Using CPF one time offset for HDB loan

[useless]

Received a letter from HDB, saying that I have excess funds in my OA, which I can use to do a one time offset to pay off my existing HDB loan, which would result in a reducing of my loan term.

Now, the question is - would'nt it be better to leave my funds in my OA and earn 3.5% interest, rather than offset my HDB loan that is charging interest of 2.6%? What other incentives are thefe for doing a one time offset?

 

[coolnhappy]

Up to 3.5% interest. For these few years it's 2.5%.

 

[dork32]

Now, the question is - would'nt it be better to leave my funds in my OA and earn 3.5% interest, rather than offset my HDB loan that is charging interest of 2.6%? What other incentives are thefe for doing a one time offset?

gamen propaganda really works. some people really believe that their oa is earning 3.5%

 

[Syaman]

Take note that the 3.5% OA interest rate applies only to the first $20,000 in your OA account (if you are over 55, it becomes 4.5%).. Beyond that it is 2.5%.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192024&folderid=13726

 

[dork32]

Take note that the 3.5% OA interest rate applies only to the first $20,000 in your OA account (if you are over 55, it becomes 4.5%).. Beyond that it is 2.5%.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192024&folderid=13726

for myself, my ma and sa is above 60k. i will earn the extra 1% even if my oa is 0

 

[maple96]

Take note that the 3.5% OA interest rate applies only to the first $20,000 in your OA account (if you are over 55, it becomes 4.5%).. Beyond that it is 2.5%.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192024&folderid=13726

U either fail your maths or fail your english comprehension

After 55, if your RA has at least 60k, it will earn 6%, your OA 2.5%, SA 4% and MA 4%.

Below 55, see answer from dork.

Bonus answer: if u are on CPF Life, the first 60k will come from RA and CPF Life Premium.

 

[Syaman]

The question posted pertains to OA so my reply pertains to OA - nowhere was SA, MA, RA or CPF Life mentioned. Please read more carefully.

In any case, the following paragraphs are very clear about the additional interest for OA.

https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2378

CPF members will continue to earn interest rates of up to 3.5% per annum on their Ordinary Account (OA) monies..These interest rates include an extra 1% interest paid on the first $60,000 of a member’s combined balances (with up to $20,000 from the OA) ...Members aged 55 and above will also earn an additional 1% extra interest on the first $30,000 of their combined balances.

 

[maple96]

The question posted pertains to OA so my reply pertains to OA - nowhere was SA, MA, RA or CPF Life mentioned. Please read more carefully.

In any case, the following paragraphs are very clear about the additional interest for OA.

https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2378

CPF members will continue to earn interest rates of up to 3.5% per annum on their Ordinary Account (OA) monies..These interest rates include an extra 1% interest paid on the first $60,000 of a member’s combined balances (with up to $20,000 from the OA) ...Members aged 55 and above will also earn an additional 1% extra interest on the first $30,000 of their combined balances.

Your further denial of your mistakes is a double confirmation of your failed comprehension of CPF rules on additional interest computation.

Read the following extracted from the CPF website:

“The priority of the accounts that make up the $60,000 and $30,000 is as follows:
1st: Retirement Account (RA), including balances used to pay for the annuity premium under CPF LIFE
2nd : Ordinary Account (OA), up to $20,000
3rd : Special Account (SA)
4th: MediSave Account (MA)”

Note that TS did not mention whether he is below or above 55. U are the one who assigned an incorrect % to OA for above 55, so that needs to be corrected.

U have to see the complete picture and priority of all the accounts to see where the additional interest will be applied. Otherwise u will be “mislead” by CPFB's written english, that's the cause of your wrong interpretation above!

Note the above had been discussed many times in this forum, priority of accounts is not new info here, pls go do your homework!

 

[Syaman]

Thank you for the priority table which is useful and disambiguates many things. The link to the full info is below for others' referral

https://www.cpf.gov.sg/members/FAQ/...s&group=others&ajfaqid=2192131&folderid=13726

What this means is that 4.5% OA at age 55+ only applies in very specialised scenarios e.g. when RA is less than $30K. And even then "The extra interest received on the OA will go into the member's RA".

 

[dork32]

you can say your oa earns 4.5% and ra earns 4%
or
you can say your oa earns 2.5% and ra earns 6.5%

it depends how you want to console yourself. this is wat i mean by analysis is one sided.

the bast way to describe the situation is developed by yywin
he says your oa earns2.5 ra earns 4 +900 bonus

 

[BBCWatcher]

What this means is that 4.5% OA at age 55+ only applies in very specialised scenarios e.g. when RA is less than $30K. And even then "The extra interest received on the OA will go into the member's SA".

No, you didn’t quote CPF correctly. In that particular scenario (age 55+), all bonus interest is credited to the member’s Retirement Account, not Special Account.

I recommend treating OA as earning 2.5% interest, full stop. There will never be even one penny of bonus interest paid into an Ordinary Account. There are two ways you can qualify for maximum bonus interest:

1. MA+SA+RA >= $60,000, or
2. MA+SA+RA+OA >= $60,000 *AND* MA+SA+RA >= $40,000.

As you can see, your OA balance is the least significant factor in whether you’re earning maximum bonus interest. You MUST have a significant MA+SA+RA balance (at least $40,000) to earn maximum bonus interest, and your OA balance often won’t matter even one bit (equation #1).

Please note that everyone under age 55 has a zero Retirement Account balance, so just treat RA as zero in the two equations above in that case.

 

[Syaman]

Thanks BBCWatcher I noticed and corrected that error a few minutes just before you posted

 

[maple96]

Thank you for the priority table which is useful and disambiguates many things. The link to the full info is below for others' referral

https://www.cpf.gov.sg/members/FAQ/...s&group=others&ajfaqid=2192131&folderid=13726

What this means is that 4.5% OA at age 55+ only applies in very specialised scenarios e.g. when RA is less than $30K. And even then "The extra interest received on the OA will go into the member's RA".

1. If u are below 55, u will be interested to know that the extra 1% interest goes to SA.

2. If u are 55 and above, u will be interested to know that the extra 1%+1% goes to RA and is based entirely on RA if it is at least 60k.

3. If u have started CPF Life, u will be interested to know the following:

a. If u are on CPF Life Basic Plan, the extra interest goes to RA

b. If u are on CPF Life Standard or Escalating Plan, the extra interest goes into the CPF Life Pool.

c. The extra interest is based on RA+CPF Life Premium if these are at least 60k. RA will be zero under Standard/Escalating Plan unless the member do topups to RA after CPF Life starts, but the RA will not earn the extra interest.

 

[BBCWatcher]

a. If u are on CPF Life Basic Plan, the extra interest goes to RA

Yes, and a quirky, bonus interest-related side effect of the Basic Plan is that your monthly payout amount may start dipping (in nominal terms, even faster in real terms) if you live long enough. As CPF phrases it, "The Basic Plan monthly payouts will reduce gradually when your combined CPF balances (including unused CPF LIFE annuity premiums) fall below $60,000. This is due to less extra interest earned."

You can avoid most or all of this nominal payout erosion if you maintain enough cash across your CPF accounts to qualify for maximum bonus interest for your entire lifetime. (CPF's statement assumes that all balances across all subaccounts eventually fall, which is pretty typical but not universal.)

b. If u are on CPF Life Standard or Escalating Plan, the extra interest goes into the CPF Life Pool.

Yes, and your monthly CPF LIFE payout amount reflects your CPF Lifelong Income Fund claim, including bonus interest. These two plans do not feature the Basic Plan's typical (but not universal) out year nominal payout reductions. The Standard Plan has a steadier (and higher) nominal monthly payout, while the Escalating Plan has a steadier real payout (and an escalating nominal payout). The Basic Plan maintains a higher residual for longer than the other two plans. However, all plans feature declining nominal residuals (and even faster declining real residuals) once payouts start, and all plans have residuals that eventually fall to zero if you live long enough.

 

[maple96]

You can avoid most or all of this nominal payout erosion if you maintain enough cash across your CPF accounts to qualify for maximum bonus interest for your entire lifetime. (CPF's statement assumes that all balances across all subaccounts eventually fall, which is pretty typical but not universal.)

Yes, it was what I explained in this forum before and u repeat/reiterate those ideas/explanations here

Yes, I explained the hidden assumptions made by CPFB as counter argument to your repeated statement that CPF Life Basic Plan mthly payouts will decrease in the future.

And why those who choose Basic Plan should not be bothered with CPF's statement ( ie “As extra interest is earned on the combined balances in your CPF accounts, including premiums committed to CPF LIFE, up to $60,000, you will experience a gradual decrease in your monthly payouts due to the reduction in extra interest paid to your RA when these balances fall below $60,000 ):

1. They still have a huge SA balance (those who exploited the loophole/SA hack before 55) to earn 4% interest

2. They have a big 10-20% CPF Life premium based on their huge ERS RA balance at 65 or 70 still un-utilised at 90, to be utilised by about 93 or thereabout.

3. They have a max BHS in MA still un-utilised.

4. They have a huge OA to earn 2.5% interest they can withdraw annually.

5. They do not depend only on CPF Life mthly payout for survival.

Those with above and other strategies will never see their combined balances fall below 60k in their life-time! And those who choose Basic Plan will likely have those plans in place.

Too bad if u dun, then maybe u should choose other plans.

Yes, and your monthly CPF LIFE payout amount reflects your CPF Lifelong Income Fund claim, including bonus interest. These two plans do not feature the Basic Plan's typical (but not universal) out year nominal payout reductions. The Standard Plan has a steadier (and higher) nominal monthly payout, while the Escalating Plan has a steadier real payout (and an escalating nominal payout). The Basic Plan maintains a higher residual for longer than the other two plans. However, all plans feature declining nominal residuals (and even faster declining real residuals) once payouts start, and all plans have residuals that eventually fall to zero if you live long enough.

As I stated again above, those who choose Basic Plan with the above “strategies” in place will not be bothered with the Basic Plan mthly payouts.

They have more than one source of payouts to live on.

It is not “your choice” to live as long as u want, beyond 90 or 100, as there are many causes of death.

If u think u can live beyond 90/100, u dun have to choose CPF Life Basic Plan.

Even if I can live beyond 90 based on family history and I do not have dependents, I will still choose Basic Plan and start payout at 65 for my own reasons with my own strategies.

As someone put it, CPF Life Basic Plan is a good hedge if u die earlier than expected. Should u survive longer than expected, u also have no worries with your strategies in place.

To each his own.