With shielding no longer possible, does it impact doing VCMA first and doing that whole supercharging thing?
I don't think so. You still get up to $8,000 of tax relief for self, you still get CPF's highest interest rate, you still qualify for bonus interest (even MA alone can do that), and you still have some liquidity at any age (for MA things). The "spillover" effects are still lovely.
I am thrown off by the fact that after 55, there is no longer an SA account@4% and instead only an OA account@2.5%.
4% virtually risk free and liquid was a huge draw but something about 2.5% just doesn't cut it.
But you still get 4+% interest on a (bigger) SA all the way to age 55. Often with tax relief. Isn't that pretty terrific at least compared to other bond/bond-like choices?
I think it's very common for people to fall into a logical fallacy, that just because one alternative goes way it means other alternatives aren't still attractive, even very attractive. It's not true. You simply evaluate the current offers as best you can. Don't worry about past offers.
It might be a case of whether someone believes in CPF or not.
A believer should probably still continue topping up.
Well, do you "believe" in UOB when you place a fixed deposit with them? I suppose you could use that word, but it seems like it'd be a religious experience. It's not that. You're hopefully just evaluating various offers and picking the best choices for you, hopefully based on reasonable forecasts and sensible financial principles. No religion required. CPF's offers are fundamentally no different.
It might depend on income brackets for tax reliefs.
That's one factor to take into consideration, sure.
Someone in the 7% bracket should consider topping up.
For 11.5% bracket, definitely consider topping up.
Well, for MediSave at least I think pretty much any tax bracket could work well, especially if you're eligible for bonus interest and if you're going to be using MediSave dollars anyway. (Helping to pay for an elder's hospital bill and insurance premiums, for example.) My household treats its MediSave Accounts as "medical slush funds," really. I think it's a strange offer, but OK, we'll take it, thanks.
If the goal is to now hit FRS/ERS and earn 4% from there instead, it's still not liquid and only usable after 65.
That hasn't changed. That offer is still the same offer, still quite attractive.
So topping up for the purpose of reaching FRS/ERS faster doesn't make sense.
Why not? You're still required to fund your Retirement Account at least "adequately" to get liquidity from age 55. The 4+% interest rate is still attractive, at least in comparison to any bond-/bond-like alternative. And the more dollars you get into your SA sooner (via MA "spillovers," OA to SA transfers, and/or top ups with tax relief) the more dollars you'll have from age 55 for withdrawal and/or a higher-than-"adequate" Retirement Account. You're also that much closer-and-sooner to being able to transfer OA dollars to a loved one's SA or RA if your CPF balances are rising faster. The
only thing that's really changed is you'll probably want to find some other way to invest "excess" dollars when you reach age 55 than to keep them parked in CPF.
I am also not seeing the rationale behind raising ERS to 4x.
I think it's partial compensation for individuals who wanted to keep Special Account dollars parked at CPF to supplement their retirements. Now they have the option to buy more life annuity income. We live in a high cost of living country with the longest lived (or near the longest lived) national population. 3X BRS-level CPF LIFE isn't actually that lavish in these circumstances.
I don't know man, I feel like gov is telling me to go invest money in the market instead.
From age 55 onward yes, you'll probably want to invest "excess" CPF dollars privately. The dollars beyond ERS-level CPF LIFE and BHS-level MA, anyway. Plus all the OA dollars that continue to flow in with compulsory contributions, every month. In anticipation of that likely outcome you can invest "excess" OA dollars before age 55 via the CPF Investment Scheme.
Hi, I am a noob when it comes to CPF. Am reading with interest about the removal of SA for those reached 55years old. I have a question:
1) When I reach 55, my SA will be transferred to RA.
Up to the Full Retirement Sum. If your SA isn't enough to reach the FRS then the CPF Board will draw from your OA. All remaining dollars will be placed in your OA.
Assuming it is less than ERS of $426k, can I top it up from OA to $426k?
Yes, you can transfer as many OA dollars to your RA as you wish, up to the Enhanced Retirement Sum (ERS).
2) I can only receive monthly payouts from 65 years old (is it called CPF Life?).
No, not only. You can make significant lump sum withdrawals from your Retirement Account if you wish, often up to as much as the Basic Retirement Sum (BRS) if you have a property pledge or charge. Of course if you draw down your Retirement Account it will reduce your CPF LIFE payouts.
I read that interest on RA cannot take out until I reached 80 years old?
Interest is fully factored into your CPF LIFE payout computation. The more RA dollars you have, and the longer they grow, the higher your CPF LIFE payout. If you start collecting CPF LIFE payouts at age 70 (the default) then the monthly payout amount is significantly higher in part because of the years of additional interest earned.
If I were to die prior to 80, the interest earned on RA will go to a common pool instead of to my beneficiaries. May I know is this true?
It depends on the CPF LIFE payout plan you select. If you select a lower payout (the CPF LIFE Basic Plan) then your nominees might receive some interest. But your payout is permanently lower than the Standard Plan, and there's absolutely no guarantee of this. Nor any guarantee of any residual to your nominees. Simply live long enough, or longer, and there's no residual.
Your payouts are always computed inclusive of all interest no matter whether that interest is paid to your Retirement Account or to (your share of) the CPF Lifelong Income Fund. That's why the Standard Plan payout is permanently higher than the Basic Plan payout, for your entire life. (The Escalating Plan is the Standard Plan but with a 2%/year "skew" layered on top so that your payouts increase every year for the rest of your life. This feature helps preserve the real purchasing power of your payouts. Both other payout plans progressively lose purchasing power due to inflation. If/when CPF LIFE is your sole or major source of retirement income then your real lifestyle would have to get progressively worse with Standard Plan or Basic Plan payouts. And all the very fair complaints about inflation nowadays should be a clear reminder that inflation is real and must be fully respected in any sensible retirement plan.)
For the rich here, js beware estate duty tax very likely to reinstate in the coming years ahead.
Possible, but I think it's very unlikely that the government will extend estate or inheritance tax to anything CPF-related, at least not MA or RA. If anything the possibility of future estate tax argues in favor of maxing out CPF RA and MA. I wouldn't take that bet when it comes to OA, though.
Govt been more generous to the lower income and the monies goto replenish from somewhere else.
I'm sure the government has a pretty good idea how the closure of Special Accounts from age 55 will affect its CPF-related interest costs.
Guess rules may change again before I retire
better I manage it on my own
