Budget 2024 – changes to our personal finance strategies

There’s been a whole lot of information protection about what Price range advantages you may get, so I received’t go into element right here, however I wished to deal with the modifications in a single’s private finance methods that this yr’s Price range bulletins has known as for.

These embrace:

• New modifications to CPF funds and RA caps, after age 55
• Why this may occasionally spell the dying of the favored 1M65 motion
• Adjustments to money top-ups for folks underneath the Matched Retirement Financial savings Scheme
• Doubtlessly extra tax reliefs for supporting your dependents

Let’s begin first with the excellent news – the money vouchers and goodies for each Singaporean.

1. Extra vouchers and rebates for people and households 

This graphic by Today offers an awesome abstract of what we are able to every anticipate to get:

Tip: Don’t get too excited and begin spending this cash as a “bonus”. The payouts are supposed to assist offset the rising price of dwelling and 1% GST enhance this yr, so use them on your necessities as a substitute of justifying a splurge on your needs.

Even higher, for those who can, make investments that as a substitute! With compound curiosity, even an preliminary funding of $5k with a 6% annualised return over 20 years, may develop into $28k.

I share funding ideas and fast takes on my Instagram virtually each day – follow me here @sgbudgetbabe for those who haven’t already!

2. The tip of the CPF-SA Shielding Hack

When DPM Lawrence Wong introduced the closure of the Particular Account (SA) at age 55 when the Retirement Account (RA) is created, it riled up many within the private finance neighborhood. That’s as a result of the hack allowed Singaporeans to keep up a risk-free 4% p.a. account that they might withdraw money from anytime after the age of 55.

That made it higher than some other mounted deposit or endowment plans because of the 4% p.a. with no lock-in!

The CPF-SA Shielding Hack was a technique that allowed of us to “cease” their SA funds from being transferred into the CPF-RA, the place it might be locked into CPF Life for month-to-month payouts. By investing their SA funds proper earlier than they flip 55, the majority of funds for RA can be taken from their Unusual Account (OA) as a substitute. Thereafter, these of us would dump their SA investments for the cash to return into the SA, the place it might proceed incomes 4.08% p.a. and out there for withdrawal anytime.

With the closure of the CPF Particular Account at age 55, our authorities has formally closed up this loophole.

The excellent news is, whereas they’ve taken this away from us, they’ve additionally raised the Enhanced Retirement Sum (ERS) to 4 occasions the Fundamental Retirement Sum (BRS).

Dying of 1M65? No, however you’ll now have to take a position, too.

CPF members desirous to get larger payouts in retirement had been beforehand restricted to topping up their RA to not more than the Enhanced Retirement Sum (ERS), which was 3 occasions of the Fundamental Retirement Sum (BRS). The federal government has now raised the ERS to 4 occasions the BRS as a substitute, which now permits one to commit extra of their CPF financial savings into their CPF-RA to obtain larger CPF payouts if they need. A member turning 55 years old in 2025 can thus receive about $3,300 per month of CPF LIFE payouts at age 65 (if he chooses to top up to the new maximum ERS), which is up from about $2,500 today.

The modifications imply that you may now solely select from the next choices as a substitute:

1. Preserve your extra funds in your CPF-OA: you’ll earn a decrease rate of interest of two.5% p.a. however can withdraw anytime you would like.
2. Prime up your CPF-RA to max out the ERS: commit your funds to CPF Life to get larger payouts. Funds within the Retirement Account can’t be withdrawn at will.
3. Make investments your extra CPF-OA funds: you may get the next return than 2.5% p.a. however tackle funding danger. Threat-adverse of us can go for capital-guaranteed investments resembling T-bills, whereas of us keen to tackle extra danger can discover different CPFIS-approved merchandise or funds for larger potential returns.

For those who’ve been voluntarily topping up your CPF yearly and shifting funds into your Particular Account with the unique intention to execute the CPF Shielding Hack whenever you flip 55, you’ll now must rethink your technique in gentle of the above modifications.

3. Larger co-matching for topping up dad and mom’ CPF

In 2021, the federal government introduced the launch of the Matched Retirement Financial savings Scheme (MRSS) to run for 5 years between 2021 – 2025 throughout which, the Authorities will match each greenback of money top-ups made to the CPF Retirement Accounts of eligible members as much as $600 per yr. This might quantity to a most of $3,000 over 5 years.

I’d shared about how I’ve leveraged it to get more money for our parents. Nevertheless, my dad and father-in-law crossed 70 throughout this era, which meant they might now not profit from the scheme.

With the rise in matching grant cap and removing of age limits, this spells excellent news for us who want to get more cash from the federal government through the MRSS.

Nevertheless, with the tax reduction for money top-ups that appeal to the MRSS matching grant now being eliminated, it additionally signifies that we have to prime up extra to proceed getting the utmost for CPF tax reliefs. In different phrases:

Bear in mind how I shared in earlier years that I may by no means get tax reliefs for supporting my dad and mom financially, as a result of their part-time jobs or brief employment stints meant that they simply crossed the $4k annual earnings threshold and thus didn’t qualify for the reduction?

Nicely, the federal government has (lastly!) elevated the annual earnings cap to $8k now, to mirror the rising prices of dwelling and wage development. In case you have any dependents (dad and mom, kids, siblings or partner) who earn underneath $8,000 a yr, now you can declare tax reliefs on them.

That is nice information for a lot of of my mates, particularly for circumstances the place one partner is quickly unemployed or has taken a profession break (normally to care for his or her youngsters or sickly dad and mom).

5. Preschool subsidies to be prolonged to non-working moms

I’ve mates who needed to cease working as a result of their youngsters wanted them, and it has all the time felt unfair that they had been excluded from the preschool subsidies that working moms may apply for.

Now that the federal government is (lastly) extending the identical preschool subsidies to all moms – no matter whether or not the mom is working or not, I really feel completely happy for my mates who can now lastly stand on the identical footing.

Conclusion

This yr’s Price range 2024 undoubtedly has one of many extra beneficiant handouts in recent times, so it’s no surprise that almost all Singaporeans are usually fairly proud of the bulletins.

The CPF modifications – whereas surprising to many – served as a great reminder as soon as extra that we can not afford to disregard coverage danger on the subject of planning for retirement with our CPF. Our authorities has proven that they will change the foundations anytime they need, and there’s nothing you or I can do about it when that occurs. Thus, CPF ought to solely be one aspect of our general plan – see mine here:

I used to be personally bummed that they didn’t reverse the modifications on the Working Mom Youngster Reduction (WMCR) which was introduced final yr, a lot to the chagrin of many middle-class working moms. Read about why I wasn’t a fan of the changes, and how this negatively impacted many of my friends’ consideration as to whether to have another child. Expensive DPM Lawrence Wong or our expensive policy-makers, for those who’re studying this, wouldn’t you think about bringing that again, please?

With love,
Price range Babe