CPF Special Account after 55 years old

[BBCWatcher]

'some well-to-do CPF members used to do' or intend to do? The first batch (born in 1958) under mandatory CPF Life has not even reached PEA in 2023.

Henry, the maximum age policy is new and applies to everyone now. It’s not unique to CPF LIFE. Up until not too long ago it was possible for CPF members to avoid drawing down their retirement savings forever. Not any more. Members who turn age 70 in 2018 (or later), including old RSS participants, are subject to the age 70 maximum now. (See here: “Can I defer my monthly payout?”)

And there is nothing clever about enhanced nomination scheme, though it may serve the purpose of 'some' members, and they do so not for the sake of higher interest rates.

That’s another policy change, and perhaps you missed that, too. And it has nothing to do with the Enhanced Nomination Scheme. The old rule allowed an heir to keep CPF funds in the decedent’s account forever, earning attractive above market interest, and available for withdrawal on demand. That’s no longer the case. Now, under the new policy (as I recall), the decedent’s funds will earn OA interest for 6 months after the member dies, then zero.

It was a lovely “hack,” to just let those CPF funds stay in the decedent’s account. The government closed that loophole only recently.

 

[dork32]

"Need the money" includes needing an emergency reserve fund (or a bigger one). But if you don't need the money...why? It's a true mystery.

need money means you need to spend it.

if it is for emergency funds, even if i have not enuf for it now, it is not that urgent. emergency funds is not a must have. it is a good to have.

it is a mystery how you define "need"

 

[dork32]

Based on your repeated points, could I say that if there's an option to defer CPF pay-out to 85 years old (and with 7% increase per year), then your personal opinion is that this is always the best choice to do so?

Assuming the person already has emergency funds of 24 months.

you are right, there is never a really best choice. every choice has its pros and cons. you choose the one that is best suited for you.

you do not have to listen to people with a one-track mind.

 

[dork32]

It is possible to do an "all three" top up, but a portion of those funds goes into MA, which is quite restricted.

if the uncle has so much in the ra and cpf life. it is likely that he has maxed out his ma. and if this were to occur, it will overflow into the sa since it has not maxed out.

 

[dork32]

Based on your repeated points, could I say that if there's an option to defer CPF pay-out to 150 years old (and with 7% increase per year), then your personal opinion is that this is always the best choice to do so?

Assuming the person already has emergency funds of 24 months.

 

[BBCWatcher]

If a bucket of money is safe and growing nicely, and if you don't need it or even particularly desire anything, sure, let it ride, at any age. Use it for heirs, philanthropy, or some of both.

Not complicated.

 

[JuniorLion]

Dork32, you can't just redeposit into RA and magically get liquid funds. Directed top-ups must be paid out as CPF LIFE annuities for CPF LIFE members, which this individual is. Non-directed ("all three account") top-ups don't go into RA at all, and they only trivially go into SA. (Importantly, some also goes into MA if MA is below the BHS; MA is a pool of restricted use funds.) And this individual is already topping up at $7,000/year (directed RA top-ups, presumably) to get whatever tax relief he can get. (He may still be working, have rental income, and/or otherwise have an income tax bill.)

The highlighted statement above. Are you saying that, after 65, if you do VC to all 3 accounts, some of it will go into SA as opposed to RA?

 

[henrylbh]

The highlighted statement above. Are you saying that, after 65, if you do VC to all 3 accounts, some of it will go into SA as opposed to RA?

Before or after 65, one is allowed to make VC either to 3 accounts (allocated to OA SA and MA) or to MA only (with tax relief), subject to annual limit. MA will overflow to SA/OA.

One is also allowed to top up one's RA, regardless of age, subject to prevailing FRS limit. Note VC is not the same as TU.

 

[henrylbh]

Henry, the maximum age policy is new and applies to everyone now. It’s not unique to CPF LIFE. Up until not too long ago it was possible for CPF members to avoid drawing down their retirement savings forever. Not any more. Members who turn age 70 in 2018 (or later), including old RSS participants, are subject to the age 70 maximum now. (See here: “Can I defer my monthly payout?”)


That’s another policy change, and perhaps you missed that, too. And it has nothing to do with the Enhanced Nomination Scheme. The old rule allowed an heir to keep CPF funds in the decedent’s account forever, earning attractive above market interest, and available for withdrawal on demand. That’s no longer the case. Now, under the new policy (as I recall), the decedent’s funds will earn OA interest for 6 months after the member dies, then zero.

It was a lovely “hack,” to just let those CPF funds stay in the decedent’s account. The government closed that loophole only recently.

I only questioned your assumption 'some well to do CPF members used to do' in relation to deferring of CPF Life payout which has yet to commence.

 

[henrylbh]

If a bucket of money is safe and growing nicely, and if you don't need it or even particularly desire anything, sure, let it ride, at any age. Use it for heirs, philanthropy, or some of both.

Not complicated.

Not so in JL's uncle case. His uncle is able to take out CPF Life payout to channel into his RA and there is no good sense to defer payout.

 

[JuniorLion]

Before or after 65, one is allowed to make VC either to 3 accounts (allocated to OA SA and MA) or to MA only (with tax relief), subject to annual limit. MA will overflow to SA/OA.

One is also allowed to top up one's RA, regardless of age, subject to prevailing FRS limit. Note VC is not the same as TU.

Yes, I understand.

After 55, you can't seem to top up the SA (i.e. RSTU automatically tops up RA instead of SA). So my question is will VC allocates the funds to SA or RA?

I ask because BBCWatcher suggested that money in SA is withdrawable (whereas money in RA is not).

 

[BBCWatcher]

His uncle is able to take out CPF Life payout to channel into his RA and there is no good sense to defer payout.

Why would he ever rationally do that (with the assumptions noted)? It requires effort, and surely the financial math is unfavorable versus simply deferring.

It’s a moot issue for this uncle because it seems he does need the money sooner rather than later, and that he wouldn’t plow the money (back) into his RA because he’d instead be bolstering his emergency reserve funds.

 

[maple96]

Yes, I understand.

After 55, you can't seem to top up the SA (i.e. RSTU automatically tops up RA instead of SA). So my question is will VC allocates the funds to SA or RA?

I ask because BBCWatcher suggested that money in SA is withdrawable (whereas money in RA is not).

VC always go into 3 accounts, ie OA/SA/MA. If MA is max, it will overflow into SA if SA is not max yet, otherwise it overflows into OA.

RA can only receive monies via topups if the ERS (max) limit is not met yet (current rules)

Monies in OA and SA can be withdrawn anytime, any amount.

Monies in RA can only be withdrawn via mthly payouts after u start payouts from CPF Life.

 

[JuniorLion]

VC always go into 3 accounts, ie OA/SA/MA. If MA is max, it will overflow into SA if SA is not max yet, otherwise it overflows into OA.

RA can only receive monies via topups if the ERS (max) limit is not met yet (current rules)

Thanks maple96! This is really helpful =)

 

[maple96]

Why would he ever rationally do that (with the assumptions noted)? It requires effort, and surely the financial math is unfavorable versus simply deferring.

It’s a moot issue for this uncle because it seems he does need the money sooner rather than later, and that he wouldn’t plow the money (back) into his RA because he’d instead be bolstering his emergency reserve funds.

To me, it is very simple maths.

If your monies are in CPF Life, it is better to start payout early as interest earned on CPF Life premiums belongs to the pool. U will only get to enjoy it if you live beyond 90+

So it is common sense for his uncle to start payout so he can earn interests which belongs to him!

 

[JuniorLion]

To me, it is very simple maths.

If your monies are in CPF Life, it is better to start payout early as interest earned on CPF Life premiums belongs to the pool. U will only get to enjoy it if you live beyond 90+

So it is common sense for his uncle to start payout so he can earn interests which belongs to him!

This is the key point.

 

[dork32]

To me, it is very simple maths.

If your monies are in CPF Life, it is better to start payout early as interest earned on CPF Life premiums belongs to the pool. U will only get to enjoy it if you live beyond 90+

So it is common sense for his uncle to start payout so he can earn interests which belongs to him!

hi, i am not a supporter of bbc. but there is a small error.

interest earn in cpf life basic goes directly to you. even if you do not live beyond 90, your kids get to enjoy it.

 

[maple96]

hi, i am not a supporter of bbc. but there is a small error.

interest earn in cpf life basic goes directly to you. even if you do not live beyond 90, your kids get to enjoy it.

the error is in your comment.

Read what I wrote carefully, I am referring to where the monies sit, ie CPF life premium interest is not yours!

With CPF Life basic, about 10% goes to CPF Life pool as CPF Life premium, interest on that is not yours!

His uncle has 50k sitting in CPF Life pool as premium!

 

[intime]

the error is in your comment.

Read what I wrote carefully, I am referring to where the monies sit, ie CPF life premium interest is not yours!

With CPF Life basic, about 10% goes to CPF Life pool as CPF Life premium, interest on that is not yours!

His uncle has 50k sitting in CPF Life pool as premium!

Agree. Basic has 2 parts, RA part and annuity premium part.
- 10% annuity premium, all interest growth remain in common pool.
- RA, all interest growth remain in our own RA, for our monthly withdrawal and bequest.

 

[henrylbh]

To me, it is very simple maths.

If your monies are in CPF Life, it is better to start payout early as interest earned on CPF Life premiums belongs to the pool. U will only get to enjoy it if you live beyond 90+

So it is common sense for his uncle to start payout so he can earn interests which belongs to him!

I think you got the wrong understanding. Leaving aside standard plan, about 10% of RA is used to pay annuity premium for basic plan at the time of PEA. That premium money, not to say interest, is as good as gone into a pool unless one lives beyond a certain age to recover what's in the poo.. The balance in RA earns interest at prevailing rates and payout is from RA till it runs dry and henceforth payout will be from the pool.

Deferring payout only makes sense as money in RA will roll over at prevailing interest rate and the subsequent payout will be (7%) higher. But then one is betting more on CPF Life as 10% of RA will be taken off as annuity premium.

My estimate, one needs to live well pass 90s to get back every cent that's in RA (without annuity deduction) at prevailing interest rates. Below that you lose in the bet.