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AnTiLooP

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BBCWatcher wrote:
beyond age 55, CPF turns into a weird “piggy bank” because you can make voluntary “all three” top-ups and then have fully government guaranteed funds earning a high rate of interest (>2.5% blended rate) that are available for withdrawal any time you wish. The “CPF 55+ Piggy Bank” works best if you’ve hit the Basic Healthcare Sum and keep your Medisave Account pegged there.


BBCW: can you expand a little more on this? I assume this special piggy bank works on the assumption that the RA account is already created and that you have residual funds left in OA and SA?

on the point re: withdrawals, is there a ceiling/milestone to meet or is it a case of "as long as one has his RA created, that he/she can withdraw monies at anytime from OA/SA". ?

if not, are you simply saying that we can leverage those 2 accounts to simply pump monies in to get interest? in which case those funds deposited + accrued interest can be withdrawn anytime?

thanks.
 

MCKawe

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You can buy on that through CPFIS? :O

Recommend she either hold, pray, stop buying and hope for a nice selling point(if even possible) or liquidate immediately.

With CPF LIFE, her earliest payout is at 65. However with just 930 in her RA, I don't think she is getting a lot per month. Unless this amount is after transfer to the Lifelong Income Fund.

She needs enough money to sustain her next 6 years before being able to receive payouts. Thus, do not cash all 20k into RA unless she can sustain on your contributions to her.

She can do a VC to her OA, SA and MA. However, since her MA has not reached the Basic Healthcare Sum, her allocation is skewed towards MA(which she cannot withdraw at all). This scenario isn't the best but I would choose this option. Earning 2.5-4% interest is better than keeping in the bank. Do note that she needs to at least hold atleast 3 months of spending in cash(Emergency Fund) and subscribe to the PayNow(for same day withdrawals from CPF) in case there is a need for cash.
 

MCKawe

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BBCWatcher wrote:
beyond age 55, CPF turns into a weird “piggy bank” because you can make voluntary “all three” top-ups and then have fully government guaranteed funds earning a high rate of interest (>2.5% blended rate) that are available for withdrawal any time you wish. The “CPF 55+ Piggy Bank” works best if you’ve hit the Basic Healthcare Sum and keep your Medisave Account pegged there.


BBCW: can you expand a little more on this? I assume this special piggy bank works on the assumption that the RA account is already created and that you have residual funds left in OA and SA?

on the point re: withdrawals, is there a ceiling/milestone to meet or is it a case of "as long as one has his RA created, that he/she can withdraw monies at anytime from OA/SA". ?

if not, are you simply saying that we can leverage those 2 accounts to simply pump monies in to get interest? in which case those funds deposited + accrued interest can be withdrawn anytime?

thanks.
It works if:

1) The RA is created with the FRS inside(or BRS with property pledge).

2) The MA reached the Basic Healthcare Sum(For maximum withdrawal amount - MA allocation will be deposited in the SA)

To withdraw, you need option 1 to happen and hold true.

@BBCW
Do advise whether the following is possible to gain overall interest closer to 4%.

With MA hitting BHS, to withdraw all sum in OA and dump back into CPF via VC. Rinse and repeat until satisfactory.
 
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AnTiLooP

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It works if:

1) The RA is created with the FRS inside(or BRS with property pledge).

2) The MA reached the Basic Healthcare Sum(For maximum withdrawal amount - MA allocation will be deposited in the SA)

To withdraw, you need option 1 to happen.

so basically,let's assume those pre-reqs are in place....

1. I have FRS/ERS/BRS in RA
2. @55, whatever is left in SA / OA... I can draw down via anytime... just like an ATM.

I ask as i've been deliberating on what I should do when i Hit 55 - this is alike 15 years away for me. I have no housing loans or other life liabilities (all done), have 139K in SA and 54500 in MA at the time of this writing. based on simple math, I should hit FRS in a year's time thereabouts. that gives me another decade or more to work the amount higher....

likely be able to leverage the special piggy bank.

question - at 55, do we have a say on how much to move into RA assuming we have to meet the FRS/BRS or will the govie just consolidate everything in both accounts to form the RA? latter of which, it is precisely this place where we need to perform SA shielding ?
 
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MCKawe

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so basically,let's assume those pre-reqs are in place....

1. I have FRS/ERS/BRS in RA
2. whatever is left in SA / OA... I can draw down via anytime... just like an ATM.

?
Yes. However time taken to draw down varies on options used - PayNow, GIRO etc...
 

BBCWatcher

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Before 55, any top-ups RSTU or VC to the SA will have a limit of the FRS right?
Before your 55th birthday, you can top up your Special Account up to the Full Retirement Sum.

On or after your 55th birthday, you can top up your Retirement Account up to the Enhanced Retirement Sum.

At any age, you can top up all three of your CPF accounts using CPF Form VC/1 or its online equivalent. This top up must fit within the CPF Annual Limit ($37,740). Funds will be allocated across the three accounts according to the standard allocation rules for your age bracket. OA and SA will always receive some portion. MA will not if it has reached the Basic Healthcare Sum. The portion for MA will first spill over into SA, but if that's at the FRS, it will be spill over again into the OA.

The fees are only for CPFIS-OA right? Are there any fees for CPFIS-SA?
The CPF Investment Scheme (OA) requires a CPF Investment Account, available from any of the "big three" local banks. UOB currently offers the lowest cost CPF Investment Account.

The CPF Investment Scheme (SA) does not require a CPF Investment Account.

For either scheme, you may need a CDP account depending on what you're buying.
 

BBCWatcher

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My mom is 59 this year with the following balances in her CPF account:
OA: 8200
SA: 300
MA: 22500
RA: 930
If you could double check those balances, that'd be great. They look odd.

At age 55, by default, she claimed, she bought into the standard CPF life plan. To date, she has $10k in unit trust with UOB and about 10k in stocks purchased through CPFIS. She is holding about 20k in cash. I am giving her 500 a month. She does not have an integrates shield plan coz she thinks it's too expensive. What would you guys recommend she should do for retirement?
Wow. Assuming those numbers are accurate, she's in a tough spot.

OK, well, here's the basic formula:

1. Keep working and earning an income. If she's not working but able to work, then she should go back to work. She needs income, if at all possible, and she needs that income until at least age 65.

2. Unwind the unit trust and stock positions, and get those funds into her Retirement Account.

3. I would encourage her to transfer some or all of her OA and SA funds into her Retirement Account. As additional funds stream in from work, she should keep transferring them to her RA.

4. She should consider depositing at least $7,000 of her cash into her Retirement Account. (Notice a pattern?) Then another $8,000 in the Singapore Savings Bond as an emergency reserve, then the remaining $3,000 in day-to-day cash.

5. You should deposit that $500/month straight into her Retirement Account. You may qualify for tax relief.

....Get the Retirement Account up, as soon as reasonably possible, as high as reasonably possible -- "all hands on deck." CPF LIFE is going to be her sole source of income in retirement for the rest of her life, or at least darn near that, it would appear. That's the best available option. But it means she still has to "bridge" to age 65, at least, with income from work.

I was thinking of suggesting to her that she could either do a voluntarily top up into her all three accounts with the 20k or directly to her RA.
Straight into the RA, where they will earn 5% at present (since she still hasn't even maximized her bonus interest).

So far, to date, all her investments and stock picks are losing money. I wanted to convince her to liquidate her holdings.
Yes, that was a mistake I'm afraid. I agree. This isn't the time to fool around at age 59, so I'd exit those positions and get CPF LIFE nailed down as best as possible.

....If she's able to keep up this strategy and work until age 67, then start CPF LIFE payouts, that'd probably work out decently enough. The CPF LIFE payout plan decision is "interesting." There are going to be two basic choices in her situation, when the time comes:

(a) The Escalating Plan would be preferred, assuming she can live on the initial monthly amount. That'll take her through the rest of her life and combat inflation, so it should protect her real standard of living quite well.

(b) If she cannot live on the initial monthly amount in (a), then she'll have to take the Standard Plan. And then somebody (you presumably) will have to support her with progressively higher gifts as she ages, as inflation eats away the real value of her Standard Plan payouts.

If she owns her own home -- a HDB unit, notably -- then there are two more choices available:

1. She can (and should!) downsize if the unit she has now is bigger than she needs. Downsizing will liberate some capital -- some of which may be returned to her OA -- which can then be pumped into her Retirement Account for the lifetime retirement income she so badly needs right now.

2. She might also be able to tap into her home value via the HDB Lease Buyback Scheme.

As far as medical coverage, she's got MediShield Life, thank goodness. I don't think it's likely that she'll be able to afford anything more, and thus she should check herself into a public hospital C ward if she ever needs hospitalization. However, for the record, if her Retirement Account is growing nicely and quickly, she could consider getting NTUC Income's Enhanced Income Shield C plan, the only Integrated Shield plan in Singapore that's designed to cover public hospital B2+ ward and below. So that would cover her hospital stay at KK Hospital's B2+ ward, which is the most affordable air conditioned ward. I'm assuming that she doesn't have any pre-existing conditions that would exclude coverage. Her Medisave balance is decent -- the only slightly bright spot in this picture -- so she should be reasonably OK there. (And income from work will boost her MA some.) She should NOT get any riders for that C plan except the Assist Rider, maybe.
 

BBCWatcher

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5. You should deposit that $500/month straight into her Retirement Account. You may qualify for tax relief.
There's another "trick" available here. If you qualify for tax relief, try to increase that $500/month ($6,000/year) to $7,000/year, to maximize the tax relief. However, if you cannot afford the extra $1,000, then ask her to give you the $1,000 from her (limited) savings, and then you take that $1,000 and top up her Retirement Account. IRAS is fine with that arrangement.
 

maple96

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Hi BBCW and the experts here,

My mom is 59 this year with the following balances in her CPF account:

OA: 8200
SA: 300
MA: 22500
RA: 930

At age 55, by default, she claimed, she bought into the standard CPF life plan. To date, she has $10k in unit trust with UOB and about 10k in stocks purchased through CPFIS. She is holding about 20k in cash. I am giving her 500 a month. She does not have an integrates shield plan coz she thinks it's too expensive. What would you guys recommend she should do for retirement?

I was thinking of suggesting to her that she could either do a voluntarily top up into her all three accounts with the 20k or directly to her RA. So far, to date, all her investments and stock picks are losing money. I wanted to convince her to liquidate her holdings.

Looking forward to all your views. Thanks in advance!

Before u follow any suggestions here, pls get a copy of her CPF statement or check it out online.

She is likely to be under the old CPF Life scheme (before changes were introduced in 2015/16), where at 55 her RA get transferred to the CPF life pool under the standard plan. CPF statement will show how much now sitting in CPF Life Pool. Under that old scheme, check when her payout will start, is it same as 65 and how much is her likely mthly payout. If it does not meet FRS, u need to rethink and find out from CPF what will happen

If payout starts 65, and u start topping up RA now, she cannot touch the monies until 65.
 
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Just to confirm, the cash top-up to SA/RA does not count towards the Annual CPF contribution cap of 37740SGD for tax relief purpose?

So if that is the case, lets say I draw a monthly salary of 7000 with no bunos. then the max amount I can top-up my MA and enjoy tax relief is

37740 - 37%*6000*12 = 11100 SGD, even if I have cash top-up of 7000 to my SA. Assuming I will not reach the BHS after the top-up.

Is my understanding right?


Your math looks exactly correct to me. What you can do, for example, is to top up Medisave immediately after there’s a withdrawal, such as a withdrawal for your 2018 base Integrated Shield premium payment. That additional Medisave top up will also be eligible for tax relief.

Well played.

To simplify matters for you and for anyone else who earns $6,000 or more per month from employment in Singapore, just remember that you won’t have any room below the CPF Annual Limit unless your bonus income from employment totals less than $30K. Since your expected bonus income totals $14K, you have room below the Annual Limit. And that room is 37% of $16,000, which is $5,920. You’ve already consumed $2,500 of that, so you get to that same $3,420 figure remaining. Just another way to get to that number, if you like.
 

BBCWatcher

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Before u follow any suggestions here, pls get a copy of her CPF statement or check it out online.
Yes, and that's my very first reaction. Those numbers look odd.

Yes, it's quite possible that most of her RA has already been transferred into a CPF LIFE premium (for a deferred life annuity), since that's how it worked for the first few years when CPF LIFE was launched. Even so, it's highly likely it'll be BRS-level CPF LIFE or less, which is still too low for her retirement needs since her savings are meagre. It's highly likely she needs to focus on boosting her future CPF LIFE payouts, which can start less than 6 years from now. But her CPF statement will explain that.

If payout starts 65, and u start topping up RA now, she cannot touch the monies until 65.
That's already true for her CPF LIFE. Her CPF LIFE payouts cannot start any earlier than age 65 for her cohort. The phased increase from age 62 to age 65 well predated her age cohort.
 

henrylbh

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5. You should deposit that $500/month straight into her Retirement Account. You may qualify for tax relief.


There's another "trick" available here. If you qualify for tax relief, try to increase that $500/month ($6,000/year) to $7,000/year, to maximize the tax relief. However, if you cannot afford the extra $1,000, then ask her to give you the $1,000 from her (limited) savings, and then you take that $1,000 and top up her Retirement Account. IRAS is fine with that arrangement.

Without knowing whether she need the $500pm allowance for personal and household expenses?
 

BBCWatcher

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Just to confirm, the cash top-up to SA/RA does not count towards the Annual CPF contribution cap of 37740SGD for tax relief purpose?
You're mixing two limits there.

SA and RA top-ups are not capped at the CPF Annual Limit. A generous parent or grandparent can deposit the Full Retirement Sum, all at once, in a newborn Singaporean's CPF Special Account, for example.

There is a tax relief limit on SA and RA top-ups of $7,000 per qualified recipient ($14,000 per depositor), with some additional rules that apply.

So if that is the case, lets say I draw a monthly salary of 7000 with no bunos. then the max amount I can top-up my MA and enjoy tax relief is
37740 - 37%*6000*12 = 11100 SGD, even if I have cash top-up of 7000 to my SA. Assuming I will not reach the BHS after the top-up.
Your SA top-up is independent of your MA top-up. Yes, MA top-ups must fit within the CPF Annual Limit. Yes, your calculation is correct. If you receive a straight monthly salary of $7,000 for 12 months with zero variable pay, then you have $11,100 of room below your CPF Annual Limit. You can thus top up your MA by up to $11,100, with tax relief if otherwise eligible (not reached the total tax relief limit, still have taxable income, etc.) You can deposit $100K+ in your Special Account if you want -- the only deposit limit there is the Full Retirement Sum. Once your SA reaches the FRS, no more voluntary top-ups are allowed. (Compulsory and "all three" voluntary contributions will still partially stream into your SA.)
 

BBCWatcher

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Without knowing whether she need the $500pm allowance for personal and household expenses?
Yes. She has $20,000 in the bank (not even counting on demand CPF funds)...and her bank is not paying 4+% interest on that deposit, I'm quite sure. Redirecting $500/month of cashflow into her RA is smart and sensible.

Let's wait to see what her CPF statement says, but clearly she's got a big retirement problem looming. It's extremely likely she'll need to flood her RA with fresh funds to solve this problem. Exactly how big this gap is remains to be seen, but she's in trouble at present course and speed.

And her own behavior indicates she knows she's in trouble, because she pulled the "classic" panic move: CPF Investment Scheme into a (likely expensive) unit trust and stocks, probably at age 57, realizing that time is not on her side. (I'll take a guess on that.) So she gambled on the yield over a short time horizon, in an expensive way, and she's lost. I could be wrong about that, but probably not. It's happened before, and a lot of near retirees make that mistake.

....So yes, she's got to regroup and nail down her age 65+ trajectory as best she can as reliably as she can. CPF RA will be the answer on the savings side, and income from work will be the answer on the income side. We'll see how much lifting the RA will need to do shortly, I hope. I'll be the first to be delighted if she's got an ERS-level or even FRS-level CPF LIFE in the pipeline!
 
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Defying_Gravity

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Thanks BBCW for the tailored retirement formula for my mom. I did not know how powerful a retirement tool CPF could be until I chance upon this forum and I have been looking forward to all your posts eversince. It took me a while before I begun looking into my mother's CPF right after she told me she is worried that her brother is closing down his food stall.

Thanks BBCW and Maple for pointing this out... The numbers are legitimate although I do agree that it's a bit weird. The numbers I originally posted were from the month before. I just did a fresh check with her ytd night. The balance on top of her OA ($5k) and SA accounts were dividend payouts from the CPFIS. You are right that most of her RA was transferred into CPF life deferred annuity. She is 59 this year and about 4 years ago, she (unknowingly) bought into CPF life Std plan giving a payout of approx $621-$677/mth. The current bal in her accounts are:

OA: $5k/-
SA: $0/-
MA: $22514.41/-
RA: $4537.73/-

CPF Life annuity paid to date: $73250.32/-

You are right that she was quite desperate. Very timely, a few years back, a UOB banker approached her to buy unit trust from him and she did. As for the stocks, she purchased them many years ago when she was till working.. They were all penny stocks like freightlink, thaibev, lifebranz, mostly penny stocks and are quite worthless now, sadly...

I believe her FRS is $155k. Henrylbh is quite right that the $500/mth is for her personal expenses, to pay the bills and household expenses... It helps to complement her income of about $300/mth for helping my uncle to run his food stall without CPF contributions since she started in 2005.

Her home is a 5 room unit and not eligible for e lease buy back scheme. It is fully paid but she refuses to sell for sentimental reasons.

Is there a way we can fine tune her retirement plan based on e above? Thanks BBCW for your detailed inputs as always!
 

tangent314

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It seems to me her priorities are:

1) Liquidate the stocks and unit trusts as soon as possible
2) Push all the CPF OA money into her RA
3) Ensure she still has sufficient income for the 6 years until age 65 - Perhaps rent a room out of the 5 room flat, or to keep enough cash to last her for those 6 years
4) Top up her RA with whatever cash she can spare

Hopefully this would be able to push her CPF Life monthly payout north of $1k when she reaches 65.
 

burger87

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Hi BBCW. I'm a lurker in this forum and have read through many of your posts (specifically in Shiny Things and this thread) and found them to be really detailed and helpful.

However I find the wealth of information rather overwhelming and my head is about to explode :eek:. So I'm writing this post to seek your advice. Apologies if this had been asked before(pretty sure it has).

I'm currently 31 working full-time. I have adopted ST's investment methodologies of DCA into 3-part portfolio: STI, IWDA and A35. Insurance polices are in place. I'm living with my widowed retired father who is currently 73 years old. I have an elder sister who is married, and we are both giving monthly cash allowance to our father.

I hope to make use of the RSTU to provide my father with the monthly allowance instead, to enjoy tax relief and higher interest on the RA. He is currently on CPF LIFE Balanced Plan with a rather low monthly payout(north of $100) due to low CPF balance. how can I top-up his RA so he can get payout comparatively close to the actual cash allowance(~$800) we are giving him every month? Or is there any way that RA savings can actually be withdrawn on demand, like an ATM?

His current CPF Balance as below:
Ordinary Account (OA) $4,773.47
Special Account (SA) $903.87
Medisave Account (MA) $27,363.55
Retirement Account (RA) $10,836.94

Second, how should I go about maximizing my CPF? I'm still single and is intending to get a resale flat at age 35, or BTO if I happen to find a partner. My major concern is the housing cost(down payment, renovations etc.) if I'm still single, then I to bear the full cost myself.

Sorry for the noob questions. Too many terminologies and information to absorb from the interwebs. Hope to hear your thoughts on the above!
 

tangent314

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To increase your father's annuity, you will need to move all the money you can into his retirement account, then submit a request to buy additional CPF Life Annuity and emptying out his Retirement Account.

Read the last question "As a CPF Life Member, how do I apply for additional CPF Life annuities from topped up amount"
https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life

Then read this page carefully: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme

So the steps you would want to take is
1. Help your father transfer all of his OA and SA into his RA
2. Top up his RA using cash, e.g. $7000 for the tax relif
3. Apply to buy additional CPF Life Annuity

Unfortunately it won't increase his monthly payout by a lot - I'm estimating about an additional $250-$300 with the ~$22.5k for age 73.
 

BBCWatcher

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It seems to me her priorities are:

1) Liquidate the stocks and unit trusts as soon as possible
2) Push all the CPF OA money into her RA
3) Ensure she still has sufficient income for the 6 years until age 65 - Perhaps rent a room out of the 5 room flat, or to keep enough cash to last her for those 6 years
4) Top up her RA with whatever cash she can spare

Hopefully this would be able to push her CPF Life monthly payout north of $1k when she reaches 65.
I agree: "Crush the RA," and bridge to age 65. Note that she has the option to choose the CPF LIFE Escalating Plan, at least this year (2018). Check with CPF to see if that decision must be made this year (if made) or can be deferred until just before payout start date. (If she's in good health, and if she's able to boost her RA, then the Escalating Plan might make sense since it'll defend against inflation.)

I like Tangent314's idea of renting out part of the flat to generate income. Trading down would be a really good idea to liberate capital, something she badly needs (the sooner the better). If she's reluctant to change neighborhoods or even blocks, OK, but that doesn't mean it's impossible to switch to, say, a 3 room in the same block.

At least she's got a near BRS-level CPF LIFE income stream in the pipeline. It could have been worse, but it's also possible to make it better.
 
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Hi BBCW,

I could not understand why people would want to go for SGS. A good deposit account, like DBS multiplier or UOB one, can give interest higher than 1.8% and that is flexible, meaning you can get the money out the minute you want to do it. And if people have more cash than the limit offered by the bank account, shouldnt they be investing in staff with higher returns, such as stock, as the limit is more than enough for emergency fund?

Am I missing something here? or I am just plain stupid ;)

Thank you

If market interest rates don't change, it should be 1.7X% yield. Maybe, just maybe, 1.8%.


If you're using cash currently held in an ordinary bank account at one of the "big three" banks, and assuming you already have a CDP account (too late for this auction if you don't), then just log onto your bank's online banking Web site and place an order. At DBS/POSB, for example, look for the "Invest" menu option and choose "Singapore Government Securities." Then proceed through the prompts from there.

The t-bill order deadline for this issue is July 25, 2018, at 9:00 p.m. (bank deadline). You should practice this order ahead of time, but don't actually place the order until the morning of the deadline. The reason is that there's no advantage to ordering early, and you lose a little bit of bank interest if you order any earlier. So just order before the deadline, that's all. The morning of deadline day is perfect.
 
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