I am sure by now you had already heard about upcoming changes to CPF. It was announced in Budget 2024 in February 2024. If you had not heard about it, I do not know how you chance upon this post. I had previously post on the more important changes and you can read more about it here:
CPF latest policy changes (No more SA Shielding), so how?
If you looked back at your life, let say since you started schooling, you will probably know that nothing goes according to plan. You can make certain plans such as education, career, family or even travel itinerary, there will always be a need to change the plan entirely or tweak parts of it. This is because factors impacting your plans are changing on a constantly basis.
This applies to any investment plan that you may have as well. You can buy a stock of a business and fall in love with it, but when it is fundamentally not sound, you need to trim down your position or cut it off entirely from your portfolio. It is important to know your goal, factors that could impact it, mitigate those risk and be flexible to change your plan to your plan B or plan C or even to a new plan. Likewise this applies to CPF as in this instances, the change in policy (policy risk) will now force everyone to rethink their retirement plans.
I have shared in the past about how CPF is my plan B, my safety net, and how I reached Full Retirement Sum (FRS). You can read about then here.
1. My CPF Strategy - Reached Full Retirement Sum (FRS) of $198,800 in 2023
2. 2023 CPF Interest of $11,134.61 and top up CPF MA to the new BHS
With CPF Changes, I had to think through whether my plan is still valid and what I should take note of or do.
CPF is and will still my safety net.
Based on current context, I will likely still do yearly cash top-up in January to my CPF MA to hit the Basic Healthcare Sum (BHS). This is because I want that tax relief and continue to earn that 4% in SA. If there is no tax relief, I will definitely not bother to do cash top-ups.
When I reach 55 years old, the excess amount remaining in my SA after FRS has been formed in RA will be transferred to OA.
At this life stage, I am reluctant to think whether I want to pump my RA into ERS amount after 55 years old as I do not know how long I am going to live. If I am sure I will die only at 90 or even 100 years old, I will pump my RA to ERS. If I am sure I will die before 80, I will want to put in BRS or FRS into my RA.
As mentioned in my previous post. "The interest accumulated on your CPF LIFE premium, along with the premiums of other CPF LIFE members, ensures that you can continue receiving payouts no matter how long you live, even if your CPF LIFE premium balance is depleted.". Hence, whatever interest earned from your CPF Life premium, it is not yours. It is pooled together.
When I reach 54 to 55 years old, it will be the time for me to make an assessment of my own health and look at the latest data on the average life expectancy in Singapore. Also, by then CPF would have other policy changes. So why worry about something I cannot control now.
Hence, for now I will still do what I can to pump up my CPF SA and MA to earn the 4% till 55 years old;
- transfer excess OA to SA if I had not reach FRS;
- yearly cash top-up to MA to hit BHS provided I get tax relief.
At 55 years old, then I will decide what to do, whether to
- withdraw that OA amount out to put elsewhere;
- continue to put that amount in OA to earn 2.5% and withdraw it any time I want; or
- pump the OA amount into my RA to reach up to ERS to earn 4% for a higher monthly payout.
Decide now also no use since policy may still change.
I would also want to highlight that I have other investment passive portfolio to rely on. If CPF is your own retirement plan, then you may want to plan different. I would also strongly encourage that you rethink and review your retirement plan on a frequently basis, not only when there is a CPF policy change.
CPF cannot be your only retirement plan. Do not put all your eggs into one basket.
These are my personal thoughts and based on my understanding of CPF mechanism. You will need to do your own due diligence and fact finding.
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