1. SRS can withdraw at a penalty. Once transfer to Special Account cannot move out. Need to be very sure of doing it. Better do it after 50 yrs old in my mind.
2. SRS can buy SGX stocks. CPF SA - u cannot buy even a good unit trust. When the market tanks and you find a huge bargain, that is when cash, SRS and CPF OA all come in good good.
(23-05-2014, 05:23 PM)phantom Wrote: [ -> ]IMHO, for PMETs earning about 100-150kpa, exhaust the following options first before considering SRS as a tax saving tool:
1. CPF MA-VC (whenever below min sum)
2. CPF SA-VC of 7k to your own CPF SA
You achieve the same tax saving but:
1. No 50% tax upon death or use of CPF-MA for hospital bills, insurance etc
2. It helps to achieve your CPF-SA min sum without pledging your property at age of 55
3. If you want to use CPF-OA to fund 2nd property, (2) comes in handy
Agree with d.o.g that if income below 100k or more than 150k don't even bother
(26-05-2014, 09:21 PM)Contrarian Wrote: [ -> ]1. SRS can withdraw at a penalty. Once transfer to Special Account cannot move out. Need to be very sure of doing it. Better do it after 50 yrs old in my mind.
2. SRS can buy SGX stocks. CPF SA - u cannot buy even a good unit trust. When the market tanks and you find a huge bargain, that is when cash, SRS and CPF OA all come in good good.
(23-05-2014, 05:23 PM)phantom Wrote: [ -> ]IMHO, for PMETs earning about 100-150kpa, exhaust the following options first before considering SRS as a tax saving tool:
1. CPF MA-VC (whenever below min sum)
2. CPF SA-VC of 7k to your own CPF SA
You achieve the same tax saving but:
1. No 50% tax upon death or use of CPF-MA for hospital bills, insurance etc
2. It helps to achieve your CPF-SA min sum without pledging your property at age of 55
3. If you want to use CPF-OA to fund 2nd property, (2) comes in handy
Agree with d.o.g that if income below 100k or more than 150k don't even bother
Contrarian brought up good point with regard to investing using SRS. SRS is a good war chest for good pickings. There are tax savings too.
I advocate starting SA Minimum Sum topping up early. SA can be treated as a bond component and returns compounded. The Minimum Sum limit applies for tax relief.
Note that your tax relief for Medisave-Voluntary Contributions (VC) is limited to the lowest of the following:
1. Actual voluntary contribution.
2. Annual CPF contribution cap for the year less Mandatory Contribution by both employee and employer.
3. Prevailing Medisave Contribution Ceiling less balance before the VC.
(26-05-2014, 10:17 PM)Caelitus Wrote: [ -> ]I advocate starting SA Minimum Sum topping up early. SA can be treated as a bond component and returns compounded. The Minimum Sum limit applies for tax relief.
One thing holding me topping up cash into CPF-SA is that we won't know how the policy will change 10-20 years down the road. Maybe by then there will be some new policy preventing us to take out most of the money
(27-05-2014, 04:38 PM)palantir Wrote: [ -> ] (26-05-2014, 10:17 PM)Caelitus Wrote: [ -> ]I advocate starting SA Minimum Sum topping up early. SA can be treated as a bond component and returns compounded. The Minimum Sum limit applies for tax relief.
One thing holding me topping up cash into CPF-SA is that we won't know how the policy will change 10-20 years down the road. Maybe by then there will be some new policy preventing us to take out most of the money
What I did was to move from OA to SA. No cash involved.
(27-05-2014, 04:38 PM)palantir Wrote: [ -> ]One thing holding me topping up cash into CPF-SA is that we won't know how the policy will change 10-20 years down the road. Maybe by then there will be some new policy preventing us to take out most of the money
There are already policies in place to prevent you taking out most of the money e.g. the Minimum Sum Scheme and CPF Life.
For salaried employees there is not much you can do except to use the CPF OA to pay for your house so that you can use cash for other things. For the self-employed, paying CPF contributions voluntarily is IMHO a poor choice. Better to pay the taxes and have full flexibility for retirement planning, than to tie up your money forever (in MSS/CPF Life) in exchange for some tax savings. The time value of money matters!
As usual, YMMV.
"For salaried employees there is not much you can do except to use the CPF OA to pay for your house so that you can use cash for other things. For the self-employed, paying CPF contributions voluntarily is IMHO a poor choice. Better to pay the taxes and have full flexibility for retirement planning, than to tie up your money forever (in MSS/CPF Life) in exchange for some tax savings. The time value of money matters!" - D.O.G
This is true, to have cash on hand is much much much more useful than having $ STUCK in CPF!!
worst, overpay for house using CPF, and $ still STUCK!
CPF is a trap already...
cpf been around for a long long time all this while what happen to the money if there is enough money why would they keep changing the rules so now they keep saying you live longer so we pay you later and later hoping you will die faster so they don't need to pay you.
Money goes to your family after your death? Have faith one day that they will find a way somehow reroute back to them maybe in the form of inheritance tax but keep it in cpf is tax free.
(27-05-2014, 05:56 PM)brattzz Wrote: [ -> ]"For salaried employees there is not much you can do except to use the CPF OA to pay for your house so that you can use cash for other things. For the self-employed, paying CPF contributions voluntarily is IMHO a poor choice. Better to pay the taxes and have full flexibility for retirement planning, than to tie up your money forever (in MSS/CPF Life) in exchange for some tax savings. The time value of money matters!" - D.O.G
This is true, to have cash on hand is much much much more useful than having $ STUCK in CPF!!
worst, overpay for house using CPF, and $ still STUCK!
CPF is a trap already...
To me, CPF is nothing but a "Every Man For Himself Scheme" or "Meritocracy Scheme" to it's MAX.
(27-05-2014, 05:54 PM)d.o.g. Wrote: [ -> ]There are already policies in place to prevent you taking out most of the money e.g. the Minimum Sum Scheme and CPF Life.
For salaried employees there is not much you can do except to use the CPF OA to pay for your house so that you can use cash for other things. For the self-employed, paying CPF contributions voluntarily is IMHO a poor choice. Better to pay the taxes and have full flexibility for retirement planning, than to tie up your money forever (in MSS/CPF Life) in exchange for some tax savings. The time value of money matters!
As usual, YMMV.
You could also allow your kids tuition fees to be funded from the CPF account. Yes repayment is necessary but it frees up cash flow to use for other things while they are studying, and if it is your intention to fund their university anyway, just give them the cash difference when they are buying a house to make up for the deficit later.
Another way to extract maximum value would be using it to max out your housing during a favourable market - in this way the CPF is being worked to generate value outside of the constraints of the system. In the event of a sale the RA will still have to be topped up, but you could take this into account and execute any transactions before 55 and get the cash refund from the sales gains, until they change the rules. Buying stocks is of no use as the cash is fully locked in CPF until the withdrawal age kicks in and still then subject to MSS.
What many people do is to use CPF to buy property and then collect rent in cash.