To transfer CPF to homemaker wife, or not?

[BBCWatcher]

The money that is locked up forever.

Forever is a long time, and forever isn't the truth.

Newsflash: life doesn't end at age 55 for most people reading my words. Why is anyone pretending it does? It's reasonable to provide for lifetimes (and dependents) both before and after age 55. If the government is tossing you a great deal of free money for the after 55 part, I say "grab some." (We can quibble about how much to grab, but zero is the wrong answer unless you've got a terminal illness diagnosis.) That doesn't mean you can't also have some fun before age 55.

I must be missing all the fun "going out of business at 55" CPF cash out parties. Anybody having one soon? Pour me a glass of champagne.

 

[BBCWatcher]

you think everyone so powerful can top up 7k a year?

"Everyone," no. Many people, yes. For those that cannot afford $7K, how about $3K? Or $1K? Or 200 bucks? If it's a good idea, it's a good idea at whatever level you can afford.

 

[kehyi4]

Is it possible to transfer just 83k (BRS) into RA and leave the rest in OA/SA?

CPF Retirement Booklet (Jan 2017) gives this example:

"Mr Ravi’s Ordinary Account savings at age 55 : $100,000
Mr Ravi’s Special Account savings at age 55 : $180,000

Mr Ravi has a total of $280,000 in his Ordinary Account and Special Account.

The Full Retirement Sum of $166,000 will be set aside in his Retirement Account which will provide him with a monthly payout of $1,380 from age 65 for life. He can withdraw the remaining amount of $114,000 in his Ordinary and Special Accounts.

If he owns a property with sufficient property charge/pledge, he can also choose to set aside his Basic Retirement Sum of $83,000 in his Retirement Account and receive a correspondingly lower monthly payout of $750 from age 65 for life. In this case, he can withdraw $114,000 from his Ordinary and Special Accounts, and an additional $83,000 from his Retirement Account."

Note that after choosing BRS, the 83k has to be withdrawn from RA because the full FRS was already transferred into RA. I don't think he can choose to transfer just 83k into RA and leave the other 83k in OA/SA to earn interest

 

[apatheticme]

Is it possible to transfer just 83k (BRS) into RA and leave the rest in OA/SA?

CPF Retirement Booklet (Jan 2017) gives this example:

"Mr Ravi’s Ordinary Account savings at age 55 : $100,000
Mr Ravi’s Special Account savings at age 55 : $180,000

Mr Ravi has a total of $280,000 in his Ordinary Account and Special Account.

The Full Retirement Sum of $166,000 will be set aside in his Retirement Account which will provide him with a monthly payout of $1,380 from age 65 for life. He can withdraw the remaining amount of $114,000 in his Ordinary and Special Accounts.

If he owns a property with sufficient property charge/pledge, he can also choose to set aside his Basic Retirement Sum of $83,000 in his Retirement Account and receive a correspondingly lower monthly payout of $750 from age 65 for life. In this case, he can withdraw $114,000 from his Ordinary and Special Accounts, and an additional $83,000 from his Retirement Account."

Note that after choosing BRS, the 83k has to be withdrawn from RA because the full FRS was already transferred into RA. I don't think he can choose to transfer just 83k into RA and leave the other 83k in OA/SA to earn interest

If that's the case, one way is to slowly put back via VC?

 

[liemsc]

Wow, came back surprised to see so many replies today..
I'll have to re-read some of the posts later though, to be able to understand what it means. But for sure one thing new I learnt from these, is that even if I have FRS amount, apparently I can choose to just set aside BRS (+property pledge) to be able to withdraw $83K more upfront.

Thanks for all the comments, really appreciate it ; and btw, please be nice with one another, ok..

 

[BBCWatcher]

But for sure one thing new I learnt from these, is that even if I have FRS amount, apparently I can choose to just set aside BRS (+property pledge) to be able to withdraw $83K more upfront.

Not always. It depends on the source(s) of the funds. Per CPF: "...excluding interest earned, any government grants received, and top-ups made under the Retirement Sum Topping-up scheme."

I am recommending Retirement Sum Topping-Up Scheme top-ups of $7K/year for you and $7K/year for your wife, or whatever you can afford, with the assumption that you pay income taxes and would qualify for $14K of tax relief (or tax relief in whatever amount you can contribute). However, these top-ups (and interest) will be withdrawn as CPF LIFE guaranteed lifetime annuities, not to throw a champagne party (or whatever) at age 55. Neither you nor your wife currently have much if any guaranteed retirement income for life, so (in my view, and in the government's view) this restriction is no problem at all, and you'd be getting a nice, immediate tax cut for your troubles. Great deal, I say. But if you both want to throw big(ger) parties at age 55 and both drop dead at 55 1/2, maybe you would disagree.

 

[dork32]

just to rephrase his grandma story.

if you top up 20k, then your brs becomes 83 + 20 = 103k

 

[windwaver]

Not always. It depends on the source(s) of the funds. Per CPF: "...excluding interest earned, any government grants received, and top-ups made under the Retirement Sum Topping-up scheme.

Wow, came back surprised to see so many replies today..
I'll have to re-read some of the posts later though, to be able to understand what it means. But for sure one thing new I learnt from these, is that even if I have FRS amount, apparently I can choose to just set aside BRS (+property pledge) to be able to withdraw $83K more upfront.

Thanks for all the comments, really appreciate it ; and btw, please be nice with one another, ok..

Just need to take note of those that cannot be withdrawn in bold.

 

[dork32]

Just need to take note of those that cannot be withdrawn in bold.

i think if you leave frs in your ra, you can take everything else out, regardless if you have topped up or not.

 

[dork32]

Forever is a long time, and forever isn't the truth.

Newsflash: life doesn't end at age 55 for most people reading my words. Why is anyone pretending it does? It's reasonable to provide for lifetimes (and dependents) both before and after age 55. If the government is tossing you a great deal of free money for the after 55 part, I say "grab some." (We can quibble about how much to grab, but zero is the wrong answer unless you've got a terminal illness diagnosis.) That doesn't mean you can't also have some fun before age 55.

I must be missing all the fun "going out of business at 55" CPF cash out parties. Anybody having one soon? Pour me a glass of champagne.

forever is a figure of speech. if you are 28 now, 88 seems like forever. that is how long your money will be stuck until if you leave it in your ra

 

[dork32]

why not doing this?

Keep 0 QA Max FRS/MA, at 55 opt BRS and the remaining still keep at SA or withdraw.
OA/cash top up ->spouse SA will max eventually, at her 55 opt FRS or not sure can opt BRS also.
All future bequest go to kids account and their rolling cycles go on.

whatever is transferred into wife sa is stuck there. the opportunity cost of my wife maxing out at 166k, is 146k at my oa account. 20k over so many years, it is ok. i forego that difference to retain the flexibility to withdraw anytime i want after 55.

wrong about the bequest. if you choose cpf life standard. you will have very little bequest for you kids.

 

[henrylbh]

Trying to seek the opinion of this group's members...
My wife is not working (so practically has almost nothing in her CPF). I'm wondering, whether or not I should transfer some of my CPF to her.
Some of my consideration points :
1) If I accumulate only in my own CPF, let's say the retirement payout in the future is $2000 for me to share with her. But if I transfer my CPF to her, and each of us get $1000 in the future, then the outcome is just the same ?
2) If I (as sole breadwinner) passed away, she will also get my CPF, so whether or not I transfer to her, doesn't make difference ?
3) If anything, transferring to her CPF will win with the extra 1% interest rate because mine is already >$60k now.
4) Obviously if a divorce ever happens, it totally makes a difference, so no need to discuss about that point here.

Is there anything else to be considered in this situation ? Thanks for sharing!

No need to think further. Just do it, unless you think divorce is quite possible or you think you can sure do better with money in excess of BRS.

 

[culture_counter]

If your spouse is a homemaker, the decision to top up her FRS must be considered carefully, as the amount is likely very significant, and it has to come out from either your CPF OA/SA or cash. This will short change your post 55 savings very significantly unless you are a high income earner, and have don't have any more housing mortgage debt.

 

[starfish.starfish]

I was also pondering this question for my mum. Homemaker, never worked so really less than 10k in her CPF. I give money allowance to her between 700 to 1k per month. She is 65.

Was thinking whether I should do a one shot 80k topup to her RA via cash/ OA ( still need to check if lump sum topup at this amount is possible). Then she can withdraw the needed 700 from CPF monthly while the rest of the money has better interest rates compared to savings account.

Any advise?

 

[BBCWatcher]

This will short change your post 55 savings very significantly....

I don't understand this comment. The money doesn't disappear! It earns at least 4% interest (and bonus interest if your spouse hasn't maximized that). Usually there's some tax relief, too. Then the top up goes toward the spouse's CPF LIFE annuity, with the possibility that some funds are "pushed" into what amounts to a high yielding, on demand savings account from age 55.

Topping up a spouse's Special Account is taking funds that might be "post 55 savings" and moving them into a vehicle that is definitely "post 55 savings."

 

[culture_counter]

I don't understand this comment. The money doesn't disappear! It earns at least 4% interest (and bonus interest if your spouse hasn't maximized that). Usually there's some tax relief, too. Then the top up goes toward the spouse's CPF LIFE annuity, with the possibility that some funds are "pushed" into what amounts to a high yielding, on demand savings account from age 55.

Topping up a spouse's Special Account is taking funds that might be "post 55 savings" and moving them into a vehicle that is definitely "post 55 savings."

When reached post 55, whatever prevailing balance left in the SA+OA is used as premium for spouse's CPF Life Annuity for FRS put aside in the RA. This RA amount will be locked in permanently and is as good as illiquid funds.

 

[BBCWatcher]

That's a possible, different argument. But "post 55 savings"? Yes, that's exactly what CPF SA top ups are.

 

[culture_counter]

That's a possible, different argument. But "post 55 savings"? Yes, that's exactly what CPF SA top ups are.

Actually what I meant was that if spouse's future RA still fall short of a large amount from FRS, then the RA is akin to being trapped in the CPF Annuity scheme. Spouse would not be eligible to draw out any cash, be it in SA or OA post 55 savings. You have to meet FRS minimum sum before you can treat CPF like a bank and take up any excess for use.

This would be a point to ponder, as to whether to top up.
"A bundle of cash in hand, is better than 2X bundles of cash in the bush" - haha, an old English proverb.

 

[BBCWatcher]

....then the RA is akin to being trapped in the CPF Annuity scheme.

That's something different: liquidity. If you want to say that some fund transfer could result in less liquid funds, fine, say that. An annuity, or an increase in an annuity, is still "post 55 savings." Indeed, the bigger one's CPF LIFE annuity, the less additional savings one needs outside CPF LIFE.

We ought to be precise when describing these issues. It's important!

 

[culture_counter]

That's something different: liquidity. If you want to say that some fund transfer could result in less liquid funds, fine, say that. An annuity, or an increase in an annuity, is still "post 55 savings." Indeed, the bigger one's CPF LIFE annuity, the less additional savings one needs outside CPF LIFE.

We ought to be precise when describing these issues. It's important!

Yes, it's all about liquidity. What's the point of having illiquid funds locked in cpf annuity which you can only start drawing down from 65 years old, which is at least more than 10 years ahead. Liquidity in cash when emergency funds are needed must also be provided for.