The basic healthcare sum (BHS) will increased from S$60,000 in 2020 to S$63,000 in 2021. This means that I have to prepare S$3,000 in cash to top up my MediSave Account (MA) in January 2021.
If you do not know what is the Basic Healthcare Sum (BHS), it is the estimated savings you need in your MediSave Account for your basic subsidised healthcare needs in old age.
If you are below the age of 65, the Basic Healthcare Sum (BHS) will be adjusted annually to keep pace with the expected growth in MediSave use by the elderly. Once you reach the age of 65, their Basic Healthcare Sum (BHS) will be fixed for the rest of your live.
With the increase in limit for the basic healthcare sum (BHS), we can take the opportunity to top up our MediSave Account (MA) using cash.
You might ask why do we even bother to top up our MediSave Account using cash?
There are several benefits of hitting the limit (S$63,000) of your Medisave Account:
- Tax rebates if you use cash to top up your MediSave Account (MA).
- When you have max out your MediSave Account (MA), your monthly CPF contribution from your salary and employer gets overflown over to your Special Account (SA). The Special Account (SA) earns you a higher interest of 4% per annum. If your Special account (SA) have met the Full Retirement Sum (FRS), the monies will overflow to your Ordinary Account (OA) which earns you a 2.5% interest rate per annum.
So for those that will be receiving your 13th month bonus or Annual Wage Supplement (AWS), do prepare to set aside S$3,000 if you are planning to top up your Medisave Account (MA).
Regarding topping up MA in January 2021, would it still be advisable to top up in Jan if the annual contribution for 2021 is expected to be very close to the CPF annual contribution limit ($37,740)? Thanks!
Hi TK, the idea is to let monthly contribution overflow to your OA and SA once you have maxed out your MA. CPF will refund you any surplus the following year around February 2022. So if you have the extra cash to spare, you can top up your MA.