CPF SA Shielding hack - RIP (Obsolete)

[BlueRobin]

Knowing that our population is aging, and that people are living longer and also having better health into their later years. And the purpose of CPF is to help people fund their own retirement in old age.

I don't think I would be surprised if...
- CPF Life payout age is set at 70 for all instead of the option for 65 right now.
- CPF life plan set at Escalating or all options have an escalating portion to manage inflation as folks grow older.
- FRS increases even more over the years. It is already increasing and with this function, it is unlikely that people will be 'forced' to all have ERS. Just increase FRS instead.
- In fact, I would not be surprised if ERS is no longer a hard cap. Just slowly decrease the returns the more people put into RA and let people decide when it is worth it. They could show indicator bands. BRS-FRS how much is the payout. FRS-ERS slightly lower percentage payout. Abv ERS slightly lower again. Even at slightly lower payouts, there will be some who value the consistency of income enough to want to consider taking it up.

One of the most balanced view I have read so far.

If the G does not make adjustments by looking at long term bigger pictures, we should worried more. The old saying "change is the constant" will always applies.

 

[Okenba]

It's quite funny. Just need to go back to the first page of this thread and you can see people cursing Lorna and OP for starting the thread and killing the shielding loophole. This was back in 2019.

It has taken almost 5yrs for it to happen, but we can't say we never thought it would happen...

 

[Guojing88]

What's to stop MIW from changing the withdrawal rate to 70 or higher or maybe scrap the basic and standard plans and only offer escalating plan. If you do really want to top up your RA to ERS levels, maybe consider to invest those OA funds outside first and only do the top-up just before you hit 65 when you are fully aware of the policy in place at that time.

There is no point doing the top up so late, if you want the reap the 4% compounded rate.

But yeah, if policy risk is an important consideration for you, its best to not to do ERS.

 

[Guojing88]

2 types of withdrawal from RA is allowed. One without property pledge and another one with property pledge.

Still waiting for your link or explanation what you meant above.

 

[royalmix]

Knowing that our population is aging, and that people are living longer and also having better health into their later years. And the purpose of CPF is to help people fund their own retirement in old age.

I don't think I would be surprised if...
- CPF Life payout age is set at 70 for all instead of the option for 65 right now.

If you understand the background/history, you will know why age 65 is still there!

Let me share a "glimpse of my crystal ball" about age 65:

There are old cohorts with "contractual commitment" to start their CPF Life payout at 65. This group will turn 65 next year. So expect some potential changes to rules which apply at 65 after CPF fulfil their commitment to this group of old cohorts. One of the rules is the option to withdraw 20% of their RA balance at 65.

We already know the "default" start for CPF Life Payout is set at 70, ie new cohorts who want to start payout at 65 must opt in with written application to CPFB, if you forget too bad. Those old cohorts have written commitment to start payout at 65, ie they have to opt out with written application to CPFB to delay their payout start date.

Basic CPF Life Plan is still there because CPFB had committed to this same old batch of cohort. Would it be changed after this old batch of cohort start their CPF Life Plan next year?

So expect more changes coming!

 

[DevilPlate]

What's to stop MIW from changing the withdrawal rate to 70 or higher or maybe scrap the basic and standard plans and only offer escalating plan. If you do really want to top up your RA to ERS levels, maybe consider to invest those OA funds outside first and only do the top-up just before you hit 65 when you are fully aware of the policy in place at that time.

Same thing for properties bro but the difference is max revised ERS today only 400k+ VS few M at stake.
Later implement hefty cap gain tax and/or hefty estate duty tax. They have to find other avenues to replenish their coffers.

The more MIW loses vote, the more gancheong they are and gear towards populist/socialist policies.
What i can see the trend is more towards wealth redistribution moving forward.

 

[stanlawj]

i think u meant all topups

Top-ups are all irreversible. Thus, they cannot be withdrawn for other purposes

https://www.cpf.gov.sg/member/infoh...top-up-ra-to-ers-for-cpf-life-theheartlandboy

Cons of topping up RA to ERS​

1. Irreversible move

When you top up your RA to ERS, this is considered as an irreversible move. This signals your willingness to participate and extract more benefits from the CPF LIFE scheme beyond the default option.

If you have used cash to top up your RA, you suffer an immediate loss of liquidity as they get locked up in the RA until payout eligibility age. Similarly, if you have used funds in your OA or SA to perform the RA top-up, you lose your ability to withdraw them

You make sound like it is really bad.
It is not. Money invested in CPF is protected from seizure by creditors and claims by ex-spouse during divorce.

Isn't that fantastic? If you have any money invested elsewhere, these will be exposed to seizure by creditors and also divorce claims.

 

[stanlawj]

If you understand the background/history, you will know why age 65 is still there!

Let me share a "glimpse of my crystal ball" about age 65:

There are old cohorts with "contractual commitment" to start their CPF Life payout at 65. This group will turn 65 next year. So expect some potential changes to rules which apply at 65 after CPF fulfil their commitment to this group of old cohorts. One of the rules is the option to withdraw 20% of their RA balance at 65.

We already know the "default" start for CPF Life Payout is set at 70, ie new cohorts who want to start payout at 65 must opt in with written application to CPFB, if you forget too bad. Those old cohorts have written commitment to start payout at 65, ie they have to opt out with written application to CPFB to delay their payout start date.

Basic CPF Life Plan is still there because CPFB had committed to this same old batch of cohort. Would it be changed after this old batch of cohort start their CPF Life Plan next year?

So expect more changes coming!

CPF is basically the govt-administered retirement scheme funded by our own savings with the "expenses/management fees" actually coming from taxes we paid, and stealth devaluation of SGD purchasing power of all the locked up CPF sum, devalued by the local fractional reserve banking with the blessing of MAS.

In effect, the "management fees" are very heavy, on par with unit trust due to the devaluation of SGD.
"REAL RETURNS" = Nominal - inflation.
For CPF SA, is not 4%, it is probably only 2%++ or less. Some years are more, but recently it was even negative returns.

Govt's abolition of CPF SA at age 55 only reinforces the need for private property as retirement vehicle due to the CPF RA cap at ERS (= 4 x BRS).

 

[SBC]

In future, OA will truely be your ATM, withdraw anytime when there are higher returns from banks or any opportunity out there, no more constraints from SA interest, no need to exploit any hack!

The new CEO/management is obviously very good at fixing loopholes, one rule change to fix 2 "big" loopholes!

New management looks like $ faced.

 

[stanlawj]

If for some reason the SG Govt becomes insolvent, or run into financial difficulties, it can choose to devalue SGD overnight, and at once all CPF locked up sums become devalued!!!

This is the main reason one should not entirely rely on CPF only as your retirement.

 

[henrylbh]

Sg gov is better than many others. If for any reason, any country becomes insolvent or run into financial difficulties, the currency will devalue and the gov may even go missing

 

[henrylbh]

If you understand the background/history, you will know why age 65 is still there!

Let me share a "glimpse of my crystal ball" about age 65:

There are old cohorts with "contractual commitment" to start their CPF Life payout at 65. This group will turn 65 next year. So expect some potential changes to rules which apply at 65 after CPF fulfil their commitment to this group of old cohorts. One of the rules is the option to withdraw 20% of their RA balance at 65.

We already know the "default" start for CPF Life Payout is set at 70, ie new cohorts who want to start payout at 65 must opt in with written application to CPFB, if you forget too bad. Those old cohorts have written commitment to start payout at 65, ie they have to opt out with written application to CPFB to delay their payout start date.

Basic CPF Life Plan is still there because CPFB had committed to this same old batch of cohort. Would it be changed after this old batch of cohort start their CPF Life Plan next year?

So expect more changes coming!

I never knew any older cohort was subject to default payout at 65 and need to write in to defer.

Earlier cohorts (1949 and before) could begin drawdown from 60 if they choose to and some never begin drawdown until the gov recently apply default payout 70 on those cohorts and later cohorts.

After 1949, cohort can start payout from 62 but gov gave 3 years of defer bonus to encourage them to start from 65 with default payout at 70 to align the earlier 2 cohorts with the later cohort of 1958 under CPFL.

 

[henrylbh]

You make sound like it is really bad.
It is not. Money invested in CPF is protected from seizure by creditors and claims by ex-spouse during divorce.

Isn't that fantastic? If you have any money invested elsewhere, these will be exposed to seizure by creditors and also divorce claims.

How many care about protection from creditors and claims by ex-spouse. Some are willing to give everything to ex-spouse to be let go.

 

[DevilPlate]

How many care about protection from creditors and claims by ex-spouse. Some are willing to give everything to ex-spouse to be let go.

Maybe thats why Bitcoin getting so popular? Not js for money laundering whahahaha

Stash some btc and start over a new life whahahaha

 

[henrylbh]

Still waiting for your link or explanation what you meant above.

All the comments prior to what I mentioned never give you any ideas of the type withdrawals and the eligible amounts that can be withdrawn? You are not the only one, as there are many misconceptions and misinformation about withdrawals from RA that's easy for some to get confused.

 

[Guojing88]

All the comments prior to what I mentioned never give you any ideas of the type withdrawals and the eligible amounts that can be withdrawn? You are not the only one, as there are many misconceptions and misinformation about withdrawals from RA that's easy for some to get confused.

Both takes place at age 55 is what I am aware of.

 

[DevilPlate]

Sg gov is better than many others. If for any reason, any country becomes insolvent or run into financial difficulties, the currency will devalue and the gov may even go missing

https://www.mof.gov.sg/singaporebudget/revenue-and-expenditure

 

[stanlawj]

Sg gov is better than many others. If for any reason, any country becomes insolvent or run into financial difficulties, the currency will devalue and the gov may even go missing

You're wrong. SG govt is already devaluing the SGD significantly in local purchasing power for decades by allowing the banks in SG to conduct fractional reserve banking with such low capital adequacy ratio requirements.

 

[BBCWatcher]

the actual order of withdraw is:
1. CPF RA
2. CPF SA
3. CPF OA

SA won't exist from early 2025 for everyone with a Retirement Account.

There's no RA withdrawal that occurs unless you explicitly request one — and in some cases have a sufficient property pledge or charge in place. Even today that's true. So I'm not sure what you mean by putting RA first in the order of withdrawal. That's not true today, and it won't be true in early 2025. RA withdrawals are separately requested.

This has the effect of giving me a higher income floor after 65, allowing me to more confidently draw down even more of my wealth portfolio, in the 10 years between 55 to 65, what we call the "go-go" years of retirement.

Yes, assured lifetime retirement income is liberating. Particularly if it's escalating. I wish more people would understand that.

I don't think I would be surprised if...
- CPF Life payout age is set at 70 for all instead of the option for 65 right now.

I wouldn't bet so.

I think it's slightly likely the Basic Healthcare Sum could be frozen at an older age than age 65. (Particularly with the recent rule change allowing disability income from MA) there's some logical sense in allowing people working past age 65 to continue growing their MAs.

- CPF life plan set at Escalating or all options have an escalating portion to manage inflation as folks grow older.

The payout plans have already changed since CPF LIFE was launched. Future plan changes are possible. But I think a joint payout plan is the most likely innovation.

- FRS increases even more over the years. It is already increasing and with this function, it is unlikely that people will be 'forced' to all have ERS. Just increase FRS instead.

BRS and FRS increases are already standard operating procedure. The 2025 ERS increase is unusual but a one-time event. (And ERS increases are purely good from an individual member point of view.) It's certainly possible for the pace of BRS/FRS/ERS increases to vary. And Basic Healthcare Sum increases, too.

- In fact, I would not be surprised if ERS is no longer a hard cap. Just slowly decrease the returns the more people put into RA and let people decide when it is worth it. They could show indicator bands. BRS-FRS how much is the payout. FRS-ERS slightly lower percentage payout. Abv ERS slightly lower again. Even at slightly lower payouts, there will be some who value the consistency of income enough to want to consider taking it up.

I doubt that. One of the major reasons to have an upper cap is to prevent wealthy people from shielding too many dollars from creditors and courts. I suppose there could be a separate asset protection cap, but that's messy.

 

[Guojing88]

Yes, assured lifetime retirement income is liberating. Particularly if it's escalating. I wish more people would understand that.

People only see that having a higher sum in their RA, or setting escalating plan, will reduce their income ceiling immediately.

Its harder to see how it raised their income floor at a later date.

So you are sacrificing a higher ceiling, to get a higher floor.