Dear respected Seedly gurus, humbly seeking your advice with the following profile: Father (Age 68, Retired with no dependant, house fully paid and CPF of OA-290k, SA-69k, MA-52k, RA-138k)? - Seedly
 

CPF

Dear respected Seedly gurus, humbly seeking your advice with the following profile: Father (Age 68, Retired with no dependant, house fully paid and CPF of OA-290k, SA-69k, MA-52k, RA-138k)?

  1. What is the maximum that Daughter can contribute to Father's CPF for tax relief?

  2. What is the maximum that Son in law can contribute to Father's CPF for tax relief?

  3. Can/should contribute to OA/SA/RA?

  4. What is the max that Father can withdraw from OA or SA or both?

  5. Assuming the CPF monies is not needed as part of retirement, is it better to withdraw and invest in bonds that potential reap better % than CPF?

Thank you all in advance for your inputs.

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Hi Musang,

  1. Daughter can contribute $7K via RSTU to father's RA per year for tax relief as long as the RA is not at that year's prevailing FRS

  2. For son in law, conditions same as the daughter

  3. If any contributions are made to the father's OA/SA/MA, that will be via normal voluntary contributions which will be split across 3 accounts. Subject to the annual limit of $37740. The monies will then be divided between the 3 accounts accordingly. So some money will flow to MA and it can't be withdrawn. However if that's ok, then understand that once the MA is full (i.e. @ BHS of $60K), future top ups to OA/SA/MA will just flow to OA/SA instead, and can be withdrawn any time. So what might be better is to do a one-off CPF MA VC (voluntary contribution) to push the MA to $60K, and then do a 3 account contribution so that everything else goes to OA/SA. Liquidity is not an issue as long as MA is at ceiling. For RA contribution, it can only be done via RSTU, with a ceiling of the year's ERS. Top ups up to the FRS will earn tax relief on the first $7K each year.

  4. Since RA has been formed, any amount can be withdrawn from OA and SA.

  5. You can, but it doesn't mean you have to. CPF is backed by our AAA rated government. There isn't really any AAA rated bond paying 4% coupons out there. In fact you'd be hard pressed to find 2.5% on a AAA rated bond. Plus, the 'coupons' automatically compound since the interest is credited back to OA/SA respectively.

If you need any further clarification, please feel free to reply to this post.​​​

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Elijah Lee
Elijah Lee

6d ago

Thanks Hariz! Was eating lunch. Yup no OA to SA transfer after RA is formed. In fact, if you want to transfer to RA, SA monies will be transferred first, followed by OA. See: https://www.cpf.gov.sg/members/FAQ/schemes/retirement/retirement-sum-topping-up-scheme/FAQDetails?category=Retirement&group=Retirement+Sum+Topping-Up+Scheme&ajfaqid=2188830&folderid=19860 And https://www.cpf.gov.sg/members/FAQ/schemes/Retirement/Retirement-Sum-Topping-Up-Scheme/FAQDetails?category=Retirement&group=Retirement%20Sum%20Topping-Up%20Scheme&folderid=19861&ajfaqid=4190084
Musang King
Musang King

6d ago

Thank you guys! Very helpful! Appreciate! 👍🏻🙏
Isabel Wong
Isabel Wong
Level 6. Master
Answered 2w ago

1) The max amount for tax relief would be 7k. This is because the RA is less than the current FRS (currently $176000 for YA2020). The current FRS amount changes every year.

2) Same as for the daughter in (1).

3) I don't think you can contribute to your father's OA/SA/MA as you can only contribute to your own account? Not sure if I am interpreting your question correctly. To assess whether you should do voluntary contribution to your own CPF would require more details on your current profile.

4) The following link by heartland boy details the calculation.

https://heartlandboy.com/money-withdraw-from-your-cpf-at-55/

You will need to dig out the basic retirement sum for your dad's age and determine if you have sufficient property pledge.

5) It is hard for bonds to hit a higher % than CPF (unless u are referring to corporate/junk bonds). If you want a higher % it would be better to invest in equities but I would not really recommend that for your dad's age.

I'm not an expert in CPF so my answers may not be completely correct - do drop your questions to CPF I believe they will be able to answer them better (except for the last question)

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Musang King
Musang King

6d ago

@ Point 3 - my apologies that I wasn’t clear, I meant as cash contribution ✌🏻 Thank you for your time and inputs, appreciate!

Probably no more tax relief available. But I can't confirm. Will need to do a bit of a refresher.

Can consider contribute to RA if you want a higher RSS payout. Now that RSS money will last till 90 and not 95, you'll get a higher amount per year paid out. Alternatively, another private annuity may work with no capital drawdown but lower yield due to his age.

Do also check directly from CPF but I'm also assuming all his SA and OA is available with SA being the first account out first for withdrawal then OA. So 359k.

I say to beat 2.5% in OA with minimal risk is possible but 4% in SA, very unlikely. The only issue is he can't just take out OA money only. He has to take out SA money first. So maybe keeping in CPF could be the better option. But not saying it's not possible to beat CPF rates if you're open to some risk, but once you take out, cannot put back in.

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Musang King
Musang King

6d ago

Thank you for your time and inputs, appreciate!