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Parking my extra $14,000 cash into CPF for better returns

Some people see putting money into CPF as a foolish thing to do. They do not believe in the CPF system for it locks their money up unless conditions are satisfied. They may be right, and they may be wrong, for there are no perfect systems.

I am putting my faith in CPF as a way for me to generate higher returns for my retirement. A 4% p.a interest in risk-free environment. Other than CPF, which other systems provide such benefits? I am only in my twenties, and have close to 30 years till 55 before I could start withdrawing my money (assuming this policy does not change). I was apprehensive about this initially - what if I need the money in the future? Once I put my money in, the action is irreversible. It does not have the liquidity like my 1 year FDs, SSBs or my savings account. Maybe I should park my extra cash into more FDs? But the interest rates are not attractive at all.

As I tabulated my finances, I figured that I have at least 1 year worth of my salary for immediate expenses. This should be enough even if I have a house now, with reno and furnitures costs to stress on. My partner has his own savings as well, so we should be able to work something out. Thinking about how my remaining sums are lying there earning pathetic interests of at max 1%, I thought I needed to do something about it.

Putting money into mine and my mom's CPF seems to be a good move. Both my mom and myself would be able to grow the money for our retirement. Another benefit would be the lowering of my income tax. By putting in $14,000, my income tax would reduce by $1,000. Why not "save" this by giving the money to my future self and my mom? The infographics copied from the CPF site summarises the benefits I concur with :)

This is the second time I'm topping up cash into my mom's RA and my own SA. I've previously came up with a guide on how to top up money into CPF using ibanking so if you are interested to do the same, you may refer to that. No guarantee that the steps are still the same since it has been close to a year :)

Do note that CPF encourages "you...to make top-ups early. For year-end cash top-up applications, payments should be made to the Board by 31 December to enjoy tax relief for the following year's Tax Assessment"

Happy saving!

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