25 Aug 2020
Saw on a forum saying that it’s best to do it on January at the start of every year . Also will be getting flat at 2023/2024. Any advice on how should I segregate my savings + tax relief? Can I dca like $200 per month to CPF?
25 Aug 2020
Independent Financial Advisor at Phillip Securities (Jurong East)
If you are only going to start your full time job in end August, you will only get 4 months of pay and pro rated AWS (if any). Calculate the amount. If this doesn't exceed $26.25K, then you don't really need to top up CPF SA for tax relief, since you won't have to pay tax on this amount. (If you served NS, this is more ~$28K)
To top up CPF SA, you can follow the instructions here:
https://www.cpf.gov.sg/Members/Schemes/schemes/... under "Apply". The merits of topping up in January are under "When should I top up"
Personally I just direct $1000/mth until I hit $7000 and stop there. I'm not fussy about the slight extra I get when I top up in January. I do make sure I have enough cash first before I top up, since it's a one way thing.
I'd advise you to calculate if you will have enough CPF OA for the downpayment. You can 'DCA' $200/mth to CPF if you wanted to, but if you are talking about DCA-ing to the 3 accounts, only about 60% of that $200 will go to OA. You can't 'force' all $200 to OA. Remember to save some money for renovations, etc. This is really dependent on your preferences of how you want your flat to be.
Firstly, do the math. Consider your salary, allowance and bonus package of your job and determine which tax bracket you belong in. This will more or less show you the amount of tax you’d need to pay. With that, you have to decide if it’s worth offsetting whole/portion of that amount with cpf top-ups or not.
Secondly, although the guaranteed minimally 2.5% interest rate is extremely sweet, the downside of DCA-ing into CPF is that it’s irreversible until you turn at least 55yo. Can you afford to do that? It is essentially “losing” the money until tens of years later depending on your age.
Lastly, you also mentioned you’ll be getting a flat in the coming years, that means you need liquidity(easily accessible cash). I personally feel that CPF is a good account for retirement. Therefore, its best if you can offset the loan with more cash than CPF. Otherwise you’d need to Ensure you have sufficient retirement planning as chances are most of your CPF will go to your house.
Just my 2 cents. All the best!
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