Because of a nudge by Siew Mun, I went to learn the CPF Modification Invoice 2021.
A few of my many blogs on the CPF have turn out to be outdated due to this Invoice.
The modifications which curiosity me most are the next and they’ll take impact from 1 January 2022:
1. Get pleasure from tax aid after we prime up our family members’ CPF MA.
I’ve at all times been curious why the recipient will get revenue tax aid and never the giver?
Effectively, that is now mounted.
2. Get pleasure from as much as $16,000 revenue tax aid when topping up CPF MAs.
We are able to stand up to $8,000 revenue tax aid for topping up our family members’ CPF MAs.
We are able to additionally stand up to $8,000 revenue tax aid for topping up our personal CPF MA.
Take be aware that this revenue tax aid cap is shared by the RA, SA and MA.
So, beforehand, we’d not say “Prime Up” to MA however “Voluntary Contribution” to MA.
Now, after we inject cash into the MA, it’s a “Prime Up” and it’ll share the annual revenue tax aid cap for the RA and SA.
This annual cap was $7,000.
3. Beefing up the MA is not a part of the CPF Annual Contribution Restrict.
This follows from the earlier level that injection of cash into the CPF MA will likely be thought of a “Prime Up” and never a “Voluntary Contribution.”
What do all these modifications imply for these of us who’re actively utilizing the CPF to have a robust basis in retirement funding?
Would my technique have modified due to these modifications?
Within the first 4 years of my life as a working grownup, I transferred all my OA financial savings to my SA to offer it a much bigger base and extra time for compound curiosity to work its magic.
I’d nonetheless try this immediately if I simply began my life as a working grownup.
If I had additional funds, I’d have pumped extra money into my SA which might get pleasure from revenue tax aid on the identical time.
Earnings tax aid will apply to the primary $8,000 of Prime Up from subsequent yr as an alternative of $7,000.
Now, in my early retirement, I’d proceed to do yearly Voluntary Contribution to my CPF account as much as the prevailing Annual Contribution Restrict as I consider the CPF as a AAA rated sovereign bond with engaging coupons.
The distinction with this CPF Modification Invoice is that I will inject a bit extra money into my CPF account from subsequent yr as a result of the MA is now below the “Prime Up” scheme and never “Voluntary Contribution.”
Since my CPF SA has already hit the prevailing FRS, I can’t do Prime As much as my CPF SA anymore.
Nonetheless, for the reason that Primary Healthcare Sum will increase yearly, there will likely be room for me to Prime Up my CPF MA yearly.
I’ll present hyperlinks to this weblog in a few of my older blogs reminiscent of the next:
Learn Siew Mun’s remark on this weblog’s feedback part:
Retiring by 40 is a fantasy.