Sunday, 8 March 2015

CPF contribution salary ceiling to be raised from 2016

Recently, our DPM Tharman Shanmugaratnam, announced that from January 2016 onward, salary ceiling for CPF contribution will be raised to $6,000 from $5,000 currently.

Those earning more than $5,000 will get a slight reduction in take home pay, but more in CPF contributions (the additional contribution coming from your employer), which can be used to service your mortgages or invest in equities / bonds (assuming you have sufficient funds for investment purposes).

If you do none of the above, you can consider setting aside these additional contributions into your Special Account (SA), which earns 4% (subjected to changes according to government policy) compounded interest rate annually. There is even an additional 1% interest for the first $60,000 in your CPF account. Do take note that the money placed in the SA cannot be withdraw till retirement age.

I think this is good news for most unless you are able to consistently generate more than 5% annual returns from the market.

Best,
AT

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Financial freedom = Passive Income > Expenses. Always remember that there are two sides to the equation of financial freedom. Beside working on how to improve our passive income through investing, we should never neglect the expenses portion. By striving to improve both side of the equation, we can achieve our financial goals and win in the game of money.

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