CPF Amendment Bill 2021 and AK talks to himself.

Thanks to a nudge by Siew Mun, I went to read the CPF Amendment Bill 2021.

Some of my many blogs on the CPF have become outdated because of this Bill.

The changes which interest me most are the following and they will take effect from 1 January 2022:

1. Enjoy tax relief when we top up our loved ones' CPF MA.

I have always been curious why the recipient gets income tax relief and not the giver?

Well, this is now fixed.

2. Enjoy up to $16,000 income tax relief when topping up CPF MAs.

We can get up to $8,000 income tax relief for topping up our loved ones' CPF MAs.

We can also get up to $8,000 income tax relief for topping up our own CPF MA.

Take note that this income tax relief cap is shared by the RA, SA and MA.

So, previously, we would not say "Top Up" to MA but "Voluntary Contribution" to MA.

Now, when we inject money into the MA, it is a "Top Up" and it will share the annual income tax relief cap for the RA and SA.

This annual cap was $7,000.

3. Beefing up the MA is no longer part of the CPF Annual Contribution Limit.

This follows from the previous point that injection of money into the CPF MA will be considered a "Top Up" and not a "Voluntary Contribution."

What do all these changes mean for those of us who are actively using the CPF to have a strong foundation in retirement funding?

Would my strategy have changed because of these changes?

In the first 4 years of my life as a working adult, I transferred all my OA savings to my SA to give it a bigger base and more time for compound interest to work its magic.

I would still do that today if I just started my life as a working adult.

If I had extra funds, I would have pumped more money into my SA which would enjoy income tax relief at the same time.

Income tax relief will apply to the first $8,000 of Top Up from next year instead of $7,000.

Now, in my early retirement, I would continue to do yearly Voluntary Contribution to my CPF account up to the prevailing Annual Contribution Limit as I think of the CPF as a AAA rated sovereign bond with attractive coupons.

See:

$1.5 million in CPF savings by doing nothing henceforth.

The difference with this CPF Amendment Bill is that I will be able to inject a bit more money into my CPF account from next year because the MA is now under the "Top Up" scheme and not "Voluntary Contribution."

Since my CPF SA has already hit the prevailing FRS, I cannot do Top Up to my CPF SA anymore.

However, since the Basic Healthcare Sum increases yearly, there will be room for me to Top Up my CPF MA yearly.

I will provide links to this blog in some of my older blogs such as the following:

1. Ways to beef up our CPF savings.

2. Know how to grow our CPF savings?

Reference:
CPF Amendment Bill 2021 Highlights.

Read Siew Mun's comment in this blog's comments section:
Retiring by 40 is a fantasy.

Retiring by 40 is a fantasy for most and AK talks to himself.

Imagine a guy in Singapore who is in his 20s.

Imagine he is in love with a female and they decide to get married right after graduation.

Imagine they decide to buy a flat or a condo right away.

Imagine them having 2 or 3 children in the next three years.

Imagine the wife becoming a stay at home mom after having their first child.

Imagine them buying a family car.

Can they retire early?

Well, if they are born with silver spoons in their mouths, yes.

Otherwise, early retirement is highly unlikely unless they got very lucky.

The title of this blog might look familiar to some readers because part of it is taken from a much longer title from a recent article in Today.

Links to financial planning sites littered that article but I guess that is normal since Today isn't a hobbyist blogger like AK.

Anyway, if we want something and if we don't plan it right, we won't get that something.

So, if an early retirement is what we want, then, we must know what will help and what won't.

How to achieve early retirement?

In a nutshell:

Build wealth and avoid wealth destruction.

In more than a decade of blogging, this is something I have blogged about extensively.

I won't rehash since I am lazy.

Instead, I will point interested readers to some blogs here in ASSI which might provide food for thought.

1. A happy marriage is worth waiting for!

2. Do you want to be richer?

3. How to upsize CPF savings from $100K to $225K?

4. Good habits now for a comfortable retirement!

5. If we are not rich, don't act rich!

6. 3 good reasons to buy a car.

7. How to have children and a comfortable retirement?

Finally, we need insurance but know what is necessary and don't overpay.

See:

What is the purpose of insurance and are we overpaying?

To be fair, retiring by 40 was a fantasy for AK too.

AK only retired a few months before he turned 45.

See:

To retire by age 45, start with a plan.

There are so many blogs in ASSI and I might have missed some useful ones. 

However, the above blogs should be good enough to make many readers lose sleep for many nights.

Jokes aside, for an average person in Singapore who wants an early retirement, it isn't impossible.

It does need good planning and disciplined execution.

Now, why is an early retirement a fantasy for most in Singapore?

If AK can do it, so can you!

Believe it!

Gambatte!

Related posts:
1. Planning for retirement early made early retirement possible.

2. Why did AK want an early retirement?

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