Asked by Anonymous

Hi I’m a 24 years old working freelance with about 3k of spare cash every month. Should I top up my CPF? If yes, should I top up directly to SA or MA or all 3? My main goal is saving for retirement. ?

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    • Steph Yeo
      Steph Yeo, Auntie Uncle Whisperer at Agency for Integrated Care
      82 Answers, 153 Upvotes
      Answered on 22 Aug 2018

      yup since your main goal is saving for retirement, use the power of compounding to your advantage and top up especially your SA to maximise interest!

      kudos to taking the freelancing route so young, and thinking of retirement so early!

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    • Brandan Chen
      Brandan Chen, Financial Planner at Manulife Singapore
      148 Answers, 217 Upvotes
      Answered on 22 Aug 2018

      Topping up your CPF does have its advantages in terms of the guaranteed compound interest earned, as well as tax relief of a max of 7k per year.

      On top of which, you would also need to take into consideration getting your first home. As a free-lancer, you are classified as self-employed and it is mandatory for you to top up your MA account. Hence, the heart of the matter here is whether you should contibute to your OA or SA. My answer to this is YES, and you can consider maxing out your MA and topping up more to your SA to enjoy higher rates of interest.

      As a 24 year old, my suggestion for you would be to consider other options (besides CPF) to accumulate your wealth for retirement. This is due to reasons such as:

      1) CPF is only available for withdrawal after 65 (or even longer if the law changes)

      2) Diversification of retirement income

      3) Creating a portfolio with allocation to different risk categories

      Some suggestions you can look at is to start investing into ETFs, either through DBS/POSB (STI ETFs) or roboadvisors such as stashaway, autowealth for starters. As you learn more about investments, you may start venturing into stocks, REITS and other financial instruments.

      Also, be sure to set aside some of your spare cash for wealth protection, ie insurance, as you slowly accumulate your portfolio. You may drop me an email at [email protected] should you like to discuss anything further.

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    Ck Chai
    Ck Chai
    84 Answers, 126 Upvotes
    31 Aug 2018

    Freelancers are required to contribute to their Medisave accounts annually, so apart from MA, you can look into topping up SA to build up your retirement fund. However, if you are looking into getting a house of your own, and you don't think you are investment savvy enough, you may want to consider contributing a portion to OA which offers better interest rate than the bank since MA cannot be use to pay for the house.

    However, always make sure you have the min 6-12months emergency fund set aside, necessary insurance coverage in place. Do consider start investing, if you are not a high risk taker, consider the SSB and ETFs.

    Kudos to you to start planning for retirement at such a young age!

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