II. Transfer $8,000 to your CPF Special Account (SA).¹⁰

Tax saved: $1,200 (15% of $8,000).¹¹

Downside: the money is stuck in your SA.

But you'll get 4.14% interest per annum.¹² And the money in your SA will be transferred to your Retirement Account when you hit 55, and will go towards funding your CPF payouts from the age of 65. The more you have in your SA, the more you'll have in your Retirement Account, and the more your monthly CPF payouts.

Now, the common response I get is, "but won't my money be stuck with CPF forever?"

I get it. I know that many folks are adverse to voluntary CPF top-ups. I myself used to think that there was no point in making voluntary CPF top-ups. I saw it as a black hole that I would never be able to recover funds from.

However, my perspective shifted after I had kids. And that's because you can nominate your children, or anyone else for that matter, to receive your CPF savings when you pass on. This means, for example, that you can plan to leave less cash to your descendants, in the knowledge that they will be able to receive cash from your CPF nomination. More on how it works here: https://medium.com/@khelvinxu/if-i-voluntarily-top-up-my-cpf-wont-my-money-be-stuck-in-there-forever-bb6e790d2d74. More on CPF nomination here: https://khelvinxu.medium.com/cpf-nomination-a-quick-primer-512d05009b5a.

So, in real terms, suppose I religiously top up my CPF throughout the course of my working life. When I pass on, let's say I have $100,000 left in my CPF accounts (after deducting the amounts I had collected via the monthly CPF payouts). My nominee(s) will get $100,000 in cash - it doesn't go to their CPF account(s). In other words, the unused CPF top-ups don't go to waste, or even into the Government's coffers - someone of my choice benefits from them.

And even if you don't plan to have kids, you may well have younger sibling(s), niece(s), nephew(s), friend(s), or even a favoured charity. If you would like to leave something to any of them when you pass on, consider this seriously.

Note that in some previous versions of this guide, I suggested that:

(a) if your Ordinary Account (OA) + SA exceeds the "Full Retirement Sum", you can withdraw the difference;

(b) if you are confident that you will eventually be able to exceed the Full Retirement Sum, then you will eventually be able to collect the excess, in the form of cold, hard, tax-free cash; and

(c) this is therefore a further incentive to top up your SA via this scheme.

However, CPF has clarified that top-ups under this scheme cannot be withdrawn.¹³ As such, that logic does not apply.

Also, a final caveat: this option will not be open to you if your SA already contains a sum that is equivalent to the current Full Retirement Sum (which is $205,800 as of 2024). If you have been making regular CPF contributions, or have been transferring CPF funds from your OA to your SA,¹⁴ it is very possible to hit the Full Retirement Sum in your 40s or even earlier.¹⁵

III. Transfer $8,000 to your parent's / spouse's SA / Retirement Account.¹⁶

Tax saved: $1,200 (15% of $8,000).¹⁷

Downside: you're giving the money away to someone else, and it goes to their CPF account (as opposed to being cash that they can spend). This isn't for everyone. Please have a serious discussion with the recipient beforehand.

If you intend to make a transfer to your spouse, you only get tax relief if your spouse is earning $8,000 or less for the year.¹⁸ So if you're in a dual-income household, you probably can't save on taxes by making a transfer to your spouse.

Stay tuned - part 3 coming up next.