Which is better in term of building up a retirement nest in CPF - RSTU vs VC3A? - Seedly
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Ultimate Hacks: Adulting

Samantha Lim

Asked 4d ago

Which is better in term of building up a retirement nest in CPF - RSTU vs VC3A?

Background: <30 years, looking to buy a house in 6 years

I’ve read that topped up monies in SA cannot he used to for BRS (which also means FRS&ERS right?). Does this mean that the best possible way is to VC3A into MA until BHS is formed and continue doing VC3A for OA and SA so that there’s an overflow?

Also, at the same time, should I be investing short-term using Endowus to gain extra cash in OA to pay for housing?

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Takingstock @
Takingstock @
Level 7. Grand Master
Answered 3d ago

I think your confusion is between brs (basic retirement sum) and bhs (basic health care sum). Bhs applies only to medisave account.

Topped up money to SA account is strictly reserved to set aside for BRS / FRS / ERS and cannot be withdrawn when you exceed the BRS / frs / ers. Example: you turn 55 in 2020, and your total oa to sa transfer + rstu + cumulative interest on these three sums = 185k, while the total SA account balance is 200k. The current FRS is 181k. You must set aside the entire 185k to retirement account for brs / frs / ers.

Back to reality, the example is rather far-fetched and not likely to happen in real life. Because by the time most pple start to do rstu, and there is a limit rule that you cannot do further rstu / oa to sa transfer to make your SA balance higher than the current year FRS, the chance of the example happening in real life is vritually zero I think. The only situation I can think of is if you can rstu before you take PSLE.

Vc3A isn't very efficient because it follows the normal cpf allocation rates, which means a higher portion goes to the OA account. If you want to reach BHS first in your medisave (so the excess amount above bhs will flow to sa), simply target the voluntary contribution to medisave. It is the smarter choice as medisave earn 4%, whereas OA is 2.5%

I think Vc3A is more useful for

A) self employed folks / free lancers (because the income fluctuates) and

B) those earning below median income.

Why I say this - because a portion goes to OA, the Vc3A becomes a better savings tool for these folks to build up and save in OA for them to buy hdb (which will be a higher priority compared to saving the max for retirement)

Investing short term to generate gains in OA to pay for housing - I guess your horizon is 6 years which isn't too long or short. Its enough time for regular investing to have some compounding but what if 2026 is also a bad / recession year and it might not be a good time to withdraw for the downpayment? Possible but considerable risk involved. Its really up to individual and risk assessment - if it does happen to be a bad year, could you wait for the market to recover?

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Shaun WQ Lim
Level 8. Wizard
Answered 3d ago

I think you might be mistaken. The SA monies topped up is purely reserved for your retirement.

The monies are not factored into the balance calculation for the cash withdrawal at 55. So if you topped up to BRS/FRS/ERS with cash, you can only withdraw those amount that is not from your top up monies.

You can do direct top up to MA too and is tax deductible. Unlike VC3A which is not tax deductible. However your MA VC does count into the CPF Annual Limit. So do take note of that. Once BHS is met, the MA contributions will overflow to SA until FRS is reached.

Considering that you might want to buy a house in 6 years, you can choose to do VC3A so that you can grow your OA balance.

For investing, you need to ensure that your OA balance meets the requirements. And also the risk level that you are willing to take. Given that your timeframe is a bit shorter, you might want to choose a lower risk portfolio or withdraw as when as you need from your portfolio and stretch the duration.

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Thank You!
Can you clarify
I wonder if
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