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Thread: Any Ceiling for contribution of CPF OA?

  1. #6

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    Quote Originally Posted by cbsh38584 View Post
    CPF is more than enough for retirement Planning if you manage it wisely - Starting pay $2500 @age25
    =============================================================================
    There are 3 type of min retirement sum as from 2016 Figure.

    2016 retirement sum figure for BRS (80.5k) , FRS ($161k) & ERS ($241k)
    2020 retirement sum figure for BRS (90.5k) , FRS ($181k) & ERS ($271k) inflation est 2.5%

    1. Basic Retirement Sum(BRS) = $80.5k with 2/3/4 rm HDB pledged
    Monthly payout for life@65 = $660-$720

    2. Full Retirement Sum (FRS) = $161k (No 2/3/4 rm HDB pledged)
    Monthly payout for life@65 = $1220-$1320

    3.Enhanced Retirement Sum (ERS) = $241,500
    Those who wish to put more saving in CPF life - optional
    Monthly payout for life@65 = $1770-$1920.

    Max contribution to your CPF for 2015 = $31.45k / yr (20% of your Salary + 17% employer + voluntary cash)
    Max contribution to your CPF for 2016 = $37.75k / yr (20% of your Salary + 17% employer + voluntary cash)


    Many of them are unaware of how their annual income + CPF adds up over 30 years of working (age 25 to age 55).

    Starting pay $2500 (3% Salary increment yearly till age 55).Do nothing to your CPF acct
    ==================================================================
    At age 25 - OA=$7.1k. SA=$1.9k MA=$2.5k

    By age 35, OA=$112k. SA=33k. MA=41k

    By age 45 - OA=$268k. SA=120k. MA=97k

    By age 55 - OA=$479k. SA=354k. MA = $138k

    ** When MA (now call BHS) ceiling is reached ($49.8k) Excess goes to SA. But if SA (4%) min FRS ($161k) is also reached. MA (4%) excess goes to OA (2.5%)

    NET CASH Income (take home pay) earned accumulated for 30 years of working (age 25 to age 55)= $1.3 million dollars very very more than enough
    for the HDB BTO 4rm HDB flat $350k (income >$8k no HDB grant) . I did not include variable or performance bonus which range from 0.5 mth to 3 mths
    & also your partner income whic may be also $1.3m if she/he has the same earning power.

    If you have the job stability & the financial capablilty . Consider on How To Manage Your CPF Money by Shift all your money from Ordinary Acct to Special Acct as
    YOUNG as possible. You will get extra >60k to 100k more with no sweat involved at all.Just transfering OA-SA every Year . It MUST BE DONE when you are young.


    Shift CPF-OA (2.5%-3.5%) to SA (4-5%) at YOUNG age & start to transfer OA (2.5% to SA(4%)
    ------------------------------------------------------------------------------------------------------------------------------
    At age 25 - OA=$7.1k. SA=$1.9k. MA=$2.5k.

    By age 35, OA=0 (vs 112k). SA=156k (vs 33k) . MA=41k

    By 45 - OA=$85k.(vs 268k) SA=347k (vs 120k). MA=93k

    By 55 - OA=$341k (vs$479k) @SA=$550k to 600k. (vs $354k). @MA=$100k - 135k

    @ SA=550k to $600k depend on the CPF board yearly adjustment of the min sum retirement % increment. Range from 2.5% to 3.5%.

    @ MA= $100k to $135k also depend on the CPF board yearly adjustment on the MA & your medishield life selection from Govt b2 to private A class
    MA (now call BHS) ceiling is reached. MA Excess goes to SA. But if SA min sum is also reached. MA excess goes to OA

    Remember, you are not voluntary CASH contribution in the CPF. Just only your 20% of your Salary + 17% from your employer.

    ================================================================================================================
    I believe only the minorities have the financial capablity , determination & discipline to prorities their retirement need when young & transfer from OA
    to SA to see the magic of compouned interest in their special acct. Young prefer WANTS 1st & ignore the NEEDS. if they mismanage the CASH & CPF,
    they will be in trouble when they grow old. Low cash & low CPF.

    I do not recommend to voluntary contribute cash into CPF when young unless you really have more more than enough cash either from your parent or you yourself.
    Maybe when your reach late 40s & your children are age 21 & start working . You have extra cash. Can consider voluntary cash into CPF if min sum is met.
    By age 55, you can withdraw all after meeting the min sum (161k). Eg OA=200k SA=201k MA=49.8k(cannot touch). U can withdraw all OA=200k + SA=40k
    (201k minus 161k) if you chose FRS ($161k).


    Since most of the young couple likely to marry late between age 30-40. Why not set yourself a tgt to hit your Special acct min $100k at age 35
    (By age 35, OA=$112k. SA=33k --- Move 67k from your OA to SA (33k + 67k ) to increase your SA to 100k tgt.


    Once your SA=100k is reached by age 35. You know that the BIG WORRY min retirement need is SETTLED & can concentrate to build your OA .
    Any extra contribution to your SA is extra extra bonus.



    $100k compounded 4% interest for 30 yrs. U will have at least 325k at age 65. A very basic retirement est 2.5k/mth at age 65 for life.
    http://www.moneychimp.com/calculator...calculator.htm



    FYI, those wiives who decided to become a homemaker to take care of children & self employed . You better start to think now about your retirement as you have much lesser CPF for retirement. A umarried man or women. You are also need to plan early as MAID is the only person which you need to depend on when you grow old.
    CPF: IT CAN BE DONE : Accumulate $1m in your CPF by age 55 with starting pay ONLY $2500 at age 25.
    The best part is that you only use 20% of your salary + 17% employer contribution. No voluntary cash involved.



    CPF Annual Limit

    The maximum amount of CPF contributions that can be credited to an individual’s account in a year. It consists of both the mandatory contributions (employer’s and employee’s share) and voluntary contributions. Currently it is $31,450 a year. [With effect from 2016, it will be $37,740.]

    CPF Ordinary Wage Ceiling

    Ordinary Wages (OW) are wages due/granted wholly and exclusively for your employment in a month and are payable before the due date for payment of CPF contributions for that month. This would be your monthly salary, which may include items such as transport allowances and overtime payment.

    The maximum amount of CPF contribution payable on OW is the OW Ceiling, which is currently $5,000. [In 2016, it shall be $6000]. For example, if you earn a monthly wage of $5,500, only $5,000 would attract CPF contributions; the remaining $500 would not.

    Additional Wage Ceiling

    Additional Wages (AW) are wages which are not granted wholly and exclusively for your employment in the month. These payments are usually made at intervals of more than a month. For example, your annual bonus, leave pay and incentives are considered AW.

    The AW Ceiling is the maximum amount of AW that attracts CPF for the year, and can be computed using the following: $85,000 - Total OW subject to CPF for the year. [With effect from 2016, it the formula will be: $102,000 - Total OW subject to CPF for the year.]



    Risk of Using this Method

    The following are the risks involved:

    First, this method assumes all money in the ordinary account is used exclusively for wealth accumulation. This means you cannot use the ordinary account for purchase of a property. You cannot use the ordinary account to service the housing loan.

    Assuming a BTO flat of $400,000, the first 10% downpayment of $40,000 would have to be paid using cash. The remaining 90% has to be funded by borrowing. The monthly mortgage installment would be $1,633 at 2.6% for 25 years payable in cash. Assuming a MSR of 35%, it means the household income should be at least $4,666. Of course, if both husband and wife are income earners, this should not be an issue.


    It is assumed all CPF rules remain static.The top-up from CPF-OA to CPF SA is irrevocable .

    ==============================================================================================================================
    So you have to decide how you plan your retirement early especially when you start to work at age 23 to 25.
    Investment in equity or property or FX or CPF or (The safest) + equity or ppty etc etc.

    Pls dont use CPF OA to buy SG stock esepcially Penny stock. When you are young. Your IQ maybe high. But it is the EQ that will make
    you lose money. Inablity to cut loss when a good trade turn bad.

    Both my niece (age 28 to 30) who bought unit trust using CPF OA 30k in 2014. paper loss >25% in Jan-Feb16.. But now the paper loss much lesser.
    They dont have the courage to CUT loss. Too painful. It will never able to beat the Special acct compounded interest of 4% for the next
    30 yrs if they transfer from OA (2.5%) to SA(4%). The more they hold on to their unit trust. More loss opportunities to earn higher 4% SA
    compounded interest. $30k compounded 30 yrs @4% is $97.3k

    My another friend invested CPF OA $50k in HSBC unit trust from friend 17 yrs ago. Till now, the NAV is only $51k.
    Look at how much interest he lost if he will be transfered OA to SA 17 yrs ago. ( 97k -50k = $47k). Unit trust gain only 1k for holding 17 yrs
    against 47k if he transfer OA to SA.



  2. #7
    Join Date
    May 2012
    Posts
    3,605

    Default

    What are your views regarding insurance Bro CBSH ?

    Quote Originally Posted by cbsh38584 View Post
    CPF: IT CAN BE DONE : Accumulate $1m in your CPF by age 55 with starting pay ONLY $2500 at age 25.
    The best part is that you only use 20% of your salary + 17% employer contribution. No voluntary cash involved.



    CPF Annual Limit

    The maximum amount of CPF contributions that can be credited to an individual’s account in a year. It consists of both the mandatory contributions (employer’s and employee’s share) and voluntary contributions. Currently it is $31,450 a year. [With effect from 2016, it will be $37,740.]

    CPF Ordinary Wage Ceiling

    Ordinary Wages (OW) are wages due/granted wholly and exclusively for your employment in a month and are payable before the due date for payment of CPF contributions for that month. This would be your monthly salary, which may include items such as transport allowances and overtime payment.

    The maximum amount of CPF contribution payable on OW is the OW Ceiling, which is currently $5,000. [In 2016, it shall be $6000]. For example, if you earn a monthly wage of $5,500, only $5,000 would attract CPF contributions; the remaining $500 would not.

    Additional Wage Ceiling

    Additional Wages (AW) are wages which are not granted wholly and exclusively for your employment in the month. These payments are usually made at intervals of more than a month. For example, your annual bonus, leave pay and incentives are considered AW.

    The AW Ceiling is the maximum amount of AW that attracts CPF for the year, and can be computed using the following: $85,000 - Total OW subject to CPF for the year. [With effect from 2016, it the formula will be: $102,000 - Total OW subject to CPF for the year.]



    Risk of Using this Method

    The following are the risks involved:

    First, this method assumes all money in the ordinary account is used exclusively for wealth accumulation. This means you cannot use the ordinary account for purchase of a property. You cannot use the ordinary account to service the housing loan.

    Assuming a BTO flat of $400,000, the first 10% downpayment of $40,000 would have to be paid using cash. The remaining 90% has to be funded by borrowing. The monthly mortgage installment would be $1,633 at 2.6% for 25 years payable in cash. Assuming a MSR of 35%, it means the household income should be at least $4,666. Of course, if both husband and wife are income earners, this should not be an issue.


    It is assumed all CPF rules remain static.The top-up from CPF-OA to CPF SA is irrevocable .

    ==============================================================================================================================
    So you have to decide how you plan your retirement early especially when you start to work at age 23 to 25.
    Investment in equity or property or FX or CPF or (The safest) + equity or ppty etc etc.

    Pls dont use CPF OA to buy SG stock esepcially Penny stock. When you are young. Your IQ maybe high. But it is the EQ that will make
    you lose money. Inablity to cut loss when a good trade turn bad.

    Both my niece (age 28 to 30) who bought unit trust using CPF OA 30k in 2014. paper loss >25% in Jan-Feb16.. But now the paper loss much lesser.
    They dont have the courage to CUT loss. Too painful. It will never able to beat the Special acct compounded interest of 4% for the next
    30 yrs if they transfer from OA (2.5%) to SA(4%). The more they hold on to their unit trust. More loss opportunities to earn higher 4% SA
    compounded interest. $30k compounded 30 yrs @4% is $97.3k

    My another friend invested CPF OA $50k in HSBC unit trust from friend 17 yrs ago. Till now, the NAV is only $51k.
    Look at how much interest he lost if he will be transfered OA to SA 17 yrs ago. ( 97k -50k = $47k). Unit trust gain only 1k for holding 17 yrs
    against 47k if he transfer OA to SA.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.



  3. #8

    Default

    Quote Originally Posted by Kelonguni View Post
    What are your views regarding insurance Bro CBSH ?
    I invested in investment link insurance using CPF at a early age. I recently took a caculation. the return is ard 5.5% return on equity . but as with investment link insurance u need to start from a young age. the more savvy ones these days can just do own share investment i.e. ETF and buy a term insurance. I find that way the overhead is much lower and its cheaper and more flexible.
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
    ― Martin Luther King, Jr.

    OUT WITH THE SHIT TRASH

    https://www.facebook.com/shutdowntrs



  4. #9
    Join Date
    May 2012
    Posts
    3,605

    Default

    Quote Originally Posted by minority View Post
    I invested in investment link insurance using CPF at a early age. I recently took a caculation. the return is ard 5.5% return on equity . but as with investment link insurance u need to start from a young age. the more savvy ones these days can just do own share investment i.e. ETF and buy a term insurance. I find that way the overhead is much lower and its cheaper and more flexible.
    I also had one such plan. But its so complex I find it hard to calculate how much gains or losses.

    Just treat as insurance plan now. Luckily is not a large amount each month.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.



  5. #10

    Default

    Quote Originally Posted by minority View Post
    I invested in investment link insurance using CPF at a early age. I recently took a caculation. the return is ard 5.5% return on equity . but as with investment link insurance u need to start from a young age. the more savvy ones these days can just do own share investment i.e. ETF and buy a term insurance. I find that way the overhead is much lower and its cheaper and more flexible.

    When you invest your CPF OA into investment link insurance (ILP). There is always a 3% sale (bid & offer) charge deduction when you buy your ILP unit trust.
    To beat the CPF return, you need to time the entry or do the switching to income fund when equity is over value & switch back from income fund when equity is
    under value etc. So Only a very few minorities beat CPF compounded interest rate return.

    In the 90s, CPF board allows 60% of your CPF-OA for stock investment . But it has since reduced to 35% as CPF board realised that most SG retail investors are not
    making $ using CPF OA. It affect their retirement planning.



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