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

Hi Samantha!

On topping up CPF

Hope you have considered the trade-offs between illiquidity of CPF monies, CPF returns and the tax savings you can get from Retirement Sum Top Up. SA Top up monies cannot be withdrawn, cannot be invested (so cannot be used for SA shielding) but will form part of your BRS.

On investing your CPF with Endowus

Thank you for considering us! Want to share my personal views on this. As a 31yo middle income single male, with no ambition of buying my own private property, I should be able to

1. buy a BTO 2br flexi if I am still single at 35

2. stop my investments and save up my CPF OA monies for my housing payments if I were to settle down.

I intend to be more aggressive with my own investments/money management because I am disciplined enough to plan to the dollar. This may not work for you though.

Your decision process

Your own decision making depends on

1. how much you are going to spend on housing

2. how fast you accumulate your CPF OA moving forward

I think it is better to invest very long term through Endowus to maximise your chance of success. You may want to understand more about the trade-offs of financing your property with CPF to help you make a better decision. I wrote this article for people like us!

https://sg.endow.us/2FVvbew​​​

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Topped up money to SA account is strictly reserved to set aside for BRS / FRS / ERS and cannot be withdrawn when you exceed the BRS / frs / ers.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?