Made a rookie mistake contributing into Medisave this year.

 

I just came back from a 3-day holiday in Bintan and wanted to talk about it, because reading this might help someone else avoid the same mistake I made.

Earlier this year, my mum got hospitalised, and the hospital debited $12,000 from my Medisave account. As I wanted to lower my tax liability, I took dividend payouts to reimburse my Medisave, since all 5 members relied on it, as I have no ISP. 

So that was my first mistake: the maximum claimable tax deductible is capped at $8,000, at least based on what Havend's CPF guide said. The excess $4,000 does not do squat for my taxes.

I realised my second mistake two weeks ago when the CPF board wrote to me to say that I still need to make about $4k+ contributions to my CPF-MA from my freelance work in 2024. 

That was my second mistake because I thought my $12k contribution would perform double duty and offset the $4k owed from income earned in 2024. I found out the hard way that it was not the case. 

So I spent the day at the CPF Board to ask around if there's anything I can do to avoid the $4k contribution. The staff there cannot do anything for me, so they asked me to submit an appeal online.

But rules are rules, and I did not read the fine print. Even if the CPF Board can bend the rules because I am acting as a responsible member throughout the year, I'm not sure how many hoops I need to jump through to finally get the $4k waived.

In the end, what made me give up on pursuing this case was hearing a sad story about someone who got scammed. I imagine my funds safely tucked in my CPF-MA, and the only way I can get "scammed" is a policy change when every Singaporean gets scammed together.  

 

I went beyond just paying what I owed to my CPF-MA; I secured my mortgage for the upcoming year and covered family expenses. The damage to the liquid funds was profound, and I still need to have enough funds through January 2026 and the Chinese New Year, which is a dry dividends period.

Then I had an idea.

I have a toy leverage account with IBKR that I use to teach leveraged investing to my students. It's been collecting my training fees for a while, and I've not touched the dividends for aeons, as it was just there to offset the amounts owed to the broker. 

Looking at the interest rate, I realised that it has fallen so low that it is around 3.3-3.4%, lower than CPF-MA, and I am not counting the meagre tax benefits I get from my contribution. 

So I withdrew a small amount of SGD to cover my cash needs through January and February.

Right now, my leverage ratio is conservative at x1.6, invested in a dividend account that offsets margin account fees. 

But it's funny that I'm borrowing money to contribute to my Medisave. 

So am I a guru or a goondu?

Anyway, the moral of the story is, if you want to top up your Medisave, cap it at $8,000; there's always next year.