Step-By-Step Guide: Top-up Your CPF SA Using Cash to Grow Your Retirement Fund & Save on Income Tax
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Step-By-Step Guide: Top-up Your CPF SA Using Cash to Grow Your Retirement Fund & Save on Income Tax

profileKenneth Lou
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As we reach the end of the year, I spent the morning together with my fiancée going through our yearly finances, identifying where we could have done better.

Overall it was pretty satisfactory.

We did grow our savings, investments, and most importantly our Central Provident Fund (CPF) as well.

This was despite us having to make a downpayment of about $30,000 using our CPF Ordinary Account (OA) for our HDB BTO.

As well as the downpayment for our upcoming wedding.

We noticed that one consistent growth was in our CPF accounts.

And that made us pretty happy as it assured us that our retirement funds were growing.

I was then reminded by what Mr 1M65, Loo Cheng Chuan shared at the Seedly Personal Finance Festival 2019 on how you can accelerate your overall savings even faster via the CPF Special Account (SA).

And we decided to practice what was preached.

Transferring from Cash to SA
Pictured above: Me and my fiancée transferring cash to our respective CPF Special Accounts

In fact, CPF reported that more people made top-ups to their CPF accounts despite the challenging economic conditions in 2020.

Most of them are first-timers and young adults who recognise the need to grow their retirement savings early.

Thinking of doing the same?

Here’s a step-by-step guide on how to contribute to your CPF Special Account (CPF-SA) via the RSTU (Retirement Sum Topping Up Scheme).

Note: By the way, we’re not sponsored or paid to write this. Any opinion is purely my own sharing!


TL;DR: Top up Your CPF Special Account to Grow Your Retirement Savings and Save on Income Tax

Did you know that topping up your SA will help you to save on your yearly income tax?

However, you should consider this only if you have some spare, liquid cash (between $1,000 to $7,000 would be a good range) on hand.

And if you don’t intend to touch it until you’re 65 years old (yes, that’s a damn long time) where it will be streamed out as monthly payments under CPF LIFE.

Why Top Up My Special Account?

You can

  • Top-up to your own and/or loved ones’ Special Account, for recipients aged 55 and below, up to the current Full Retirement Sum. For those aged 55 and above, you can do a top-up to the RA up to the current Enhanced Retirement Sum.
  • Take advantage of compound interest and grow your retirement savings — your $7,000 will become $21,000 in 30 years!
  • Save on total taxable income by $7,000

HOWEVER, this action is irreversible.

If you are keen, it literally takes you 10 minutes to do this online or via PayNow.

While you can wait till the end of the year to do this, you can also choose to do this cash top-up early in the year too!

Before I detail this step-by-step (with pictures).

I want to share more about the ‘magic’ behind compound interest and explain why doing this top-up works for the better…


Pros: Compounding With 4% Per Annum Interest Works ‘Magically’

If you leave your cash in a regular bank savings account, you’ll get a paltry 0.05% p.a.

If you use a high-interest savings account, you’ll probably get anywhere between 0.05% to 2% p.a.

But these interest rates can change anytime at the bank’s discretion.

And what’s even worse is that when you see your cash sitting there… there’s a higher chance that you would spend it.

However, if you choose to put that cash into your CPF account instead, you’ll earn a guaranteed 4% to 5% p.a.

Guy getting mind blown
Source: Giphy

I’m sure some of you might be thinking that you can get more than that out there.

But the risk is definitely higher than putting it in your CPF account, which is backed by the AAA-rated government of Singapore.

30 Years From Today: Your $7k Will Become $21k

So…

“How much will $7,000 be in the future,” you ask?

I did a little math and worked some Excel magic to come up with this chart:

The power of compounding CPF SA

This chart shows you that if you topped up $7,000 into your CPF SA today.

It’ll grow to become $21,000 in 30 years’ time.

If you think about it, that’s really incredible with an interest rate of 4.0% p.a.

For my fiancee and me, we’re in our late 20s this year.

Which means that at 65 years old — that would be about 30-plus years later — the value in our CPF SA will definitely be more than three times its current balance just by compounding at 4 % to 5% p.a.

That sounds like a pretty good retirement nest egg.

And potential extra funds for us to leave for the next generation — if we want to.

Pros: Grow Your Retirement Savings & Save On Your Income Tax

By topping up your CPF SA, you can:

  • Grow your retirement savings earlier by taking advantage of time and compound interest
  • Save on your taxable income by up to $7,000 for individual contribution
  • Save on another $7,000 taxable income by doing a top-up for your spouse, parents, parents-in-law, grandparents, grandparents-in-law, or siblings

Cons: You Say Goodbye to Your $7,000 for a Very Long Time

As the Chinese saying goes, “You first taste bitter before you taste sweet”.

This is admittedly a very Asian mentality.

But what I’m trying to get at is that pressing the button to transfer the $7,000 was pretty painful.

However, in my opinion, doing this CPF SA top-up is a very prudent decision in the long run.

So as painful as it was, we’ll definitely do this again next year to grow our CPF Special Account at a compounded rate!


8 Steps to Transfer Cash Into Your CPF Special Account

If you’re convinced by what I’ve shared so far.

And want your retirement savings in your CPF SA to grow at a faster rate…

Just follow this step-by-step guide to find out how to transfer cash into your CPF Special Account.

All it takes is just 10 minutes of your time.

Note: you can either download the CPF Mobile App or head over to the CPF Website (which I have used)

STEP 1: Navigate to “Building Up My/ My Recipient’s CPF Savings”

Submit an online application via “My Requests” and selecting “Building Up My / My Recipient’s CPF Savings”.

STEP 2: Enter Your CPF Account Number

Note: your CPF Account Number is your NRIC.

STEP 3: Select  “Top Up Your Own SA Account Under The Retirement Sum Top Up Scheme”

STEP 4: Key in Your CPF Account Number Again

STEP 5: Key in the Amount You Want to Top up to Your SA

STEP 6: Confirm Your Payment Request Details and Click “Make Payment”

STEP 7: Payment Request Page Will Show Up With a PayNow QR

STEP 8: Check That Your Payment Has Been Received

You can check this under “Transaction Details” and looking at “Other Contributions”.


Parting Thoughts: You Have to Taste Bitter First Before Enjoying the Sweetness

I’ve shared the pros and cons of topping up your CPF Special Account.

But most importantly, I want to highlight again that this action is irreversible.

Meaning you should only do this if you do not intend to touch the $7,000 for the next 30 to 40 years of your life.

But on the flipside.

The magic of compound interest is really cool, so this is something that you should seriously consider if you’re serious about your retirement.

Alternatively, you can also consider the $1 top up to your Supplementary Retirement Scheme hack too!

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About Kenneth Lou
Co-founder of Seedly. Passionate about helping people make smarter financial decisions.
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