You might be supporting your parents ahead of their retirement by giving them a portion of your salary now, but is there a better option? Here's why topping up their CPF accounts yields more benefits:
1. Your parents can earn up to 6% interest on their CPF savings
Your parents' Retirement Accounts earn up to 5% p.a. interest, inclusive of a 4% base interest and an extra 1% on the first $60,000 of a member's combined balances. This is an attractive rate compared to similar financial offerings in the market.
On top of that, CPF members aged 55 and above can earn an additional 1% interest on the first $30,000 of their combined balances. They would be losing out on the extra interest earned if you stuck to giving them cash.
2. Your parents can receive higher monthly payouts from CPF
By topping up your parents' Retirement Account, you're helping to build their savings towards higher retirement sums. This allows them to receive higher monthly payouts from CPF and makes the return on your top-up more than worthwhile.
3. You can enjoy dollar-for-dollar tax relief of up to $7,000
Other than the benefits to your parents, you stand to gain by topping up their Retirement Account as well. Receive up to $7,000 in dollar-for-dollar tax relief for your cash top-ups, until they reach the Full Retirement Sum.