Personal Finance

My CPF and SRS Strategy for 2024

Calvin Lo

Every time year end comes around, I end up scrambling to figure out what to do with CPF and SRS. This year, I’m trying to plan ahead and have better clarity in my CPF/SRS strategy. Here’s what I plan to do this year, subject to change.

Since I’m still below age 55, usually there are a few things I can do under my control:

  • Voluntary Contribution (VC) to all 3 CPF accounts
  • Voluntary housing refund to OA
  • Cash top up to SRS (eligible for tax relief)
  • Cash top up to SA/MA (eligible for tax relief)
  • CPF transfer from OA to SA

VC to all 3 CPF accounts

If my mandatory CPF contributions for the year don’t hit the CPF Annual Limit of $37,740 (i.e. my gross annual salary package doesn’t hit $102,000), this would be my first choice. However, my bonus usually takes me up to the limit unless it’s a bad year. So, I would usually decide after bonus payout around end of Q1.

Voluntary housing refund to OA

For the past 2 years, both my wife and I have been using cash to refund the OA used for monthly instalments for those respective years. Currently, $367.50 is being deducted from each of our OA accounts every month for housing so that works out to ~$4.4k each.

This year, we will continue to refund this amount in cash into OA, and subsequently transfer to SA (more on that later). Doing this refund would help to reduce the OA used for housing and incur less accrued interest, which is the interest that would have been earned if the funds weren’t used for housing and left in OA. Transferring it to SA would earn even higher interest.

As of today, I’ve withdrawn $103k of OA for housing and have accrued $17k in interest. That’s $17k that could’ve been added to my CPF balances.

Cash top up to SRS

For the past 2 years, I’ve been topping up $3k into SRS to get some tax relief. The funds I used were earmarked for long-term investments anyway. So far, I’ve invested SRS funds into a US index fund and cash fund via Endowus.

Read: Reducing Taxes While Saving For Retirement Through SRS Contributions

As at 04 Jan 2024

Note that SRS account only pays an insignificant 0.05% interest, so you practically have to invest it otherwise the opportunity cost outweighs the tax relief benefits.

If you’re interested to try Endowus, sign up with my referral code J5HPB or through this link and invest S$1,000, both of us will get S$20 Endowus fee credits.

This year however, I’m thinking of topping up my SA/MA instead and I’ll explain my rationale in the next section.

Cash top up to SA/MA

The main reason I’m leaning towards topping up SA/MA is because I’ve not hit the Full Retirement Sum (FRS) yet, after which I won’t be able to top up SA anymore anyway.

I’ve hit Basic Healthcare Sum (BHS), but seems like I may still be able to top up MA since the limit will be increased by $3k to $71.5k. That’s also an option since top up to both SA/MA qualifies for tax relief up to $8k.

I would prefer to max out my MA to BHS and SA to FRS first, before continuing to get tax relief via SRS top up. I’m hoping to hit FRS within the next 2 years before I hit 40. Also, funds in excess of FRS can be withdrawn at age 55 vs age 63 for SRS, so that optionality is nice although I’ll probably just leave the funds there untouched.

CPF transfer from OA to SA

Lastly, I’ll continually transfer excess OA to SA until I hit FRS. I’ll leave a buffer of $30k in OA to service housing repayments in case of retrenchment or other unforeseen events.

We don’t intend to upgrade our HDB at least for the next 5 years, so I don’t see much point in holding too much in OA and forgoing the higher SA interest.

By the way, these are the current CPF interest rates:

Concluding thoughts

As interest rates are expected to fall going forward, CPF SA/RA/MA provides very decent interest rates at very low risk. Of course with CPF, the downside is that cash top ups are irreversible and locked in until at least age 55.

Although that’s still some time away, I intend to live prudently where possible in terms of lifestyle and housing, so I should still have sufficient cashflow until I can access my CPF funds. Meantime, CPF SA/MA will earn at least 4% which is not too shabby.

Update: Just topped up $3k to MA on 03 Jan 2024

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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