Understanding Voluntary CPF Contribution

    CPF helps building the very foundation of retirement planning for citizens, especially self-employed individuals. Essentially, CPF is divided into 3 primary accounts, which includes Ordinary, Medisave, and Special account. The terms dictate that if you are a self-employed person, you must make a compulsory annual contribution towards your Medisave account based on your age and business income. However, you can always contribute to all the three accounts voluntarily, and there is no minimum voluntary amount you must contribute.

    Why should you voluntarily contribute towards your CPF?

    There are several reasons why making voluntary CPF contribution might work in your best favour. You might want to take advantage of high compounding interest rates. Often, you may have a surplus of money, besides your emergency fund. In such a situation, you would ideally want to find an alternative way that not only increases your money, but also remains risk-free while you make use of compound rates offered. As mentioned earlier, this is also best suited for self-employed people who intend to financially secure their future.

    Moreover, it’s ideal you contribute towards your CPF whenever possible. This will not only increase your CPF savings, but it will also assist in supporting your personal expenses, such as medical expenditure, home purchase, and other post-retirement expenses. This is not all. Money can always be transferred from your Ordinary Account to your Special Account to earn greater interest.

    The whole point of making CPF contributions is to create a robust safety net from a financial standpoint. However, to ensure that, you must start making CPF contributions as early as possible. Based on calculations, you can make estimates if your current contributions meet your future requirements. This is the most ideal approach to go about making CPF contributions.

    You could also be working overseas, with an eventual plan to settle back in Singapore. In this case, CPF contributions can be made to your retirement fund, using which you could plan a comfortable retirement in Singapore. Besides, topping up your Medisave account lets you get tax relaxation.

    CPF contribution rates

    Depending on the age and income, you and your employer must make monthly contributions towards your CPF. These rates vary a lot. For instance, if an employee’s age is 55 and below, and he earns a sum below or equal to S$50 per month, his total CPF contributions, which includes employer’s and employee’s share, would be nil. The same will apply to the employee’s share of CPF contributions. Similarly, for people aged between 55 and 60, and earning between S$50 and S$500, the total CPF contributions would stand at 13% of total wages. However, the employee’s share of CPF contributions would remain nil.

    In another example, let’s take the case of someone aged between 60 and 65, and earning between S$50 and S$500. In this scenario, the total CPF contributions would amount to 9% of the total wages, and employee’s share of CPF contributions would be nil. On the same lines, people aged above 65 and earning between S$50 and S$500, will have total CPF contributions which is 7.5% of the total wages, while the employee’s share of CPF contributions would be nil.

    What are the interest rates earned on each account?

    There are different rates of interest associated with different CPF accounts:

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