Anonymous

07 Jun 2019

∙

What's your thoughts on topping up your CPF SA account?

I am split about whether to top up SA account. The interest rate for SA will be at 4% but the cons will be that I can only withdraw the amount at the age of 55 (provided I have sufficient FRS amount in my SA account). The interest accrued from 55 to 65 will also not be allowed to be withdrawn. The pros will be it can help me with tax savings. If I were to purchase annuity plan, it can give around 4% too and I can decide when I want to withdrawn. Of course, the cons is it's non-guaranteed.

AMA Christopher Tan

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Christopher Tan

07 Jun 2019

CEO at Providend Ltd

Dear anonymous, thank you for your question and sorry for the late reply.

Firstly, if you intend to top up your SA using cash, it must be because it is for retirement planning and not because of the tax savings. Because topping up your CPF SA comes with an opportunity cost.

There are 3 "things" you will need in retirement:

A fully paid house
A good medical expense insurance
A lifellong income stream

Under lifelong income stream, CPF LIFE forms the foundation. It gives you a reliable income stream that hedges against longevity and market volatility risk. By contributing into your CPF now, you are actually accumulating towards a lump sum to buy this annuity (CPF LIFE) at age 65.

So if you have excess cash and if your SA has not reach $176K this year, it might be a good idea to use your SA to accumulate towards this lump sum of buying CPF LIFE later.

Hope this helps.

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CPF top up to Special Account - After hitting the SA limit, can I invest using SA such that I do not meet the limit and top up SA with cash for tax relief? After top up, I liquidate back to SA.

Is there any difference in interest if i top my CPF SA or RA account with cash? If not, how would u choose whether to top up SA or RA account?

If my CPF SA account is already at FRS ($181k), can i deploy or invest some money from SA account so that the SA sum is below FRS amount and then top up $7k cash to qualify for tax exemption?

For CPF, after age 55, can top-up any amount in SA account to earn the 4% interest rate, eg $50k? And afterwhich can withdraw any amount anytime? Or have to top-up just below age 55?

Would like to check if I top up $7K to my CPF SA account, does it mean that I could only top up to $8.3K in SRS so that I max out $15.3K maximum contribution per SRS limit for tax deduction?