3 Reasons Why 220,000 People Topped Up Their CPF
More than 220,000 people topped up their CPF or their family's accounts by over $4 billion in 2021! (Source: https://www.straitstimes.com/singapore/community/4b-in-top-ups-to-cpf-accounts-so-far-this-year-numbers-of-those-topping-up-for )
The CPF scheme is the Singapore government’s way of safeguarding the financial stability of Singaporeans. CPF monies can be used for retirement planning, to purchase homes, and also to pay for various insurances (term life, hospitalization, mortgage, long-term care, et al). However, some people still have an issue with CPF because the money that goes in, can’t come out until they are much older (55 years old specifically).
One of the key reasons that Singaporeans may
consider topping up their CPF is the rate of return that it gets - Ordinary
Account 2.5%, Special Account & MediSave 4%, with the initial $60,000
attracting an additional 1% (capped at $20,000 of the Ordinary Account). While
this rate is not guaranteed forever, your CPF is invested in Special Singapore
Government Securities which are guaranteed by the Singapore Government.
With consistent contributions to one’s CPF
throughout one’s working career, the monies in their CPF account will channel
into a Retirement Account at age 55, and after compounding for 10 years (refer
to the earlier mention of better interest rates), will then pay them an income
stream from age 65 onwards. This provides a very tangible base to plan their
retirement. They can then take further steps if they wish to have a larger
expenditure during retirement, or be more aggressive in saving and investing if
they wish to retire earlier.
Top ups to CPF will attract tax reliefs. Top
ups to your own CPF will get up to $8,000 of tax reliefs (from 1 Jan 2022),
while top ups for your parents, parents-in-law, grandparents,
grandparents-in-law, spouse, sibling, will get another $8,000 in reliefs.
Amounts should not exceed the Full Retirement Sum (for SA), or the Basic
Healthcare Sum (for MA).
Additionally, if you top up your parents CPF (for those who have not met the Basic Retirement Scheme), the Government will match every dollar of cash top ups made to the RA of eligible members up to $600 per year, through the Matched Retirement Savings Scheme. Do note that only up to $16,000 of cash top ups will qualify for tax reliefs each year.
Do you wish to find out how you can secure your financial future? Speak to our EF consultants to optimise your planning today!
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