

Thank you for your speedy reply. If my funds/investments can grow as fast as the speed of your reply, I will already be able to retire. Haha.

Based on your reply, you mentioned that for Minimum Sum Top Up (MSTP) as in my case, I will not be able to withdraw at age 55? What if I have already hit the FRS or even ERS? If that is the case, your suggestion of placing $7k into my CPF SA per year will be better as I can save on taxes as well. However, the compounding effect wont be as good.

I will like to clarify this point as I have always thought that at age 55, I will be able to withdraw any access of the prevailing Minimum Sum.

E.g If OA has $200k, SA has $300k and prevailing minimum sum is $250k.

I will be able to withdraw $300k (SA) - $250k (Prevailing Minimum Sum) = $50k + $200k (OA) = $250k + any access of MA.

Thank you again =) So much happier reading your posts while travelling in public transport.

AK71 said...

Hi Marcus,

I am happy that you are happy. ;)

I don't always reply so quickly. So, you have to expect some tardy replies sometime.

I think, for most people, it is difficult to have money in our CPF-SA to be mostly from MSTU. Let us say that you do top up $130K to your SA now. In 20 years from now, this $130K, compounding at 4% per annum will become $285K. This is just about where your estimate for the FRS might be by then.

If MSTU and interest earned must go into the CPF-RA to help fund our retirement, then, you will still get to withdraw all the other money in your SA in excess of this.

So, I wouldn't worry about it. :)

Not many people will be in such a situation.

Unknown said...


They may withdraw the savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above the Basic Retirement Sum in the RA.

Unknown said...


They may withdraw the savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above the Basic Retirement Sum in the RA.

Investminds said...

Hi AK, can i do volunteer top up to OA and SA if i hit the 170k ?

AK71 said...

Hi Investminds,

If you are talking about doing voluntary contributions to OA, SA and MA when your SA has already hit the prevailing FRS, you can if your yearly mandatory contributions do not hit the annual contribution cap.

I know because this is something I do. See:
AK is buying a 12 year tenor AAA bond.

Unknown said...

Thanks for providing the link Don.

However, I am confused with the statement. They may withdraw the savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above the Basic Retirement Sum in the RA.

To use an example: If I were to top up $130k cash into my SA today to become $161k. After 20 years and monthly mandatory top-up from my salary of $250/mth into SA, this $161k will have grown to $450k. As this amount will be above the FRS already but consists of interest earned and top up made under the Retirement Sum topping up scheme, which portion will I be able to withdraw at 55?

Anonymous said...

i agree with AK
1. 300k - 120k for hdb loan (2.6%). left 180k

2. 7k/yr to both his acct and wife's acct would be better than 1 lump sum. Assume wife working hor. so 14k this dec 2016, 14k jan 2017. left 152k

maybe also can consider top up ur dotter's CPF? I think its posted here b4, can be done, but idk how. when she's older, if local Uni, then can borrow against her own OA for studies. Assume 20k, left 132k.

3. so OCBC 360, 60k for wife/self. left 12k.

If KS abit, do up to 50k, since FDIC protects 50k/acct/bank.
If you do FD approach, maybe can split into 2 sum. S1 = S2 + 14k.
so 132k, S1 = 73k, S2 = 59k. S1 in Bank1, S2 in Bank2. so Jan 2018, 73k FD in B1 matured, minus 14k into SA, left 59K, put into 2yr FD in Bank2. Jan 2019 59k FD in Bank2 matured, minus 14k into SA, put into 2yr FD into Bank1.

The banks prefer new customers. existing customers get poorer rates, imho. so every yr u got 1 FD maturing. Keep running to and fro... maybe get some cans of abalone if got promo offer :D

pls ensure medical coverage for whatever condition it was paid out for.


AK71 said...

Hi FC,

I like the way your mind works! ;)

Of course, what Marcus chooses to do ultimately would depend on his circumstances and motivations. :)

AK71 said...

On my FB wall:

Fast Twitch:
"Since we are on the topic of CPF, I would like to share something that I found out from CPF Board. I used to mention in AK FB that cash top up (plus interest earned on the top up monies) via RSTU scheme cannot be withdrawn via property pledge. CPF board clarified that any monies in the OA and SA above the prevailing FRS can be withdrawned after 55. Means RSTU monies can be drawn out after setting aside the FRS.

"Fast Twitch For VC, you can withdraw the monies in OA and SA after setting aside the FRS or BRS. For VC, if your MA hits MCC, the MA contribution will go to SA. If SA hits FRS at the same time, it will go to OA."

Investminds said...

Thanks Ak for the link. May i ask the maximum contribution of $31,450 is total contributions from OA, SA and MA?

Thanks to your inspiring blog, i've transferred wife's OA funds to SA. Hope to enjoy a high payout during retirement.

AK71 said...

Hi Investminds,

That blog post is 2 years old.

"From 2016, the CPF Annual Limit will be increased correspondingly from $31,450 to $37,740 (equivalent to 17 months x CPF salary ceiling of $6,000 x 37%)."
Updated blog post on changes to CPF: here.

CPF Annual Limit is the total contribution (mandatory + voluntary, if any) to all three accounts (OA, SA and MA).


Rn said...

I agree with contributing to our CPF SA because of the generous 4% interests. I do that myself. The only risk to the SA top up if we have a long term horizon of 20 to 25 years before reaching 55yo is whether the government will maintain the 4% for this long. Who knows how the Singapore economy will be like in 25 years.

All the above calculations that the 4% interests for granted. But that may not be the case long term.

On a short term basis of 10 years before reaching 55yo, we could perhaps be more certain that the 4% interest rate will be maintained.

overseas sinkie

Investminds said...

Thanks AK for the sharing. Greatly appreciate.

Unknown said...

After seeing everyone's advice, this is what I plan to do with the $300k. Please correct or give me pointers where growth can be maximised.

(Liquid funds)
$100k into my wife and my OCBC 360 account for 2.25% pa interest.
The $2250 interest will be used (part of the $7k) to be placed in the CPF SA -

(Semi-Liquid Funds)
$100k will be split into 2 $50k portions to be placed in FDs. $50k in Bank of India 1.5% pa and another $50k in RHB 1.4% pa. Total interest earned $750 + $700 = $1450.
The $1450 interest will also be used (part of the $7k) to be placed in CPF SA - Semi Liquid funds. Might put $100k on each staggered FD 1 year plans until I learn more about how to invest. If so, the interest earned will be $2900 which will go into the CPF SA as well.

Thus $2250 + $2900 = $5150 ... need to top up $1850/yr in cash to put into the CPF SA for $7k tax relief.

Also, will transfer any excess from OA to SA on a monthly basis to enjoy the higher interest (2.5% -> 4%)

If I continue working with my current wage, I might also place $500 a month into a trading account to buy STI ETF. To put into SRS (where can enjoy tax relief) or to place into trading account have to be decided again. SRS means cash will be stuck till 62 but can get tax relief also.

Pardon the long post. Just like to consolidate my thoughts out aloud and hopefully get some pointers from seasoned pros out there.


AK71 said...

Hi Marcus,

Staying cautious while you learn.

I like risk free returns.

Two thumbs up from me. ;)

Unknown said...

Has anyone heard about the Manulife global asset allocation growth fund? Supposed to be having 7.2% dividend pa. However, I read from AK's post that a high dividend might not mean a good deal as the price of the fund might fall. Upon further research online, I also come across other articles which mention that the fund might just sell some of its units to produce dividends to pay the shareholders.

Also of note will be the management fees. There is a 1.35% management fee. Meaning to say, if I were to invest $100k, straight away $1350 paid to the fund managers. There is also an initial 3% charge.. which works out to be $3k if $100k is invested.

Any of you have any suggestions on the things to look out for before getting investment products from insurance companies?


AK71 said...

Hi Marcus,

After all the fees, you have to ask how are they able to give you a 7.2% yield. It might or might not be a bond fund but you might want to read this:
Buy a bond fund that pays 7% a year.

If they are investing for growth as the product name suggests, there is no way they can ever guarantee a fixed yield and a rather high one at that. If you are familiar with my asset allocation pyramid, you will know what I mean.
Motivations and methods in investing.

I won't touch stuff like this even with a five feet pole. -.-"

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