You will write a plan for transfers and top-ups that fits your housing, buffer and other goals.
By the end of this module Kelvin had four possible moves in his head: an OA-to-SA transfer, a cash top-up for himself, a top-up for his mother and a voluntary MediSave contribution. Each made sense on its own. Together, they would have taken more cash than he had and locked up OA money he needed for the flat. What he needed was a plan that put them in order and said no to most of them for now.
This exercise produces that plan. It takes about half an hour. You need your notes from lessons 3.1 to 3.4, your CPF balances, and a rough picture of your cash: your emergency fund, and what you expect to spend on big goals in the next few years.
Before any CPF move, list the things your cash and OA must cover. Write three lines.
Your buffer: how many months of expenses your emergency fund holds today, and how many you are aiming for. If it is short of your target, the shortfall is the first claim on your spare cash, ahead of any top-up.
Your housing: whether you plan to buy, upgrade or right-size in the next ten years, roughly when, and how much OA money you expect to need, including a reserve for instalments if you lose your job.
Your other goals: a wedding, a renovation, a child, a course, a car. Note each with a rough amount and date.
Kelvin's three lines, with example figures: a buffer of four months, aiming for six; a resale flat this year using his OA for the downpayment and instalments; a wedding in eight months and a renovation of about S$45,000 shared with Mei.
Go through the four options in turn and give each a yes, a no or a not yet, with one sentence of reasoning.
OA-to-SA transfer: only if step 1 shows OA money you are sure you won't need, as lesson 3.1 explained. Cash top-up for yourself: only with spare cash after your buffer and near-term goals are covered. Cash top-up for a family member: the same test, plus a conversation with them and anyone else in the family who might also be helping. Voluntary MediSave contribution: only if you have room below the Basic Healthcare Sum and a reason, such as tax relief or a low balance.
Choosing none of them is a valid plan. For many people in the year they buy a home, it is the right one.
Kelvin's decisions: transfer, no, because the OA is going into the flat. Voluntary MediSave, no, because his compulsory contributions keep filling it and he has better uses for the cash. Top-up for his mother, yes, a small amount this year. Top-up for himself, not yet, starting next year once the buffer reaches six months and the renovation is paid.
For each yes, write the amount, the month and the reason. Use lesson 3.4, Timing a top-up so it earns more interest, to choose the month.
Kelvin wrote: S$2,000 to his mother's Retirement Account in the third week of December, after checking whether she qualifies for government matching, to raise her monthly payouts. From next year, S$3,000 to his own Special Account every January, because by then he expects the cash to be spare and January earns the most interest. He noted that the tax relief would be a bonus, and that he would check the IRAS limits each November.
For a top-up to yourself, work out what the plan adds to your balance in ten years. A simple way is a column of ten years: each year, take last year's total, add the year's interest at the account's rate, then add the year's top-up at the end of the year. This undercounts slightly, because a January top-up actually earns for most of its first year, so the true figure will be a little higher.
With an example SA rate of 5%, not the current rate, Kelvin's S$3,000 a year for ten years grows to about S$37,733.68. He would have put in S$30,000, so about S$7,733.68 is interest. For a top-up to a family member, the effect shows up in their balance and payouts, so note the amount and leave it out of your own projection.
Yours is done when it fits on half a page: your three lines from step 1, a yes, no or not yet for each of the four options with a reason, an amount and month for each yes, and a ten-year estimate for anything added to your own accounts. Add one more line, the date you will review the plan, which for most people is the yearly CPF check in lesson 8.3.
Write your own plan with your figures, and check it against your buffer and housing lines one last time before you commit to a date.
Write your top-up and transfer plan with amounts, dates and reasons, and the estimated effect on your balance in ten years.
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