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Increase in CPF Contribution rates from January 2023

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malcontent
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Re: Increase in CPF Contribution rates from January 2023

Post by malcontent » Fri, 01 Jul 2022 12:02 pm

Looking back, contributing to CPF was one of the main deterrents to applying PR back when I first started out here. When you earn less than $6,000/mo, that 20% really bites, especially when are on your own (no parents to live with), and you don’t have nearly enough for a downpayment, so owning is not an option.

In my particular case, I was getting 6.2% deducted for SS and 1.45% for Medicare, and 6% deducted for ESPP (voluntary, but necessary to get the employer match). Imagine deducting another 20% on top of all that… I don’t think I would have had enough left to pay the rent, let alone anything else.

I guess I’m the square peg. But I feel as though things have worked out in the end. My employer has a CPF substitute program that I don’t need to contribute to, so I haven’t really lost out versus what I would have collected in employer contributions to CPF. That is the main reason I’m still on an EP after all these years; switching now would actually set me back financially.
Every great and deep difficulty bears in itself its own solution. It forces us to change our thinking in order to find it - Niels Bohr

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Re: Increase in CPF Contribution rates from January 2023

Post by NYY1 » Fri, 01 Jul 2022 12:29 pm

The ability to live at home when just starting out is a big difference. It's basically building up the down payment vs paying rent each month. Still, more and more kids are looking to live on their own now sooner and sooner. The degree of higher paying jobs may also be more these days. Some seem to be able to make it work.

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Re: Increase in CPF Contribution rates from January 2023

Post by JWNYsg » Wed, 18 Oct 2023 11:34 pm

I just checked my cpf contribution today. Some difference

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malcontent
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Re: Increase in CPF Contribution rates from January 2023

Post by malcontent » Thu, 19 Oct 2023 8:27 am

JWNYsg wrote:
Wed, 18 Oct 2023 11:34 pm
I just checked my cpf contribution today. Some difference
The ordinary wage ceiling increased from $6,000 to $6,300 effective Sep 1, and will eventually increase to $8,000 by Jan 1, 2026.

While this might seems substantial on the surface, it was confirmed that the annual wage ceiling of $102,000 will not change. This means the annual limit of $37,740 also remains, and only those earning above $6,000 but getting less than $30,000 in bonuses will benefit. It seems like an edge case that is not typical.

So despite the headline, I would not expect this change to impact the vast majority of people when they look at their totals for the year.
Every great and deep difficulty bears in itself its own solution. It forces us to change our thinking in order to find it - Niels Bohr

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Re: Increase in CPF Contribution rates from January 2023

Post by malcontent » Thu, 19 Oct 2023 11:25 pm

Although I don’t enjoy CPF, my wife does, and because she perceives all CPF contributions are donations that she’ll never get back… I’ve been helping manage her CPF account for many years. The very first thing I did was transfer her entire OA balance to SA for the higher interest rate. Although it’s irreversible, for anyone that doesn’t need OA for housing, it’s definitely worth considering. This provided a huge boost in annual interest earnings. I’ve also been topping up her account (up to the max tax deduction - but only she gets the tax benefit), and now her SA is approaching FRS and her MA close to BHS.

Before she turns 55, I will be investing most of her SA (except the $40,000 which can’t be touched) into a T-bill or similar instrument so that her SA money won’t be swept into her RA. This is known as SA shielding, which allows you to preserve the maximum dollars earning SA interest, while funding your RA through other means (by default, any OA balance, plus you can top up to reach the minimum sum which is either FRS or BRS with property pledge). From there you can top up RA further to ERS if desired. Once you’ve got your RA funded, you can let the SA dollars flow back in and the SA shield maneuver is complete.
Every great and deep difficulty bears in itself its own solution. It forces us to change our thinking in order to find it - Niels Bohr

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Re: Increase in CPF Contribution rates from January 2023

Post by PNGMK » Fri, 20 Oct 2023 12:30 pm

malcontent wrote:
Thu, 19 Oct 2023 11:25 pm
Although I don’t enjoy CPF, my wife does, and because she perceives all CPF contributions are donations that she’ll never get back… I’ve been helping manage her CPF account for many years. The very first thing I did was transfer her entire OA balance to SA for the higher interest rate. Although it’s irreversible, for anyone that doesn’t need OA for housing, it’s definitely worth considering. This provided a huge boost in annual interest earnings. I’ve also been topping up her account (up to the max tax deduction - but only she gets the tax benefit), and now her SA is approaching FRS and her MA close to BHS.

Before she turns 55, I will be investing most of her SA (except the $40,000 which can’t be touched) into a T-bill or similar instrument so that her SA money won’t be swept into her RA. This is known as SA shielding, which allows you to preserve the maximum dollars earning SA interest, while funding your RA through other means (by default, any OA balance, plus you can top up to reach the minimum sum which is either FRS or BRS with property pledge). From there you can top up RA further to ERS if desired. Once you’ve got your RA funded, you can let the SA dollars flow back in and the SA shield maneuver is complete.
I didn't do the SA shielding as I didn't know about it. However I am not that fussed as I had the ERS already to go - if you have at least BRS or FRS you can always pull the OA out into a T-Bill or similar for a higher interest rate when you're 55 on.
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