Reader says...
A quick intro about myself.
I am 34 this year, staying in a bto hdb flat and have existing housing loan of $20k outstanding (serviced by my wife and myself).
Checking with you on my strategy for CPF.
I have around $5k in ordinary account, and $145k in special account.
Already met my min sum for medisave. Am hoping to hit my S.A. min sum when I reach 35yo.
My thinking is that once my min sum (FRS of $166k) for S.A. is met, all employment contribution will flow into my ordinary account(~$2k a mth), and I would be able to hit around $500k when I reach 55 ( $24k x 20yrs - not including contribution from bonuses) and withdraw this amount.
Am I missing out on anything here? Thanks!
AK says...
Once you have hit the FRS, you will still be making mandatory contributions to your SA.
So, monthly CPF contribution goes to OA and SA but nothing to your MA if it has maxed out.
When you hit 55, the prevailing FRS goes to the newly created RA and you can withdraw whatever is left in your OA and SA, if you like.
If we do the right things, we could withdraw a more meaningful sum of money from our CPF account at age 55 instead of a token $5,000.
Do you like that?
I know I do.
Related posts:
1. Changes to the CPF and SRS.
2. My CPF-SA (Jan 2016).
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21 comments:
Hi AK
Will you go for FRS or ERS?
Based on 3% increase per year, the ERS is likely to reach 400K and more in another 15-20 years' time. So based on what you mentioned, whatever is available to be drawn out will be less this 400K.
Thanks always,
Pirate
If there isn't any pressing need, I'll probably leave my excess in CPF after 55. Treat it as AAA bond as you've monologued many times liao.
And since I'll be gainfully unemployed for the foreseeable future, I can simply withdraw any excess above FRS anytime if I really need to.
Enough worries liao on managing cash portfolio performance, no need to add more worries about managing big lump sum withdrawal from CPF. Hahaha!!
Just have to keep an eye out for changes to CPF policies and ratings downgrade (maybe many years in the future who knows?).
Hi Pirate,
I could very well go for ERS unless I have better use for the money when I turn 55. Same idea applies to the balance in my CPF OA after setting aside the ERS using money from my CPF SA. I will have to decide 9 or 10 years from now. :)
Hi Spur,
Peace of mind is priceless. I will enjoy the good times while they last since, indeed, who knows what the future might bring. I will blog about this. ;)
Yes, I will prefer to go for ERS too especially for singles.
Hi AK,
for BRS -> payout is $700~$750
for FRS (2XBRS) but payout is < 2x $700
for ERS (3XBRS) but payout is < 3x $700.
Why Ah Gong maths is not to our benefit?
Regards
JQ
Hi pirate,
Having more certainty in retirement funding is a good thing. ;)
Hi JQ,
The CPF is really to help the less well off which explains the higher interest rate for the first $60K when we turn 55. It is one way to lessen the gap between the poorer and the richer folks. Don't complain, rich man. ;)
Lee Keh Yi:
The max monthly contribution for ordinary wages is $2,220 ($6k x 37%). If MA is maxed out, max that can go to OA at 35yo or younger is $1,860 ($6k x 31%). He probably didn't realise that 6% will still flow to SA even when FRS is reached and thought all will go OA.
Reference your question to AK -------- "Am I missing out on anything here?"
Yes. There are still 21 years to go before you are 55. When it comes to the CPF scheme, goalposts move periodically. And the fine prints change even more frequently.
Hi Laurence,
Things could change in future. If they have to change for good reasons, then, it would be reasonable to accept them. Crossing fingers. ;)
what about the interest that have used to pay for the BTO HDB? Does it need to be refunded?
Hi JJ,
If you are referring to the accrued interest from borrowing from their CPF-OA to pay for their HDB flat, if they are not selling their flat, they won't have to repay.
Thanks AK for the reply. So assuming a couple has fully paid up the HDB at the 5th year and they decide to sell the house at the 10th year. They would have to pay back the accrued interest up to the 5th or 10th year?
Hi JJ,
Yes, if you have used your CPF-OA money to pay for the flat, you would have to repay all the borrowed money and the accrued interest if you choose to sell the flat.
Accrued interest stacks year after year as long as you did not refund the money borrowed from your CPF-OA. It doesn't stop once your flat is fully paid.
"Later on in life, to grow our CPF-OA savings faster, if we have spare cash, we can always think about doing voluntary refunds to our CPF-OA."
From:
AK showing off his CPF-OA.
Hi AK,
Can I choose to repyay the accrued interest earlier rather than later when I sell the flat?
Hi Ernest,
Here you go:
How to stop accrued interest from growing?
Gambatte! :)
yevets pay said...
I think that some people think that the government is not reasonable to move the goal post on CPF from 55 to 67 year old because they want to take out the money to buy a cheaper home in the neighbouring countries where the cost of living is much lower than Singapore. They may wish to join their children in the country they choose to settled down. I have a number of friends in these dilemma.
AK said...
At age 55, we will be allowed to withdraw all money in our OA and SA in excess of the FRS.
I don't know why there are people who keep talking about age 67.
Having said this, even if we are reasonable, I find that there is simply no reasoning with some people.
Dear AK,
Trust that you have been doing fine!
I was the person who wrote in to you previously, some updates:
1) OA has since grown to $100k
2) SA met FRS, at $225k (int able to meet the yearly increments)
3) Housing loan fully paid. Currently looking for resale/bto(chances not high though) to move more centrally because fo schooling needs for kids
4) using same strategy, helping my wife to meet her FRS by end this year
Am still planning to have the option of having the choice to move to part time work at 55.
Many thanks to you again, if not for you I would not have managed to meet the targets 😊
Hi WS,
Very good to hear from you again and thanks for the update.
Happy to see that you have hit the targets!
Congratulations! :D
You are a good husband to help your wife meet FRS in her CPF.
I am rooting for you to move to part time work at 55. :D
Gambatte!
References:
1. Good men top up their wives' CPF accounts.
2. When can I quit my full time job?
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