CPF Special Account after 55 years old

[BBCWatcher]

money in RA only functions like deposit account when it is the original money.

Not below the Basic Retirement Sum (with property pledge) or below the Full Retirement Sum (without), for those who are on CPF LIFE.

Extra top ups after 55 cannot be taken out.

All Special Account and Retirement Account directed voluntary top-ups must be paid out via CPF LIFE annuities (for those on CPF LIFE), no matter when you make those top-ups.

I'm excluding the $5,000 age 55+ withdrawal option in the above, generalized remarks.

....Anyway, yes, I'm puzzled by the "Don't need the money/start payouts at age 65" advice. It doesn't make mathematical sense to me. What am I/are we missing?

 

[JuniorLion]

So I've dug further. Here is what I found.

My uncle was under the old Minimum Sum Scheme, then opted to join the early CPF Life Scheme. So the rules at that time was really different.

My uncle turns 65 on the 1st May 2019. He turned 55 on 1st May 2009. According to the CPF Minimum Sum Scheme (https://www.sgmoneymatters.com/cpf-minimum-sum-scheme/), he had to set aside the minimum sum cash component (MSCC) on 1st May 2009. The MSCC is half the amount of the minimum sum. The minimum sum applicable to him was $106,000. So that means he had to set aside $53k.

According to this FAQ: https://www.cpf.gov.sg/Assets/members/Documents/FAQs_SimplifiedCPFLIFEscheme.pdf, there were 4 such schemes when CPF Life started.

My uncle joined the CPF Life Standard Scheme and had pledged 50k to CPF Life at that time. Between 2009 and 2019, the RA continues to grow. When he reaches his draw down age (DDA) on 1 May 2019, The remaining amount of his RA savings above the MSCC, if any, will be committed to CPF LIFE on that day.

From now till 1 May 2019, he is able to use his RA for his housing needs, if any.

Dayum, that's complicated.

 

[rrr2015]

so that means he can't use RA like "bank deposit"? i.e withdraw as and when he like?

The remaining amount of his RA savings above the MSCC, if any, will be committed to CPF LIFE on that day.

From now till 1 May 2019, he is able to use his RA for his housing needs, if any.

Dayum, that's complicated.

 

[JuniorLion]

so that means he can't use RA like "bank deposit"? i.e withdraw as and when he like?

Sadly, no. Unless above FRS.

 

[rrr2015]

thanks ... am still pretty confused over various schemes as well
but i thought all RA will be committed to CPF life?

my understanding is only if he is under minimum sum scheme, RA balance can use for monthly payout after 65

Sadly, no. Unless above FRS.

 

[JuniorLion]

thanks ... am still pretty confused over various schemes as well
but i thought all RA will be committed to CPF life?

my understanding is only if he is under minimum sum scheme, RA balance can use for monthly payout after 65

The older schemes function somewhat differently..

 

[BBCWatcher]

He’s under the new CPF LIFE then, with some minor variation due to transition rules. One of the likely transition benefits is a “signing bonus.”

I’m still unclear why there’d be any recommendation to start CPF LIFE payouts at age 65 if he doesn’t need the income stream. That doesn’t make financial sense, unless I’m missing some fact not yet in evidence.

 

[maple96]

He’s under the new CPF LIFE then, with some minor variation due to transition rules. One of the likely transition benefits is a “signing bonus.”

I’m still unclear why there’d be any recommendation to start CPF LIFE payouts at age 65 if he doesn’t need the income stream. That doesn’t make financial sense, unless I’m missing some fact not yet in evidence.

I suggest u go re-analyse the CPF rules in detail or go attend the 55 talk to find what u are missing, or wait till u hit 65 then I share with u!

 

[BBCWatcher]

I suggest u go re-analyse the CPF rules in detail or go attend the 55 talk to find what u are missing, or wait till u hit 65 then I share with u!

The information to make this sort of decision is not secret. If you’ve got some advice to share, just do it. This isn’t black magic. It’s a straightforward financial optimization decision.

 

[JuniorLion]

The information to make this sort of decision is not secret. If you’ve got some advice to share, just do it. This isn’t black magic. It’s a straightforward financial optimization decision.

Ok. Now we're talking about mathematical optimization.

Not everything is about pure numbers optimization; wish it is like that, isn't it? There's this thing known as flexibility. It is not just about receiving payout of $500 starting @ age 65 versus receiving payout of $675 starting @ age 70.

Emergency doesn't allow a person to withdraw the rest of the CPF Life, though I believe it may be possible if one decides to do so in writing, and then going through some hoops.

Having a little more cash at hand and having the flexibility to re-deposit back to CPF Life beats having nothing at hand from age 65-70.

Unless, of course, the person has spare cash in the bank as excess. Sadly, not the case for my uncle. He has some, though. Not a lot.

 

[BBCWatcher]

....Unless, of course, the person has spare cash in the bank as excess. Sadly, not the case for my uncle. He has some, though. Not a lot.

Then he needs the money at age 65! If he doesn't have an adequate emergency reserve fund, then he needs the money. OK, then, that's the fact that was not in evidence. Now it is.

Please note that he should count his CPF Ordinary Account and Special Account, if/as applicable, as part of his emergency reserve fund since those funds can be withdrawn on demand.

Redepositing makes no sense for building up an emergency reserve fund. If the strategy is to redeposit funds right away, don't start CPF LIFE payouts -- that doesn't make sense. If the strategy is to build up emergency reserve funds (in the form of SSBs, typically), starting at age 65 because his emergency reserves are presently inadequate, OK, that makes sense.

 

[culture_counter]

Please note that he should count his CPF Ordinary Account and Special Account, if/as applicable, as part of his emergency reserve fund since those funds can be withdrawn on demand.
QUOTE]

Agree with BBC on this portion about CPF facts.

 

[dork32]

Redepositing makes no sense for building up an emergency reserve fund. If the strategy is to redeposit funds right away, don't start CPF LIFE payouts -- that doesn't make sense. If the strategy is to build up emergency reserve funds (in the form of SSBs, typically), starting at age 65 because his emergency reserves are presently inadequate, OK, that makes sense.

it does make sense if what lion says is true.

cpf life is totally not liquid. ra is totally liquid according to lion. but i am not sure about that.

by transferring for cpf life to ra, he is converting something that is not liquid to something that is liquid. but i am also not sure if you can deposit every thing into just ra

also ra earns 4% interest and CPF life standard earns 0 interest.

cpf life forces you to draw out at 70. for ra, you can wait until 120 before you draw.

 

[dork32]

hi lion,
what you are doing for your uncle is not wrong, depending on which angle you are looking at.

but there are two main issues here.

1st issue.
Are you sure that you can re-deposit it back into just the ra? I thought you can only put money into cpf through vc, voluntary contribution. the bulk of vc goes into oa and not ra.

2nd issue.
based on the old minimum sum scheme, ra is just as liquid as cpf life. it gives you a fixed monthly payout till the funds run out.

 

[BBCWatcher]

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.)

....In short, no, it rarely makes sense to start CPF LIFE payouts any earlier than required if you don't need the money. But, we've since learned, this money might be needed to build up a currently insufficient emergency reserve fund, presumably via SSBs. OK then, that means this money is needed sooner rather than later. In that case, sure, start the CPF LIFE payouts at age 65.

 

[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.)

Pretty sure top ups to RA after 65 will NOT be used automatically purchased the CPF Life Annuity.

 

[BBCWatcher]

Pretty sure top ups to RA after 65 will NOT be used automatically purchased the CPF Life Annuity.

Voluntary top-ups to RA, no matter when those top-ups are made, can only come out in two ways:

(a) Via CPF LIFE (or old RSS, if applicable) monthly payouts.

(b) Upon the death of the CPF member, to the nominated heir(s), if part of a residual bequest.

That's it. (See here for details, under "How can the top-up monies be used?") Once payouts start the CPF member might have to contact CPF if he/she wants the monthly payout adjusted upward as soon as possible. CPF might eventually, automatically make that adjustment on its own in due course.

Unfortunately there's no option to "split" the RA across two or more CPF LIFE payout plans. No matter whether you're in Standard, Basic, or Escalating, all your payouts -- including recalculated payouts after top-ups -- need to stay within the same payout plan. (I could see some merit in, for example, opting for Escalating on a BRS-level CPF LIFE foundation and then Standard above that. But that's not an option.)

 

[maple96]

Voluntary top-ups to RA, no matter when those top-ups are made, can only come out in two ways:

(a) Via CPF LIFE (or old RSS, if applicable) monthly payouts.

(b) Upon the death of the CPF member, to the nominated heir(s), if part of a residual bequest.

That's it. (See here for details, under "How can the top-up monies be used?") Once payouts start the CPF member might have to contact CPF if he/she wants the monthly payout adjusted upward as soon as possible. CPF might eventually, automatically make that adjustment on its own in due course.

Unfortunately there's no option to "split" the RA across two or more CPF LIFE payout plans. No matter whether you're in Standard, Basic, or Escalating, all your payouts -- including recalculated payouts after top-ups -- need to stay within the same payout plan. (I could see some merit in, for example, opting for Escalating on a BRS-level CPF LIFE foundation and then Standard above that. But that's not an option.)

This confirms u either dont know or understand all the cpf rules, will let juniorlion or others to correct your claims!

 

[henrylbh]

Pretty sure top ups to RA after 65 will NOT be used automatically purchased the CPF Life Annuity.

Quite certainly that the top-ups to your uncle's RA will not be channelled into CPF Life (as he has met the min sum for his cohort). I believe besides CPF Life standard plan payout, he can also drawdown his RA like under the old RSS over a period of 20 years. If that's the case, he should commence CPF Life payout without delay while topping up his RA and delaying his drawdown on RA, if fund is not needed. But he can't withdraw RA at one go.

 

[JuniorLion]

Voluntary top-ups to RA, no matter when those top-ups are made, can only come out in two ways:

(a) Via CPF LIFE (or old RSS, if applicable) monthly payouts.

(b) Upon the death of the CPF member, to the nominated heir(s), if part of a residual bequest.

That's it. (See here for details, under "How can the top-up monies be used?") Once payouts start the CPF member might have to contact CPF if he/she wants the monthly payout adjusted upward as soon as possible. CPF might eventually, automatically make that adjustment on its own in due course.

Unfortunately there's no option to "split" the RA across two or more CPF LIFE payout plans. No matter whether you're in Standard, Basic, or Escalating, all your payouts -- including recalculated payouts after top-ups -- need to stay within the same payout plan. (I could see some merit in, for example, opting for Escalating on a BRS-level CPF LIFE foundation and then Standard above that. But that's not an option.)

https://www.cpf.gov.sg/assets/members/documents/form_lidapp1a.pdf

You're suggesting that any top-up to RA after 65 will sit in the RA if the member does not contact CPF to purchase additional annuity.