facebookI am 45. OA is $110k, SA is $190k & MA is $61k. Has $15k invested in STI ETF thru SRS early this year. My flat is fully paid up using OA. Gross salary is $9k. Haven't done any retirement planning. - Seedly



10 May 2021


I am 45. OA is $110k, SA is $190k & MA is $61k. Has $15k invested in STI ETF thru SRS early this year. My flat is fully paid up using OA. Gross salary is $9k. Haven't done any retirement planning.

Unsure on how to go about maximizing my cpf for my retirement. Like to seek suggestions from the experts in community. And how much will I get after maximizing my cpf? Thank you in advance for your kind suggestions.

Discussion (7)

What are your thoughts?

Elijah Lee

Elijah Lee

10 May 2021

Independent Financial Advisor at Phillip Securities (Jurong East)

Hi anon,

(Parameters used in my answer: No AWS, no salary increment, just basic salary till retirement, you don't sell off your property)

Since you have practically maxed out CPF MA and SA, the only thing to be concerned about is how else to grow your wealth. Your MA contributions and interest will overflow to OA after you hit the BHS, SA contributions and interest stays in SA, thus your OA will start to grow rapidly as you still have your OA contributions.

I'll start with a couple of simple questions that you should think about: Do you intend to sell your property? Also, when do you intend to retire? Your timeframe will determine how much income producing assets that you can build up. 5 years does make a difference, between retiring at 60 and 65, for example.

You have reached the ordinary wage ceiling, but you won't have the full contribution of $37740 to CPF unless your additional wages are at least $30K/annum. With that in mind (and assuming that you don't have AWS or any bonuses, which is a conservative case), your estimated CPF OA balance at 55 would be $305K and your CPF SA balance will be $369K (inclusive of 1% extra interest from OA). This is more than sufficient to do CPF SA shielding (plenty of articles out there) and you will have approximately $329K in your SA after that, and at least $345K in your RA, which you can leave in RA for CPF LIFE (estimated CPF LIFE payout will be $2.5K/mth or $30K/yr at 65). SA balance generates $13.16K/yr of additional interest, which you can withdraw from SA starting at 55 for extra cashflow.

Great, so now you know you have $13K/yr of passive income starting at 55. I suppose the next question you need to ask is whether you should invest your OA at this point to maximize your CPF. This will depend on what you seek in retirement, as well as your current and projected resources in the future.

For example, if I have other income assets available to me, and the projected income streams from these assets are sufficient in future (inflation adjusted), I might not want to risk my CPF OA, after all, if I will have enough, then why rock the boat? I will just leave my CPF to compound risk free.

If I desire to grow my OA balance more to achieve more capital, then I would look at investing it, as with a 10 year horizon, I do have time to grow it further. However, once I do this, I take on market risk and I must manage this well, a market crash right before 55 will disrupt my plans for CPF shielding.

Note that I wouldn't invest CPF SA; 4% risk free is extremely hard to beat, if I had to take on risk to get 5% returns, I would rather just leave it.

Also, once you complete CPF shielding and liquidate your SA investment to return the funds to SA, any remaining balance in OA cannot be taken out at all unless your SA is depleted; so plan your steps very carefully.

Beyond CPF, you'll want to look at retirement planning as a whole, incorporating your SRS and cash to come up with a strategy that works for you. Since your question focuses on maximizing CPF, I will not add on too much to my answer. You have mentioned that you have not done any retirement planning yet, and to plan for retirement can be complex, without many details, I can probably only provide you with a brief overview on retirement and SRS in some of my previous answers here, here and here for example.

In short, you will need to understand what level of passive income you expect in retirement, what are the sources, their pros and cons, and whether you can achieve them in your desired time frame (or else you might have to delay your retirement by a bit). You might want to speak to an advisor if you need detailed analysis and planning for your situation, I understand that not everyone might be comfortable to reveal too much in an online forum even if anonymous.

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Tan Choong Hwee

Tan Choong Hwee

09 May 2021

Investor/Trader at Home

Your SA already exceeds this year FRS $186k. The 4% interests plus your CPF contributions from employment would definitely continue to grow your SA to stay above prevailing FRS. Projected FRS when you are 55 is $250k if it continues to increase by 3%.

If there is no change in CPFIS rules for SA, you can do SA Shielding just before 55 to have FRS in RA and shielded amount in SA after your 55th birthday. You can also top up cash to RA to hit ERS then for higher CPF LIFE monthly payouts starting 65. That will be your baseline retirement income after 65, or even higher amount if you postpone payout to 70.

Your salary already exceeds Ordinary Wage Ceiling of $6k, so you have room for $30k in your Additional Wage before total mandatory contributions hitting Annual Limit of $37740. Your MA is $2k short of this year BHS of $63k, you can voluntary contribute $2k to your MA if it doesn't burst the $37740 limit.

You have high income tax bracket, so you should continue with yearly SRS contribution of $15.3k, and invest your SRS in higher yielding investment vehicle than STI ETF because you have at least 17 year investment time horizon to age 62. You can consider investing in roboadvisors that accept SRS.

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