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 My understanding is that it (together with interest earned) cannot be withdrawn for any other purpose.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

My girlfriend is more than US$100K in debt!

Human beings are rarely solitary. 

Although in modern societies with very high cost of living like ours, fewer people are thinking of getting married unless they want children (but, in Singapore, people who don't want to have children will still get married just to get a BTO HDB flat).

Fewer who are married are staying married but many still need companionship in life.

Realistically, once we have a partner in life, for better or for worse, naturally, things will change. 





Our life is no longer ours alone. 

It is shared. 

This is only fair. 

We gain something. 

We lose something.

When it comes to money, however, I personally feel that couples, unless they are married, should keep their finances separate. 

To pool financial resources together is a BIG step, whether forward or backward will depend on the circumstances each person brings to the relationship.





Money, I think we all agree, is a very sensitive issue. 

It is probably more sensitive than religion. 

Don't agree? 

Would it be easier to ask your date whether she goes to church or what is her personal net worth? 

See?





If we care about financial security and if we are not rich which I assume most of us are not, no matter how strong our attraction, it is probably a good idea to stay away from someone who has growing financial debt. 

The question is how do we find out?

Some of you might remember my female friend, Posh. 

If you don't, see related post at the end of this blog.

I never did find out how much her net worth was and I didn't know if she was heavily in debt and, if so, whether it was growing in size. 

I only knew that if I wanted to be rich, I would have a better chance if I had a frugal partner. 

Posh and frugal didn't exist in the same space.





Now, say, I gave Posh the benefit of the doubt and thought that she had plenty of money and that, despite her lavish spending, she was only spending a small percentage of her income (hey, love is blind or so they say) but found out much later that she was actually in debt and that it was snowballing! 

Then, what?

By then, it could be too late. 

"I didn't notice the crows nesting in the attic of the house before. Love the house, love the crows." 

Of course, I derived this from the Chinese saying "爱屋及乌" but I always get the feeling that the saying is to console ourselves when we discover something bad comes attached to someone or something we love.





I might be putting my head on the chopping block here (and this won't be the first time) but if we are not rich and if we want to be rich, we are probably better off with a frugal partner in life.

If you are willing to get married to someone who has snowballing debt and to help pay off the debt, you are a better person than me. 

Good on you!






Related post:
A story about a lady in my life.