Which tax bracket do you fall in to make your CPF RSTU worth it? - Seedly
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Asked on 30 Aug 2019

Which tax bracket do you fall in to make your CPF RSTU worth it?

Fresh grad @ 25 y/o. With my monthly on 3.5k gross, should I opt for CPF voluntary top up just to save that 7k tax on 3.5% bracket (~$245)?


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Personally, RSTU for me is more about the 4% p.a. benefit that you receive from compounding when you contribute while still young. The 3.5% tax bracket is still considered low, although the tax savings will be helpful. Consider instead to open an SRS account first to lock in your withdrawal age as it will be raised to 63 in a few years time. When your income tax starts to hit the 7% tax bracket, you will find SRS and RSTU more 'helpful', that was the case for me.

The downside of course, is that RSTU is pretty much one way.


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Cedric Jamie Soh
Cedric Jamie Soh, Director at Seniorcare.com.sg
Level 9. God of Wisdom
Updated on 02 Sep 2019

If it's me, I won't. CPF top up is one-way.

Holding the cash currently has many benefits for you at your age group.

You may need cash later on for higher returns, or life events, and you can't plead with CPF board to return your cash. You are so young that it is almost certain you will have better use for cash in a few years time (or shorter).

Some examples of a potential higher returns:

1) recession, stocks at cheap price compare to valuation

2) opportunistic event to snap some assets at a bargain price (such as stock options in your company, cheap property take over, assets at auctions)

3) IPO of certain favourable stocks

Life events that will certainly need cash:

1) marriage

2) first property

3) emergencies (both bad and good types)

4) business start-ups.

Your tax liabilities are also quite low, wait till it reaches a much higher bracket the savings are more reasonable for locking up funds.


šŸ‘ 4

Personally I wouldn't do that. I would use the money to build up an emergency fund worth of either 1 year's expenses or 1 year's worth of income and also a war chest for investment.

You should weigh your opportunity cost. Not saying that RSTU is not a good idea, but looking at your current age I believe if I were you I will do what I mentioned above. Saving of 3.5% in the tax bracket is minimal. You can get investments paying about 4-5% currently in this market.

Keeping some funds liquid during early in your career is a good idea also because you are looking at upcoming expenses such as

  1. marriage

  2. renovation

  3. children

  4. housing

All these will eat into your savings and when you have your funds locked in, you might not be able to manoeuvre it when you need it.


šŸ‘ 2
Fergus Tan
Fergus Tan
Level 5. Genius
Answered on 07 Sep 2019

As a short answer, no.

The 2 common tax relief product would be SRS and CPF RSTU.

If you are below the 7% bracket, then it makes more sense to keep cash.

If you are above the 7% bracket, then putting to SRS is a good thing to consider.

If you have maxed out your SRS contribution for the year, then you can consider CPF RSTU.


šŸ‘ 1
Takingstock @
Takingstock @
Level 6. Master
Answered on 02 Sep 2019

Same as Cedric, Vincent and Elijah.

Thought about this before, and I think even at 7% tax bracket, it might not be that good of an idea, the reason being it would be better to hold for marriage and/or downpayment.

I do think at 11.5% tax bracket, you can consider RSTU or SRS, but only a bit. At 15%, I think you should try to max out the reliefs if your cash flow can afford it.


šŸ‘ 1

In order for tax bracket to be worth it, you have to be above 11.5%.

MY simple calculation is this. 11.5% Present Value is worth 22% after 18 years. IF you know what I mean.


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