It is painfully obvious that the constant name changing causes confusion for people trying to find out information about Medisave and Basic Healthcare Sum (BHS).
A quick look on the popular search terms that people are using revealed the following –
- Basic healthcare sum 2019
- Medisave ceiling 2019
- Medisave limit 2019
- Medisave minimum sum
- Medisave Contribution Ceiling (was actually the official term until it was renamed in 2015 to Basic Healthcare Sum)
People do have a very good idea of what Basic Healthcare Sum is! For now, all we need to know is that Basic Healthcare Sum is the estimated savings required for basic subsidised healthcare needs in old age. The BHS is adjusted yearly for members below age 65 to keep pace with the growth in MediSave withdrawals. Once members reach age 65, their BHS will be fixed for the rest of their lives.
For the past three years, Basic Healthcare Sum requirements are as follows –
- CPF Basic Healthcare Sum (2017) = $52,000
- CPF Basic Healthcare Sum (2018) = $54,500 (4.8% increase)
- CPF Basic Healthcare Sum (2019) = $57,200 (4.9% increase)
As you can see from the chart, different CPF contribution and allocation rates apply to different age groups – this is to ensure the employability of workers and to meet their needs at various stages of their lives.
I don’t use much of my CPF-MA each year. At the start of 2018, Medishield Life deducted $228.00 and my private shield plan (government ‘A’ ward) took another $162.21. In addition, a deduction of $346.21 was used to pay for my dad’s heart medication. Did I mention that I had hit BHS last year?
With the end of the first quarter of 2019, I can now report my quarterly results as of 1st April (haha much like how REITs does theirs). The target is finally in sight.
CPF-MA (BHS) : $57,200.00
I can now put the updated BHS target of $57,200 to rest as my CPF funds will now flow into just CPF-OA (21%) and CPF-SA (16%) for the rest of the year. A good pump would be very much appreciated this year!
CPF-OA + CPF-SA : $144,354.33 (excl. CPF-OA investments)
With money in CPF-OA getting 2.5-3.5% and money in CPF-SA getting 4-5%, that’s a lot of money getting good rates! Pretty sure to carve out good progress towards Full Retirement Sum (FRS). Provided nothing is burning up my CPF-OA, that it. These are my annual outflows (2018) –
- HDB Housing Loan : $340 x 12 months
- CPF Investment Scheme : $5.35 x 4 quarters // STI ETF
- Home Protection Scheme : $159.39
- Dependants’ Protection Scheme : $48.00
It wasn’t always sunshine and rainbows as I’ve written about in my last post. Sometimes, I talk to people I know and learn of their plans to buy HDB apartments that can be rather expensive, which will inevitably deplete their CPF-OA on a monthly basis. I don’t like golden handcuffs, and I don’t think anyone does. I’ll have to admit, I tend to keep my thoughts in my head rather than saying it out.
The Thing About Accrued Interest ..
What about accrued interest?
Accrued interest is just pure maths. It is interest on my CPF-OA money I would have earned from CPF Board if I didn’t borrow from myself to buy my HDB apartment. It is a simply tracker to let myself know how much I owe myself (in a parallel universe in which I didn’t borrow from myself), in case I couldn’t reach FRS.
Well, if I’ll reach FRS this year and have enough for my retirement, then accrued interest doesn’t matter to me. The only scenario that I can imagine it coming into play is when I sell my current place due to a second successful attempt at BTO. Maybe I’m lucky – I do not have lofty ambitions for private properties.
After FRS : Plans For My CPF-OA
I have not done a single transfer from CPF-OA to CPF-SA in my life. My understanding is very simple : CPF-OA earns less interest because of its higher flexibility. CPF-SA earns more interest to compensate for opportunity cost in terms of less usage options.
Citizens who have accumulated enough money for their own retirement (based on CPF guidelines) are ALLOWED to take money from their own CPF-OA to support their parents who are in a less ideal situation. Being in this very specific situation means that yes – CPF money is my money in ka-chiiing cash 😛
My plan in 2020 is to divert $690 each month from my CPF-OA to my parents’ CPF Retirement Accounts to fund their cash payouts, which is expected to be exhausted in three years. This will supplement the cash allowances that I’ll continue to give them monthly. As far as I know, this is the only legit way to withdraw any CPF money before the age of 55. Children who are CPF-rich whereas parents are CPF-poor. I’ll make some enquiries soon.
A dozen years is a long time, but I’m contented that it didn’t need to take me any longer than that. Slow and steady wins the race for me – nine more months to turbocharge my CPF-SA.
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