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Improving retirement funding adequacy for my father.

Sunday, March 26, 2017

To have aged parents is our good fortune. However, they could be a drain on our financial resources if they do not have adequate savings to fund their golden years.

Add to this the greater possibility of being stricken by illnesses which require hospitalization or even long term medical care, we could have a very stressful situation on hand.

In recent years, I have been suggesting that we contribute to our parents' CPF accounts. Contributing to their CPF Medisave Accounts (MA) which earns 4% per annum would, in effect, make the government help us grow this contingency fund.

However, my dad's CPF MA has been maxed out. So, this year, for his birthday red packet, although I will be doing a voluntary contribution to his CPF Account, the money will go to his OA and SA instead of his MA.

If my dad's MA is not maxed out, the bulk of the voluntary contribution would go to his MA as he is above 65 years of age. See table below: 


With the money going into his OA and SA only, he would earn 2.5% to 4% per annum from this voluntary contribution. 

No longer having an earned income means he would be able to withdraw this money anytime he wants although withdrawing only the interest income from his CPF Account, leaving the principal untouched would be a better idea.
Good food and good company = Good celebration.
See how we celebrate birthdays: HERE.

Happy Birthday, 我的老爸!

Related post:
2016 changes to the CPF & SRS.

9 comments:

jeremiah said...

Can I ask why not just contribute to the RA since the MA is already maxed out? My mum is 61 and both her RA and MA do not have the minimum sum. I couldn't find the option to top up her MA using CPF services. I thought her OA and SA will go to her RA so I topped up her RA instead of SA. I hope I am doing it right.

AK71 said...

Hi J,

I would max out her MA first because that is more practical. I have a blog on how to do this: Do online contribution to CPF MA.

I did not want to top up my dad's RA because he won't be able to do a lump sum withdrawal if he wants to. If he decides he wants to transfer the money into his RA later, he is free to do so. He has options. :)

AK71 said...

From my FB wall:

Lee Keh Yi:
If aged 55+, the overflow from MA goes to *RA* if FRS/BRS not reached. If reached, overflow will go to OA. There's no overflow to SA - source: CPF FAQ

AK:
My dad's FRS reached liao.

(The reader probably said this with reference to the following paragraph in this blog:
"However, my dad's CPF MA has been maxed out. So, this year, for his birthday red packet, although I will be doing a voluntary contribution to his CPF Account, the money will go to his OA and SA instead of his MA.")

Sillyinvestor said...

Hi AK,

I sure can identify with the "stress" of money worrries when aged memebers or for that matter, any loved ones fall seriously sick.

Money is a source of conflict, then come time of caregiving and then many others, such as "bo Xin" etc

It's crisis or difficult times like this u know whether u have good karma or not LOL

AK71 said...

Hi Mike,

I always think about what could possibly go wrong and prepare accordingly.

That is a big problem I have. I think too much.

jeremiah said...

Hi AK71,

There is only an option to top up our own MA but no other option in the list to top up the MA for our parents in CPF services.

AK71 said...

Hi J,

Really? In that case, do it the old fashioned way.

Fill out a voluntary contribution form in your mom's name. Tick the CPF-MA option. Issue a cheque to CPF Board for the contribution amount. Mail to CPF Board. :)

r said...

Lee Keh Yi:
If aged 55+, the overflow from MA goes to *RA* if FRS/BRS not reached. If reached, overflow will go to OA. There's no overflow to SA - source: CPF FAQ

I thought after 55 all OA+SA = RA?

AK71 said...

Hi r,

Only an amount up to the prevailing FRS will be transferred into the RA.

Of course, for those who pledge their property, only an amount up to the prevailing BRS will be transferred into the RA.

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