today is the last day for topping up CPF/SRS and Jan 1 is the first day to top up again

[PNGMK]

Remember to top up your CPF accounts today to take full advantage of:

1. tax savings for the medisave account (current limit $60,000).

2. tax savings for the special account and retirement account (current limit $181,000) - RA for those over 55 of course (note you can top up RA to the ERS which I think is $273,000).

3. contributions to your three accounts (no tax savings, this years contribution limit is $37,740) - don't forget to adjust for AWS so you don't over contribute (if you get AWS in this month's salary it will be included in total contribution calculation even if paid in Jan or later - HINT: use last years contribution for Dec AWS to work out what to expect if your AWS is fixed annually - check your contribution - transaction history for Jan 2020 to see what happened last year).

4. On Jan 1 you can top up as above with adjusted limits to earn full interest through the year:

Medisave limits will be $63,000 in 2021 (tax deductible).

SA and Retirement sums will jump up to $186,000 (meaning you can immediately move OA into SA or RA to get a higher interest rate from Jan 1 or do a voluntary top up). I expect the ERS will also jump but can't find a forecast for it.

The total contribution limit will also jump but as present I cannot find the number. However you can do a lump sum contribution on Jan 1 if you expect your employment contributions to be less than the cap to once again get full interest for the year. I plan to lump $10,000 in it as my current monthly employment contributions only total ~ $20,000 p.a. due to the entrenched ageism in the CPF tables.

Today is the last day to contribute to SRS for up to $15,3000 for SPR and SC or $35,700 for non SC/SPR. You won't have time to do it by cheque so may have to go in person to do the deposit (most SRS accounts don't allow EFT). This is a big tax savings for some of us (over $3,000 p.a. for me) so don't forget!

If you're over 55 you can treat the CPF system as a HISA if you've got more than the minimum sum.

[malcontent]

Good tips PNGMK. It’s a shame that many here see CPF as more of a hindrance than a help to their financial situation. Back when I first arrived here in my 20’s, I had that same wrong perception. Although I don’t have CPF, my wife does - and she still has that same wrong perception. For the past few years she has reluctantly allowed me tinker with her CPF. First thing I did was move her entire OA balance to SA! Each year I’ve continued to do that. I’ve also started doing the tax deductible $7,000 RSTU to her SA. We can do one more of those next year before she hits FRS. By the time she hits 55, I’m planning to shield her SA and top up her RA to FRS with cash. That will leave over $200k in her SA that will (hopefully) continue to earn at least 4% and can be withdrawn at anytime. How good is that?

[PNGMK]

It's excellent mal. I didn't do the shielding thing (for various reasons - basically had the wherewithal not to be too concerned about it). Now I've got close to 600k sitting in CPF and I expect this year I will be credited around 20k interest tonight. That's effectively like a $1500 per month pay rise. I hope to hit 1MM by 65 - I should be able to do it (10 years left at ~40k contibution per year [inc interest] from this year to 2030). I have almost 200k in SRS now which will be a massive help in my first decade of retirement as well (are you contributing to SRS Malcontent?). I expect SRS should be around 350k retirement which will return ~35k per year for the first decade.

[malcontent]

That is great PNGMK. I doubt my wife can ever reach those kinds of levels, but I’m hoping to at least get her RA up to ERS by age 65.

I’m less positive on SRS. For one thing, SRS is not as attractive to US persons, many investments are considered PFICs under US tax law (taxed punitively). Also, I’m not 100% sure that I will retire in Singapore, so that could mean a minimum flat 15% nonresident tax rate on half the amount withdrawn no matter how it is spaced.

That said, my company recently switched our CPF substitute program from defined benefit to defined contribution... into SRS, and the amount of the of contribution is near the maximum SRS for foreigners.

[GSM8]

Thanks for starting this very useful and timely thread, PNGMK and malcontent. One doubt I had below:

Remember to top up your CPF accounts today to take full advantage of:

- tax savings for the medisave account (current limit $60,000).
- On Jan 1 you can top up as above with adjusted limits to earn full interest through the year:

Medisave limits will be $63,000 in 2021 (tax deductible).

Question for PNGMK -- am I correct in interpreting that if one's Medisave account is currently maxed at $60K and the Medisave share is also thereby going into SA, then one can now top up an additional tax deductible $3K right away into Medisave account? Also, would it then follow that if one doesn't do the Medisave top up right away and instead waits/procrastinates till later in the year, they may no longer be eligible to do so if the $63K limit is reached in the meanwhile by way of payroll contributions?

[malcontent]

That is correct, provided your top up comes in before the payroll cycle in Jan.

[PNGMK]

Ok Jan 1. Current balance not quite as high as I had thought. ~$595,000 with a total of $16,488 interest paid for 2020 (I had over estimated due to forgetting that interest is calculated monthly at month end). Total contributions for the year ~$53,000 (interest plus EE/ER and VC). Right on the CPF contribution limit.

1. RA topped up by SA/OA transfers of $7,500 (290k appears to be the new ERS limit for RA).
2. Medisave interest was moved by CPF from Medisave into OA. Topped up Medisave by $1k to 61k. Will top up again tomorrow and day after to 63k. At my tax rate this is a measly but helpful ~$500 or so tax savings for 2021.
3. Waiting for my AWS bonus CPF EE/ER payment to hit on Jan 15/16 to determine further top ups (trying to decide if I will top up 10k immediately to OA/SA or wait to see if my job is stable and whether I will pull in bonuses as they effect CPF EE/ER contributions).

I can see why this system is ranked so highly - for two reasons - it's not taxed (in Singapore) and it's a free system (Aussie super is taxed at 15% and the fees are significant usually).

[poods]

Great stuff guys.

Unfortunately, for those of us who are not blessed with those numbers, the math just doesn't work. The lack of flexibility in the system means that CPF really does continue to be a millstone dragging us down.

[malcontent]

As PNGMK mentioned, he has already crossed age 55. He has many years of contributions and interest. This is not something you can appreciate in your 20’s and 30’s when you are struggling just to make ends meet and could really use the cash in hand.

As you get into your 40’s and 50’s, your perspective will change as your priorities shift to building up your retirement assets, and CPF does a great job providing high yield for the low risk side of a balanced portfolio.

[poods]

I'm 52. I don't have many years of contributions. It doesn't work for me, as it doesn't for Singaporeans who aren't on a good income, have had a life accident or whose life doesn't fit the economic model.
My best option is to renounce my PR when I get to the stage I'm not working anymore, and get it all back in a lump sum.

[malcontent]

If you are 52, did you contribute to a pension scheme back in your home country prior to arrival Singapore? If yes, then CPF might be redundant and you should probably shift your OA to SA to maximize yield, or use CPFIS to step further out on the risk spectrum. However, if your home country pension scheme is inadequate for the “low risk side” of your portfolio, then you can leverage CPF to an even greater extent, with top ups and voluntary contributions. The alternatives outside of CPF on the low risk side of your portfolio are going to be well under 2% yield unless you venture into high risk currencies, which I wouldn’t recommend.

[PNGMK]

I'm 52. I don't have many years of contributions. It doesn't work for me, as it doesn't for Singaporeans who aren't on a good income, have had a life accident or whose life doesn't fit the economic model.
My best option is to renounce my PR when I get to the stage I'm not working anymore, and get it all back in a lump sum.

For Singaporeans I would like to see a state form of support for those who can't accumulate enough CPF in their working lives (particularly women). This is an issue for sure.

For PRs I can only say - "why stay here if you aren't making bank? - is it love?" - because there is NO other reason to stay in this expensive city.

For none SC/SPR then I'd argue almost the same except with an understanding that there is a large number of folk here on WP who have no other option and they are the ones I feel sorry for most of all. The SRS system doesn't work for the lower income earners and they are taxed proportionally higher (FDW levies, WP levies etc are all a form of indirect taxation and proportionally high).

As some encouragement I'd add that if I showed you a graph of my CPF totals it really only started to climb in my 50's. I was servicing a mortgage from my OA for most of my 40's and even some of my 30's which really ate into it.

[malcontent]

For Singaporeans I would like to see a state form of support for those who can't accumulate enough CPF in their working lives (particularly women). This is an issue for sure.

Absolutely right - that is probably the #1 CPF deficiency: joint survivorship. If only one spouse has substantial CPF and something happens to them, the other spouse is likely to be up the creek with no paddle. They may get something, but they may also get nothing (e.g. spouse is on CPF life standard payments until around 80 or so, oops... no bequest and no more payments, good luck!)

[ProvenPracticalFlexible]

Thanks PNGMK for the timely reminder. I've been a bit lazy on paying attention on this but started to make those 7k tax deductible additional contributions recently.

But now looking at the additional 7k one, which I can't make to my wife as she works and makes money. But wondering if it makes sense to do those to my mother in law. She's already over the 65 retirement age, and as far as I'm aware has no significant cpf savings as she never worked outside home. So if I'd add the max. 7k to her cpf now, how does that work? Will she be able to get almost instant monthly payments and 4+% interest on that money? Or should I just forget this idea?

[PNGMK]

PPF - I'm sorry I am not that up to date with how to take money out. My best guess is that she will not be on CPF life and will get the legacy payment system which is some sort of regular payout based on what is in the account.