While planning for retirement can feel overwhelming, it’s reassuring to know that implementing the seemingly simple tips can have a massive compound effect a few years down the line.
In this article, we cover 10 CPF hacks that Singaporeans should know to optimise their CPF savings and retire with more money.
10 CPF Hacks for Singaporeans
- Top up your Special Account (SA) in January and earn interest earlier
- Transfer your Ordinary Account (OA) savings into your SA for higher interest
- Shielding your Special Account (SA)
- Top up your parents’ accounts and enjoy tax relief
- Pay your monthly mortgage in cash
- Keep $20,000 in your Ordinary Account (OA) instead of using it all when purchasing your first flat
- Top up your MediSave Account
- Utilising the CPF voluntary contribution scheme
- Doing smaller top-ups throughout the year
- Top up your child’s Special Account
1. Top up your Special Account (SA) in January and earn interest earlier
When saving for retirement, the money you set aside should have a growth rate higher than that of the bank interest rate. The reality is that the interest rate offered by most savings accounts is lower than the inflation rate, meaning that your money is losing purchasing power over time.
By topping up your SA, you can earn up to 5% interest per annum (or up to 6% per annum after age 55), and possibly double your CPF savings over the span of 20 years.
If you top up your SA at the start of the year in January rather than December, you’ll give your cash an entire year to grow.
Over a decade, you’ll have accumulated 20% more interest compared to if you had you topped up in December each year.
You might want to think twice the next time you earn that December bonus!
2. Transfer your Ordinary Account (OA) savings into your SA for higher interest
If you don’t plan on using all your OA for your future housing needs and value saving for retirement early, then consider transferring your OA savings into your SA to earn a higher interest rate (up to 5% per annum).
Since your OA only pays 2.5% interest, and your SA offers 4%, those 1.5% extra interest earnings can make an enormous difference over time.
What difference can this make?
Well, let’s say you put $100,000 towards your OA that earns 2.5% interest per year, after 30 years the sum would be $209,756.76.
Whereas if you put the same $100,000 in a SA that earns 4% interest, you’ll have $324,339.75.
| Account | Sum | Sum after 30 years |
| Ordinary Account (2.5% interest) | $100,000 | $209,756.76 |
| Special Account (4% interest) | $100,000 | $324,339.75 |
| Difference | $114,582.99 (~55% more!) | |
The one thing to keep in mind is that this transfer is non-reversible.
Meaning that once your money enters your SA, there’s no going back. That being said, you may want to carefully consider whether your housing needs are settled before making this move.
3. Shielding your Special Account (SA)
When Singaporeans turn 55, all of our combined savings in our SA and OA accounts will be transferred towards a newly created Retirement Account (RA).
If you’d like to work around the withdrawal from your SA, consider doing this hack a couple of weeks before turning 55.
Remember that you need to leave behind the minimum amount of $40,000 (as it is not allowed to invest all your SA savings), and temporarily invest the remaining amount in a secure investment product that falls under the CPF Investment Scheme.
The day you turn 55, $40,000 from your OA savings and SA (up to the full retirement fund) will be moved to your RA. After this, you can liquidate the temporary investment you made earlier.
By using this hack, you’ll be able to retain the majority of your SA savings while continuing to enjoy the interest earnings.
Like any shielding strategy, this hack comes with risk. To minimise your potential losses, make sure that you do your research and are careful about picking a reputable investment product to temporarily park your SA savings.
We talked more about it here: CPF SA Shielding: Worth the Gamble?
4. Top up your parents’ accounts and enjoy tax relief
As our parents get older, many of us opt to help them out by giving them cash.
If you’re already giving your parents cash, consider channelling the cash to their CPF accounts via top-ups.
By doing this, you get a tax relief of up to $7,000 and they also benefit by earning CPF interest.
Note that there is an $80,000 personal income tax relief cap, and a limit to the top-up amount eligible for tax relief.
Read more about tax planning here: Guide to Personal Tax Planning
5. Pay your monthly mortgage in cash
Although it’s possible to pay your monthly housing loan instalment using your OA savings, paying your loan fully or even partially in cash may be the better move, particularly if you have a high disposable income and have extra cash that is not being used.
By paying your housing loan with cash, you leave more savings in your OA which means more interest earnings at a rate of up to 3.5% per annum.
Ultimately, this means that your OA savings can grow quickly if you’re paying off your housing loan with cash.
6. Keep $20,000 in your Ordinary Account (OA) instead of using it all when purchasing your first flat
Although most of us lean towards using CPF as a way to finance our first home purchase, this may not be the best option.
If you’re planning on taking out a loan from HDB, it’s worth noting that they have implemented a new rule that allows you to keep $20,000 in your OA rather than clearing it out when purchasing your first flat.
This is great because it gives you the safety net of having that extra reserve in the case that you lose your job or for whatever reason you are tight on money for the month.
What’s so great about this rule?
- The first $20,000 in your OA earns an extra 1% interest which totals to 3.5%, guaranteeing you $700 in a year
- It provides you with flexibility and an extra reserve
7. Top up your MediSave Account
There’s a high chance you’ll rack some medical bills or hospitalisation fees at some point, and your MediSave can be used in these cases to offset your medical bills.
It’s important to set aside enough savings for future healthcare expenses, particularly as you get older.
By topping up your MediSave, you can grow your savings for healthcare needs at up to 5% per annum and enjoy tax relief from the cash top-ups to your MediSave.
8. Utilising the CPF voluntary contribution scheme
Imagine that you’ve maxed out your CPF savings by topping up to the current limit in your SA.
Now if you want to enjoy the lucrative CPF interest rates, consider the CPF voluntary contribution (VC) scheme – the “VC-3A” scheme-to top-up monies to your OA, SA, and MediSave CPF Accounts (all subject to the CPF annual limit).
The CPF annual limits consider all contributions made, whether voluntary or mandatory.
The most you can voluntarily contribute to the 3 CPF accounts is the difference between the CPF annual limit ($37,740) and the total annual mandatory contribution.
The extra contribution above the CPF annual limit will be returned to you without interest from your voluntary top-ups.
9. Doing smaller top-ups throughout the year
Although many people like to top up their CPF as a one-time hit and run, it doesn’t have to be this way.
You can make small yet regular top-ups, that may even exceed the lump sum amount you would have otherwise made.
For example, you don’t need to contribute $10,000 to your SA or RA at one time, you can split this into 12 monthly payments over a year.
On top of this, consider using your bonuses or birthday money to make some additional contributions, as these smaller amounts add up over time.
10. Top up your child’s Special Account
If you’re set for retirement and you happen to have surplus cash (maybe you won a lottery or received some inheritance), you may want to consider contributing to your child’s SA to maximise compounding interest rates.
Assuming your child’s SA is empty, you can top-up up to $192,000 (the FRS in 2022).
If the interest rate is 4%, then this amount will compound to $1.66 million over 55 years.
The above calculation does not account for any change in CPF policies and interest rates.
It’s important to note that there is no tax relief for contributions made to children’s CPF accounts.
Final words
With the above hacks, you’ll be on the right track to retiring with a comfortable amount of money in no time.
From simply topping up in January to being strategic in how you finance your home, there are plenty of ways to maximise your CPF and optimise your retirement efforts.
While CPF planning can be tedious, it doesn’t have to be.
Whether you want a second opinion to make sure you’re on the right track or need comprehensive financial planning advice, consider speaking to an MAS-licensed financial advisor.
Click here to get connected to a financial advisor today for free!
