CPF SA Shielding hack - RIP (Obsolete)

[dork32]

At 4% interest for SA, (not even counting bonus interest), SA doubles every 18 years.

If you put in 176k at birth, this would be 352k when 18, 704k when 36, 1.4m when 54.

Basically, anything you can put into your kid's SA at birth would multiply 8x by 55 even if you don't add anything else...

i am amazed tat people really believe in the 72 rule, when they have a computer, hp infront of them

this lousy rule is an estimate. when you want to post here you have to be accurate. also it works for 2x, 4x, 8x... it does not work for other numbers

eg 176k at 4% for 54 years is 1.463 mil. if you want to do rounding, 1.5 mil is a better number.

 

[chopra]

tks guys. good la. cost of shielding is not high, if not zero sales charge . 176k is not alot of legacy hor. this is surely an asset. better than buying a 99yr old lease of u know what.

but quite hard to psycho ownself to do that. meanwhile i only put in MA for kids

At 4% interest for SA, (not even counting bonus interest), SA doubles every 18 years.

If you put in 176k at birth, this would be 352k when 18, 704k when 36, 1.4m when 54.

Basically, anything you can put into your kid's SA at birth would multiply 8x by 55 even if you don't add anything else...

 

[Okenba]

i am amazed tat people really believe in the 72 rule, when they have a computer, hp infront of them

this lousy rule is an estimate. when you want to post here you have to be accurate. also it works for 2x, 4x, 8x... it does not work for other numbers

eg 176k at 4% for 54 years is 1.463 mil. if you want to do rounding, 1.5 mil is a better number.

Sorry bro. Must have missed the forum rule about no estimates allowed.

When I sit for a dork test, I'll be sure to be more accurate...

 

[Farmer1212]

Lets say E person on the 40s, Sa 176k and OA 60k can E person invest SA 60k in the fund and trf 60k to the SA? After "AWHILE" E person call back the fund and the fund will be still in SA?

 

[terence2112]

Lets say E person on the 40s, Sa 176k and OA 60k can E person invest SA 60k in the fund and trf 60k to the SA? After "AWHILE" E person call back the fund and the fund will be still in SA?

Unable to. Because the FRS for those below 55 is the cash component in the SA and amount of investment used in the SA.

 

[oceanicmanta]

Qn: if one deploys the shield 1 year in advance (at 54yo), is the potential loss roughly the difference between SA 4%pa and the return on the 1 year investment (assume 1.5%pa) ?

 

[dgeralds]

Losses may be more.

Are you afraid of change of CPF policy before you hit 55 in the next one year?

Qn: if one deploys the shield 1 year in advance (at 54yo), is the potential loss roughly the difference between SA 4%pa and the return on the 1 year investment (assume 1.5%pa) ?

 

[oceanicmanta]

Losses may be more.

Are you afraid of change of CPF policy before you hit 55 in the next one year?

not so fast for me ...

just trying to visualize/simplify the impact of early shielding ...

besides interest differential, I guess there could also be capital loss/gain over the shielding periods

i think this avenue would be closed for me by the time it becomes practical for me to execute/consider

 

[dork32]

Sorry bro. Must have missed the forum rule about no estimates allowed.

When I sit for a dork test, I'll be sure to be more accurate...

i am just condemning this 72 rule. it does not answer many questions.

eg how many years it will take for the my principal sum to triple.

or how much will i have when i am 65

or my kid is already 5 years old, if i deposit now, how much will he have when he is 55.

there are too many gaps in this method. it is only meant for people that does not pass maths

on the other side, we have henry. he tries calculates to the last cent of how much he has in his spread sheet.

 

[Okenba]

i am just condemning this 72 rule. it does not answer many questions.

eg how many years it will take for the my principal sum to triple.

or how much will i have when i am 65

or my kid is already 5 years old, if i deposit now, how much will he have when he is 55.

there are too many gaps in this method. it is only meant for people that does not pass maths

on the other side, we have henry. he tries calculates to the last cent of how much he has in his spread sheet.

I...

OK. Let me try to keep this short.
There is a place for estimates and there is a place for accuracy. If people want an estimate, then they use whatever methods work for estimation. If they want accuracy they pull out a calculator or spreadsheet.

Truth be told, while I have heard of this 72 rule, I also have a spreadsheet in front of me from which I plucked the number of 18 years. What in the world is the big deal? I'm giving an estimate. This isn't an exam and no one has asked me to answer to 3sf...

 

[chopra]

there's a reason y ppl like estimates and / or accuracy. as long as we know the caveat
i think dork is worried for others who take numbers wholesale.

for that context, 1.4mill and 1.5mill make very little difference to me in terms of decision on whether to lump sum into kids SA or MA.

we should move on from this.

 

[fr33d0m]

there's a reason y ppl like estimates and / or accuracy. as long as we know the caveat
i think dork is worried for others who take numbers wholesale.

for that context, 1.4mill and 1.5mill make very difference to me in terms of decision on whether to lump sum into kids SA or MA.

we should move on from this.

seriously, 100K over 54 years make very difference to you? it is less than 2K per year.

 

[chopra]

sorry typo. i meant very little.

 

[KeytoFreedom]

Lorna Tan even talked about this CPF SA shield today in the Sunday Times. So the government is already aware there are people doing it.

https://www.straitstimes.com/business/invest/four-ways-to-optimise-your-cpf-savings

Can't read the article.. asked me to login or subscribe... can you summarize the 4 ways to maximize CPF?

Sent from OnePlus ONEPLUS A5010 using GAGT

 

[kerwen]

What happens if one does not have frs but execute this sa shielding?
E.g oa=0 sa=100k, frs=176k
Use 60k from sa to buy some stable fund before 55.
ra=40k at 55
Sell fund, 60k goes back to sa or go to ra because frs not met?

 

[lyndonmaxewell]

Much, much higher. The hypothetical maximum would involve this sort of formula:

1. Deposit the Full Retirement Sum into a newborn’s Special Account within the month she is born.

2. Deposit the CPF Annual Limit into her accounts (“all three” top up) within the month she is born and every January thereafter.

3. After a childhood and young adulthood of #2, she is self-employed in Singapore or living outside Singapore and continues making CPF Annual Limit “all three” top ups every January.

4. She then celebrates her 55th birthday with a massive Special Account balance.

I leave it as an exercise to someone who’d like to calculate that SA balance. Don’t forget the bonus interest.

She would be able to envision retiring from early that she can spend more time working on her passion in her younger days instead of working for the sake of living life.

 

[lyndonmaxewell]

i am amazed tat people really believe in the 72 rule, when they have a computer, hp infront of them

this lousy rule is an estimate. when you want to post here you have to be accurate. also it works for 2x, 4x, 8x... it does not work for other numbers

eg 176k at 4% for 54 years is 1.463 mil. if you want to do rounding, 1.5 mil is a better number.

I share the formula here. Though you will need a calculator and get your hands dirtier for a more accurate answer.


https://toc.net/2019/10/14/compounding-interest-and-rule-of-72/

 

[lyndonmaxewell]

tks guys. good la. cost of shielding is not high, if not zero sales charge . 176k is not alot of legacy hor. this is surely an asset. better than buying a 99yr old lease of u know what.

but quite hard to psycho ownself to do that. meanwhile i only put in MA for kids

Would agree with you. Unless you can part with this sum of money and for a long lock-in period.

 

[lyndonmaxewell]

Lets say E person on the 40s, Sa 176k and OA 60k can E person invest SA 60k in the fund and trf 60k to the SA? After "AWHILE" E person call back the fund and the fund will be still in SA?

No cannot. As whatever you use to purchase in the fund is also considered in the calculation towards the limit from which you still can put in funds. Cannot hack like this.

 

[lyndonmaxewell]

Should be possible as scenarios bring up the use of cash top up.
As with SA, you cannot fully invest (shield) your OA. I think need to leave 20k?
But there is less incentive to shield OA as the interest rate of 2.5% is not quite comparable to 4% I guess.

It is possible, people do shield OA in the past where they would not want to wipe out their OA savings just to buy house.