Is your CPF the Devil or an Angel?

The Singapore CPF is a very powerful tool. However, depending on how you intend to use your CPF, it can work for you or against you.

There are many things you can do with your CPF. Click here if you would like to know more about “What can I use my CPF for?“ However, it does not mean that just because you can use your CPF for those purposes that you should.

Dipping your hand into that CPF jar to help with expenses such a downpayment on your house is like taking that first step into the devil’s lair. You don’t know how long that road will take and if you will ever get out of it.

However, if you are really short on cash and see a good “investment” in the house you want to buy, the CPF can help you with the affordability of the house. It provides you with the funds to help cushion the affordability when making that initial purchase. *BE WARNED* using your CPF will come at a price. Be prepared to payback the accrued interest when you sell that house. If you would like to learn more about how to reduce the impact of CPF accrued interest, you can reference my previous article here.

“Ok Mr Kua Simi, I get it. You are trying to tell us not to use our CPF as much as possible right? I listened already. What else you want me to do?”

Have you ever considered topping up your CPF with cash?

Topping up your CPF with your hard earned cash is not intuitive to most people. Who in their right minds would willingly put their hard earned money into our government’s piggy bank knowing it’s going to be stuck in there until they reach the age of 55?

If the withdrawal of your CPF to fund your current day needs is a sin then topping up your CPF is like performing a miracle. I total understand not everyone has spare cash lying around read to be put a piggy bank to be locked up for many years to come. So here is some of Mr Kua Simi’s guidance on whether to top up your CPF.

Whether to top up your CPF with your hard earned cash really depends on what you are going to be doing with that cash. If you are (1) Planning to splurge it on something you don’t need (2) Leave it in your bank account (3) Leave it in your milo can/khong guan biscuit tin under your bed, then i’ll advise you to consider using that money to top up your CPF.

However if you are planning to use that money to (1) buy food for your daily needs (2) pay for your medical bills (3) won’t be able to survive without that money or something to that effect then i’ll advise you not to do so.

Where does my money go when I top up my CPF?

There are two kinds of cash top ups you see on the CPF website. (1) Voluntary Contributions (2) Retirement Sum Topping-Up Scheme. These are dependent on your current age. If you are below the age of 55 you can do a Voluntary Contribution. However if you are 55 and above you can reference the Retirement Sum Topping-Up Scheme. For the sake of this article i’ll be focusing on the Voluntary Contribution. Reference the CPF for more information regarding the Retirement Sum Topping-Up Scheme.

Every time you make a Voluntary Contribution to your CPF, the percentage of your contribution will be split accordingly into your OA, SA, MediSave account based on your age. Reference the following table for more information on those percentages.

How much can I make if I top up my CPF?

Take note, the government limits how much you can top up your CPF based on the difference between the mandatory contributions and the CPF Annual limit for the year which stands at $37,740 at the time of this writing.

Mandatory Contributions refers to compulsory contributions required under the CPF Act. These include CPF contributions on the Ordinary and Additional Wages for employees, and MediSave contributions by self-employed persons.

In simple english, take $37,740 minus the CPF contributions from you and your employer that’s how much are you are allow to top up your CPF for the year.

How do I top up my CPF account?

Shown above is an infographic from CPF which tells you the many ways to top up your CPF. I would think, in current day and age the PayNow QR code would probably serve most people well.

Conclusion

In conclusion, the situation will depend from person to person. But if you can help it, try your best not to reach into that cookie jar for your CPF money. Even better if you can put more cookies into that jar if you can afford it. Plan for your retirement early that way you won’t be wondering where all your money went when you are at 55 years old. What do you think? Will you be going to heaven or hell?