Wise man!!
I am mid-40's and currently, SA account has $193K. I am not able to top up to gain the tax incentive as the capped is $166K.
If I can continue to till age 55, it would be great to hit the then ERS limit estimated $354K. This is easily achievable with the annual contribution and 4% compound interest. And have not factor in the extra amount sitting in the OA that would be transferred to meet the shortfall.
I feel that SA ERS is a safe retirement plan as I have encountered huge investment losses in the past.
CPF life would be my safety net at age 65. Alternatives are the SRS which I have been contributing. However, besides investing the SRS on UT (global market yield 8%), I am not willingly to take the risk in buying shares. So there is a large amount sitting in SRS account earning low interest. Some banker recommended buying into insurance which gives an estimated guarantee of 2.25%. I feel the insurance yield is too low to consider.
May I ask what would be a safer bet using SRS money? Perhaps waiting for good time to buy into the blue chip shares such as bank,
SIA, or ST gov-linked coy?
Of course, besides depending on SRS and
CPF Life, I have annuity insurance and cash saving to depend on.
I am not sure when the poster claimed "Putting money in
CPF SA is about the dumbest thing an educated person can do.", does he has any other good suggestion that has worked for himself or proven to be safe and yield better and guarantee for life as
CPF Life?
Thanks
Quote:
Originally Posted by Unregistered
I must qualify that I was not the poster who claimed that "Putting money in CPF SA is about the dumbest thing an educated person can do." But I would like to offer some perspectives to the issue. There is also no right or wrong here.
Money in the CPF SA enjoys a guaranteed 4% interest per year from the government which means its practically risk free. But in exchange for that, you have to forgo the option of ever touching the money until you are 55 or 65.
Why 55 or 65?
At 55, a portion of the SA will be automatically placed in the RA (retirement account). In 2017, the RA full retirement sum is $166k. (This amount increases every year to keep pace with inflation). So at 55, if your SA amount was higher than the FRS of $166k, you will be able to withdraw the excess left over in your SA. If not, you will have to wait till you are 65 to ever see your money. And at 65, you will be paid monthly a certain amount till your last day. So you see, even at 65, you cannot withdraw your full amount!
So when you are young, just getting married and looking to purchase your first home and starting a family, it may not be the wisest thing to "lock up" money in the SA. This money could help you reduce your home loan and mortgage payment burden.
On the other hand, when you are more settled in your career, family home is set up, and having extra savings, it would make sense to shore up your SA. This has to be money you dont need to use for a very long time!
Sharing my own experience, I didnt put extra money into SA when I was young. I only contributed what they deducted monthly from my salary. This went on till I was 50 yo. At 50, after my home loan was fully paid and with extra savings, I then contributed to the max what was allowed in the SA. By 55 yo, I had $230k in my SA, from which they took away $166k to put into my RA leaving about $70k in my SA. This $70k is the amount that I can withdraw at 55, if I so choose to. But since I am still working, I leave the money in SA to earn that 4% pa. |