AK showing off his CPF-SA numbers again?

(4 things you need to know about your new CPF statement.)

I hope my blog has not caused too much trouble for the authorities.

Just like my passive income numbers, my CPF-SA numbers seem to have garnered a following as readers reminded me on Facebook that it is time. 

Even Facebook reminded me that it is time.

I guess sharing my CPF-SA numbers is inspiring to many readers and it helps them to stay the course.

Er... OK, I am not quite sure what to make of the last comment (and some say I am cryptic).

Anyway, although I thought I might skip it this year, a remark from a reader on FB gave me a nudge.

AK was old, fat and ugly. Now, AK is old, slimmer and ugly.

If by revealing my CPF numbers again, AK can be old, slimmer and handsome, OK, I do it.

What? 

You surprised AK is like that? 

Alamak, you didn't know?

I am human too!

Hey, who wants to be old, fat and ugly? 

Cannot do anything about old but if can do away with the fat and ugly, that's two out of three! 

I win!





OK, the numbers:

How much has my CPF-SA money grown from the year before? 

See related post at the end of this blog.

Worried about the projected 3% yearly increase in Minimum Sum (Full Retirement Sum)? 

Not me.

How did this "miracle" happen? 

If you have to ask, you must be a new reader. 

See related post at the end of this blog.

Ask why does having more money in our CPF-SA and as early as possible make sense? 





How to do this?

See the related post at the end of this blog. 

Then, go to the right side bar of my blog to read more of my blogs related to the CPF.

If you are a regular reader, you should be smiling now! 

Huat ah!





Truly Happy New Year!

Related post: CPF-SA outperformed.

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

http://singaporeanstocksinvestor.blogspot.sg/2014/08/how-to-upsize-100k-to-225k-in-20-years_4.html?showComment=1481415040678#c7130698713317820054



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 My understanding is that it (together with interest earned) cannot be withdrawn for any other purpose.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,
AK
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:

A good wife worries about retirement adequacy.

A recent conversation with a reader:

Reader says...

I have been a silent reader mostly for several years now. 

And i am ashamed to say that i now feel like i have not learned well from your blog, and am caught in this situation where i just do not know if i should bite the loss of almost 15k, or just continue with the plan i bought from my FA. 

Hence, I am writing to hear your advice.




I am 34 years old and my other half is 36... purchased a Retire Happy plan last year. 

My husband purchased it mainly because of me.

I was doing a review of this plan and chanced upon your words of wisdom on this Retire Happy. 

And then i realised that i might as well have topped up my own CPF account.




What should i do now?

Even though its my hubby's money, it is foolish to continue with a plan that is not value for money.

If i terminate the plan now, I will lose about 15k, which is damn a lot of money. 

If i don't, there is no guarantee that my hubby will save. 






After i have explored the CPF option, we are shocked to know how good it is but my husband still says he won't be maxing out his CPF as he doesn't have enough cash.

The most sensible and logical thing would be for my hubby to max out his CPF with the monies he is using for my plan and use it to provide for our retirement, but honestly, money is truly emotive and i don't know if he can.

What should i do, AK? I feel like a foolish wife now.

Would be eternally grateful for a response.

AK says...

I am only talking to myself in my blog. 

If you overheard me talking to myself, you have to decide if I make sense. ;)

I think you know what you want to do.

Does it make sense to continue sending money to where it is not treated best?




I understand that things are not as straightforward in your case because you are trying to force your husband to save money. 

Frankly, however, what is to stop him from not making regular payment towards Retire Happy?

I feel that if he is committed enough to pay regularly now, you should trust him.




Instead of paying Retire Happy, ask him to pay you and you manage the money. 

You could take the money, do MS Top Up to his CPF-SA and not keep it for yourself to show that you are doing this for him and the family. :)

To be quite honest, we cannot be sure of anything in life. It is all about trust. 

There is no guarantee that things will always go our way. 





We just have to do what we feel will give us peace of mind.

It depends on what we believe in.

I believe in having a risk free and volatility free portion in my investment portfolio. 

I believe in having an annuity that pays me not for only 20 years but for life. 

I am lucky to be a CPF member and I am maxing out the benefits of my membership.






Related posts:
1. Retire Happy.
2. How many $29K do we have?
3. How to upsize $100K to $225K?

Just be a better saver and forget investing for some.

• 
  
  

  Reader: I am currently 28 years old earning annual income of around 240K. Not sure whether doing SA contribution of 7K per annum and SRS 15.3K per annum is a wise move for my current age? Main purpose is to get income tax relief as much as possible since I am in high bracket tax payer and this contribution might be able to save quite a lot on income tax
• 

  
  

  Assi AK: As long as you are paying a lot in income tax, it makes sense to do MS Top Up to SA and to contribute to SRS. You don't really need to invest. Just be a good saver.
  

• 
  
  

  Reader: But it is a long long way to go before i can see the money again for CPF at 55 yo and SRS at 62 yo. what if i die before that? Lol
• 

  
  

  Assi AK: The money goes to your loved ones. ;)
• 
  
  

  
  
  

  Reader: i dont get to enjoy the hard earned money then
• 

  
  

  Assi AK: You cannot have your cake and eat it too. You have to question what is more important to you.
• Reader: I plan to have financial freedom like u by investing for income
• 

  
  

  Assi AK:  Everyone is different. Dun be like me. ;p
• 
  
• 
  
  
• Reader:  I can save around 150K a year after deducting all the expenses including income tax. Slowly buying solid dividend stocks to hopefully get sizeable passive income like u
  
• 

  
  

  Assi AK: Sounds like a good plan.
  

• 
  
  

  Reader: I seriously think your strategy is good that's why i follow
• 

  
  

  Assi AK: If this is more important to you than getting income tax relief, well, you have your answer. :)
• Reader: I am super conservative and not risk taker as well
  
• 

  
  

  Assi AK: If you are investing, you are taking risk.
• Reader: Haha true
  
• 

  
  

  Assi AK: The only risk free way to building wealth is the CPF. ;)
• Reader: CPF top up is risk free but not sure worth the wait and lock up of cash
  
• 

  
  

  Assi AK: Well, you know my answer to that. You have to decide for yourself if you believe me. ;p

Related posts:
1. Want to create another stream of income?
2. Should a young person contribute to CPF or SRS account?
3. Should I top up CPF-SA, CPF-MA or SRS account?

CPF OA to SA transfer or MS Top Up to SA?

Reader:
"I would like to make transfer from OA to SA so I did a check with CPF. Assuming that I reach the full retirement sum at age 55, they mentioned that I cannot withdraw cash top up to SA and its accrued interest but I am allowed to withdraw the OA to SA funds transfer and its accrued interest. I am confused however. My initial understanding is if my combined sum in OA and SA exceeds the full retirement sum, I am allowed to withdraw the access funds. If that is the case, whether it is cash top to SA or OA transfer to SA, should not make any difference. If you could clarify on this issue, I will be greatly grateful. Thank you."

AK:
"MS Top Up is a cash top up meant to help us with funding our retirement. It is an additional input and not part of the of the annual contribution limit (mandatory + volutary).The OA to SA transfer is money that is already in your CPF account.

"The OA money is from mandatory contributions and voluntary contributions (if any). These are made within the annual contribution limit and not in addition to the limit.The CPF is meant to help every member with retirement adequacy.

"Whether we choose to do OA to SA transfer or MS Top Up will depend on our circumstances. Whatever those circumstances might be, the MS (or the FRS) will go to our CPF-RA at age 55 and cannot be withdrawn (unless we choose the BRS by pledging a property) until age 65 at the earliest in the form of an annuity (i.e. CPF Life).

"Unless our CPF savings are made up entirely of cash through MS Top Ups to the SA, it is unlikely that we won't have a more meaningful lump sum withdrawal at age 55 if we should exceed the prevailing MS (FRS) significantly by then."

Related post:
1. Almost 55 and worried about CPF.
2. Did CPF Top Ups but denied lump sum payment.

Understand the function of each tool in personal finance.

People get confused sometimes what the CPF is supposed to do. We should be clear what each tool in personal finance is supposed to do for us. Don't be confused.

C

... May I know how much should I top up my SA cpf by cash if I want to avoid paying tax?

Assi AK

You could do MS Top Up to your SA. Tax relief will be given for the first $7K of top up per year.

C

Thanks. Tax relief meaning the entire tax payment is waived or only partially waived?

Assi AK

Well, if you taxable income is $20K and you do MS Top Up of $7K, your taxable income becomes $13K.

C

Alright thanks. Most ordinary folks will not be taxed so much so I think there is no point in topping up. I would also like to learn investment. Where can I start? I am risk averse though.

Assi AK

Risk free? CPF. ;)

Tax savings from CPF MS Top Up is just a sweetener. It should not be the primary motivation.

Learn how to invest? You can start by reading some books. Go to my blog's right side bar and look for the box with the heading "Food for thought".

C

Thanks AK. Am I right to say that if if I hold the stocks long term e,g. More than 10 years, I will not be making losses?

Assi AK

I don't think anyone can guarantee that...

Related post:
Build a cornerstone in retirement funding.

He met the CPF minimum sum but has one regret.

Regular readers know that AK transferred all his CPF-OA money into his CPF-SA in the first few years of his working life. That provided a bigger base and a longer time for compounding to work its magic. Of course, I have shared the numbers here in my blog too.

Now, this was part of a chat this evening with a reader who is buying a HDB flat:

Reader:
do you mean that letting HDB wipe out the OA money first? My flat will be ready in 2019. So in this 3 years, do you have any views on what should be done using the CPF OA money?eg. Transfer abit to SA account? I will take your comments as opinions. Do not WORRY!"

AK:
That was what I told a friend. He transferred a large portion of his OA money into his SA about 10 years ago before he bought his flat and now his SA has already hit the minimum sum. But this will work for someone with an emergency fund on hand that would also cover the mortgage payment initially as his OA builds up again after the flat purchase.


The chat gave my memory a jog. I cannot remember exactly how many years ago but it was probably more than 10 years ago when a friend discussed with me what to do with his CPF-OA money. He was still single then and not buying a flat yet.

During a meet up a few months ago, he told me that he already hit the CPF minimum sum and to a large extent, it was thanks to the hefty interest payments received for his CPF-SA savings. He basically transferred all his CPF-OA money into his CPF-SA after the discussion we had and did nothing to his CPF-SA since. 

So, apart from the mandatory contributions from employment, the money in my friend's CPF-SA really grew through compound interest!

Did my friend regret anything?

Well, it was something like this:

"I should have transferred more money from OA to SA in the following years. Then, I would have received even more interest and hit the MS even earlier."

Alamak. If AK had done that, he would have even more money in his CPF now too. Aiyah.

Of course, all our circumstances and motivations are different. We have to question if this route is something that is good for us too.

This would work for someone who is not thinking of buying a property soon or is able to buy a property without using money in his CPF-OA. 

In the latter case, to be safer, he should have emergency cash on hand which also allows for 12 to 24 months of mortgage repayments as his CPF-OA savings is rebuilding.

For a more complete picture, please read the related posts below.

Related posts:
1. CPF-OA to CPF-SA transfer before buying flat?

2. If I had done this, I would have hit MS too.

3. A lot of my CPF-SA money...
...the interest I received in my CPF-SA has been higher than my mandatory contributions to it for many years by now... 

Mom stunned at what happened to her CPF-RA money!

Alamak, another blog post on the CPF?

Quick, those who are tired of the topic, close the window!





Still reading?

OK lor.

My mother is going to be 70 years old next year.

When she turned 55, $65,000 was moved into her then newly created CPF-RA. 

That was the minimum sum for her cohort, apparently.

My mother is still actively employed but is thinking of retiring soon.






Mom:
"Ah boy ah. Can help me go into my CPF account online or not? I want to see how much I have now."

AK:
"You want to see how much money government gave you, is it?"

Mom:
"Aiyoh, cannot be a lot lah. Maybe now my CPF-RA will have $80K or $90K lor."

AK:
"You will be pleasantly surprised."


After 14 years, what has happened to the money in her CPF-RA?





This happened:

Click to enlarge.

$118,709.04

Mom:
"I so stunned like vegetable! Haha."

Stunned already can still laugh?

OK, no need to call ambulance.





If there is a need for it, this will provide her with a monthly income.

What? 

People say don't be stupid to top up your CPF-SA?

OK lor.

Related posts:
1. Get 6% from CPF?
2. Financial strategy for elderly?
3. Retirement funding adequacy.

How many 20 years and $29,000 do we have?

Friend, sighing, "I should have listened to you."

AK, "Huh?"

Friend, "I finally surrendered my PruLink policy."

AK, "Oh, congratulations!"

Friend, "Congratulate what lah? I put in total of $29,000 since 1996. Every year put in money. 20 years and I took back less than that! I lost money!"

AK felt like saying "I told you so" but AK kept quiet. 

Friend, "Leave money in the bank or fixed deposit also better. Should have terminated long ago. My agent told me to continue paying for another few years and maybe it will make money. Stupid, right?"

AK, "Er... Ahem..."

Friend, "I still remember you said to terminate and put the money in my CPF-SA. How much would I have now if I did that?"

AK, "Well, I don't think you want to know..."

Friend, hesitating, "Ya, you are probably right. Haiz. Sad lah."






My dear readers, are you curious?

If my friend had placed the yearly contribution of $1,450 into his CPF-SA for 20 years instead of the Investment Linked Policy (ILP), how much would he have today?

About so much:

Calculator at:
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

$48,000.

A hard truth and the truth hurts.




That's not all. 

My friend would also have had the benefit of income tax relief which is given for the first $7,000 of Minimum Sum (MS) Top Up. 

In my friend's case, the income tax savings would have probably been a few hundred dollars a year. Multiply that by 20 years? Ouch.




The long and short of it, buy insurance for the sake of insurance. 

Don't mix insurance and investment.


Related posts:
1. Should I terminate an expensive ILP?
2. Free ILP or Term Life policies?
3. How to upsize $100K to $225K in 20 years?
Hey, sexy S A! Oppa AK style!