Is it a good idea to top up my CPF Medisave? And why are so many people against topping up MA or SA? - Seedly
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Asked on 14 Aug 2018

Is it a good idea to top up my CPF Medisave? And why are so many people against topping up MA or SA?

The basic sum for Medisave increases every year, does it mean I will never be able to max it out? And why are so many people against topping up MA or SA? Please help

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Dawn Fiona
Dawn Fiona
Level 7. Grand Master
Answered on 14 Aug 2018

I personally think it's a great idea and I do CPF cash top ups every year. Not entirely true, it moves every year but so does your amount inside, due to compound interest! Those who are against it are often cos they don't like the idea of locked up monies and prefer liquidity. You've to see what you prioritise and value more to decide if this move is good for you :)

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Topping up your MA will have far more uses than topping up your SA, since MA can be used for a variety of medical related expenses, most importantly of which is your Medishield life and Integrated Shield Plan premiums.

The BHS may increase every year, but if you are working, there should really be no issues maxing it out. Most people earning a median income will max it out by their 40s. It helps that topping up MA via VC can confer some tax reliefs, but the exact figure depends on certain criteria (can be found on IRAS website). Once maxed out, the MA interest spills over to SA, so that helps a lot as well.

Topping up SA early has tremendous compounding effects, and it does help that the tax relief can be significant. People fear what they don't understand, so I suppose they need to understand that for a 4% compounding effect to work it's magic, you can't just have freedom to withdraw at any time. Part of the reason why 4% can be achieved is because the money isn't going anywhere and can be grown for the long run.

I personally top up MA and SA directly every year. I know that I won't see the money again, but that's offset against the benefits I will receive down the road.

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Choon Yuan Chan
Choon Yuan Chan
Level 9. God of Wisdom
Updated on 05 Dec 2019

Seriously??!!! People are against topping up CPF SA?

Topping up into SA gives tax deductions and you get to earn 4% per annum. I think its a good idea to top up SA.

Medisave if i recall, don't have tax deductions. SO its not my first priortiy to top up but it gives 4% interest also​​​

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Hwee Kian
Hwee Kian
Level 7. Grand Master
Answered on 04 Dec 2019

Yes, it's certainly a good idea to top up MA, reason being the interest that you earned in MA can be used to pay your yearly medisave premiums.

Secondly, once you max out your MA, then the contributions (that are meant for MA) will auto flow to your SA and it will definitely speed up your SA pool.

I suppose people are against because of a herd-mentality and they think the FRS is too far-fetched a goal to achieve. But once you start early and see that your CPF amount keeps increasing over time, you'll feel satisfied that you start early.

So i'll suggest that you ignore hear-says and go through this seedly forum as there are a lot of sound financial advice from many experts here. All the best!

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Adelyn K
Adelyn K
Level 5. Genius
Answered on 04 Dec 2019

If you intend to max out the basic sum for Medisave, then it's definitely a good idea to top up your CPF Medisave on a yearly basis. While you are at it, topping up on SA will also help your SA to hit the basic cap too! :)

Also helps you to cut back on tax payable every year. People are against topping up MA/SA because of illiquidity and they are not able to touch the funds until retirement. Also, there's quite a bit of lack of understanding on how CPF schemes are, so they are not keen to put their excess cash into something with little/no access, unless you are at the right age. Go with a different perspective/mindset on CPF MA/SA and treat it as another investment with guaranteed 4% yearly interest. The earlier you start, the more days you have to accrue interest, and more compounding takes effect. :)

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Jay Liu
Jay Liu, Diploma in Accountancy at KHEA
Level 7. Grand Master
Answered on 15 Sep 2018

It's illiquid. Only able to withdraw at the later stage in life. If you die earlier than the withdrawal age and have no dependants.

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HC Tang
HC Tang, Financial Enthusiast, Budgeting at The Society
Level 9. God of Wisdom
Answered on 15 Sep 2018

it's a good Because of guaranteed 4% interest compounded yearly. 2nd questions: Not entirely true, it moves every year but so does your amount inside, due to compound interest.

Some people are against top up are Because the $ is only available after retirement and you have no control over it now. Consider it as a risk free guaranteed 4% force savings and as part of your investment portfolio with tax rate incentives, then why not ?

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Jeff Yeo
Jeff Yeo, amateur Social contributor at School of social sharing
Level 7. Grand Master
Answered on 14 Sep 2018
  • Money that goes in is “one way”. When it comes to drawing out and using it there are many TnCs so you have to be aware of when you need to use that CPF money and on which area(medical,housing etc)

  • Topping up CPF is good for two main reasons. Tax relieve and to get compounding interest

FRS May be a moving target, so is our retirement age however the compoundOng interest also increases yearly.

Your money in CPF is ultimately yours and there are situations that you can apply for exceptions to draw out that money.

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Luke Ho
Luke Ho, Venture Capitalist at CFX
Level 7. Grand Master
Answered on 31 Aug 2018

Hi, thought I'd help you out here.

Firstly, it is a GOOD idea to top up your medisave. The issue its whether or not its the best, most optimal idea for the asset allocation of your money.

As I advised someone else recently, if you're young and you have a lot of cash flow compared to someone who knocks out 20% of their salary on a compulsory get go and then has like a ton of responsiblities and expenses, with a mentality saving for Retirement, you can afford to go a lot more aggressively and make a lot, a lot more for your retirement than a CPF SA could even dream of.

I invest a minimum of $2500 every month into expensive but high yielding, inefficient market funds no matter what happens and am on track to hit at least $500,000 in less than 10 years. Likely a lot more. At the same time, I focus on what I'm good at and increasing my income. I encourage clients with objective-saving to do something similar, because whatever cash you have left over as you get older - is completely yours.

You can also pay for your downpayment (house) with a portion of that money and still have a ton rolling left over. Across 25, 30 years...the volatility of a 10% per annum fund isnt that historically different from 5% one (though obviously SA is risk free, but...)

I only dump money in CPF whenever I want to have subsidized taxes, which will also have a bit more into my retirement in the event of future volatility. Of course, a good financial retirement plan would account for this and have you move out of equities as you hit your 40s and 50s.

Of course, you MUST get insurance first.

Coming back to the second part of your question, some of the general population is generally against CPF because of its lack of flexibility till you hit 65. Furthermore, its predicted that this age (65) will get higher and higher. If it were run by anyone else, it'd seem like a complete scam. But its in the governments best interest to keep people working hard and unhappy for a little while being able to afford everything, rather than happy for a while and then screaming bloody murder for 30 years or longer later after having no money.

If you're a conservative type who wants to do things by the book - retire at 65, save money at no risk etc etc, my investment advice doesnt apply to you and max out your CPF with significant peace of mind.

I'm a Financial Adviser. Investing is my specialty, but you can also drop me a message if you'd like my help on this.

https://web.facebook.com/luke.ho.54

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