CPF SA Shielding hack - RIP (Obsolete)

[BBCWatcher]

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

I'm just referring to the psychology related to getting monthly payments for life, especially if they're increasing every year. I think it's just going to take a generation of elder Singaporeans receiving monthly retirement income for life before it dawns on enough people how liberating it is, how much of a relief it is to not worry (or to worry much less) about money whether you're the retiree or the child/grandchild of a retiree.

 

[highsulphur]

Let's have a illustration

You turn 55 in 2025. BRS is 106.5k. FRS 213k. ERS is 426k

You have 300k in SA and 200k in OA before RA is formed. Once RA is formed, 213k from SA will be swept into RA and balance 87k transferred from SA to OA.

RA: 213k
OA: 287k

Suppose you want to top up your RA to ERS, you transfer 213k from OA to RA
RA: 426k
OA :74k

Assuming RA interest for the next 10 years is 4% and there is no other inflow into RA. Your RA after 10 years will be 1.04^10*426=630.5k

How much can I withdraw at 65Y (after 10Y from 55Y)? Will it be
1) 20% of 213k (original FRS into RA)
2) 20% of 426k (original ERS into RA)
3) 20% of 630.5k (final RA at 65)

My interpretation is (1) 42.6k. Leaving 587.9k in RA for CPF Life payment to start at 65. Did I get it right? I avoid pledging property in this example first.

Reply from cpf

The amount you can withdraw based on this example is $78,500.

The formula works in such a way that the [total amount in RA at age 65 will minus your top up monies x 20%] - 5000.

You may refer to the link below to understand on the computation for the withdrawal of 20% at age 65. cpf.gov.sg/member/faq/retirement-income/retirement-withdrawals/how-is-the-withdrawable-amount-computed

 

[sohguanh]

I hope readers in this forum are old enough to know cpf rules are subject to changes every now and then. What you plan as of this year can be ruined the next year etc.

E.g cpf life starts at 65 or say delay to 70. What is stopping them from changing the rules to say 75, 80 or even 85, 90? since according to them ppl are living long life?

E.g SRS change to only start withdrawing at 70, 75, 80 etc since again ppl are living long life?

With this in mind that the only constant is change in cpf scheme, my own thinking is try not to lock up too much monies and trust them. Just do the bare minimum to satisfy their rules and the rest DIY once you get hold. After all cpf monies are your own monies you don't want them to dictate how it should be used, released etc

 

[iMac]

I hope readers in this forum are old enough to know cpf rules are subject to changes every now and then. What you plan as of this year can be ruined the next year etc.

E.g cpf life starts at 65 or say delay to 70. What is stopping them from changing the rules to say 75, 80 or even 85, 90? since according to them ppl are living long life?

E.g SRS change to only start withdrawing at 70, 75, 80 etc since again ppl are living long life?

With this in mind that the only constant is change in cpf scheme, my own thinking is try not to lock up too much monies and trust them. Just do the bare minimum to satisfy their rules and the rest DIY once you get hold. After all cpf monies are your own monies you don't want them to dictate how it should be used, released etc

Agreed.

Wont be surprised in a few years time, the withdrawal age increase from 55 to 65.

CPF Life increase from 65 to 75.

 

[sohguanh]

Agreed.

Wont be surprised in a few years time, the withdrawal age increase from 55 to 65.

CPF Life increase from 65 to 75.

You too optimistic. If I am govt I will raise much higher say 55 to 75. 65 to 85. And guess what no need go to Parliament to vote for changes and it will just get implemented. All use the perfect explanation ppl are living longer life as justification for the upward revised age.

 

[Okenba]

You too optimistic. If I am govt I will raise much higher say 55 to 75. 65 to 85. And guess what no need go to Parliament to vote for changes and it will just get implemented. All use the perfect explanation ppl are living longer life as justification for the upward revised age.

I dunno, but I'm guessing there's probably a very good reason why you're not govt...
So I don't think it's wise to use what you would do as a predictor of what govt would do?

 

[snowcrabramyeon]

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.

Talk nonsense lah. If your nightmare scenario happens, all your SGD bank deposits and cash at hand are all affected, not just the CPF. So how? Does that mean your last sentence should replace "CPF" with "anything"?

 

[stanlawj]

Talk nonsense lah. If your nightmare scenario happens, all your SGD bank deposits and cash at hand are all affected, not just the CPF. So how? Does that mean your last sentence should replace "CPF" with "anything"?

From the time you started working till 2019, did you ever considered Covid-19 scenario?

The SG Govt in 30 years time, will no longer be helmed by the same ppl today (aged and retired and/or dead). The Singaporean masses and the natural environment in 30 years time, may also not be the kind that you have today.

Please read below regarding my past post regarding the major nightmare scenarios.

Maybe you should be thinking about the specific disruptions that will result from a black swan event and then plan accordingly. Not all may happen at the same time.

1. border (movement) controls, forced military conscription relocation plans
2. capital controls, asset seizure offshore liquidity
3. electronics disruption non-electronic assets: cash & coins, physical gold, real estate titles, physical share certs
4. national currency collapse foreign currencies including gold
5. food & water rationing emergency supplies, relocation plans

As to the details, is up to the person to plan depending on wealth abilities (net worth). But relocation plans is always popping up in many scenarios. I would prioritise it as 2nd after gold.

Air traffic can be closed, but land & sea crossings may still be open. US stopped passenger air travel in Sept 2001 but did not close the land borders of Canada and Mexico for crossing because commercial trade still need to pass through.
https://www.cbc.ca/news/world/coronavirus-covid-19-border-canada-united-states-trade-1.5503192"Operating on a case-by-case basis, U.S. border agents began waving through the cargo and travellers they deemed low-risk."

As a warning, learn from Ukraine. The govt is rounding up all resident men to send to fight the Russian meat grinder. Woe to all men who stayed behind in Ukraine and did not flee at the outbreak of the war in February 2022.

 

[celtosaxon]

A few changes I think would be reasonable to expect in the future would be an increase of the employer 17% contribution rate toward 20% and an inflation increase on the $102k annual salary maximum. Both have not changed in a very long time.

 

[snowcrabramyeon]

From the time you started working till 2019, did you ever considered Covid-19 scenario?

The SG Govt in 30 years time, will no longer be helmed by the same ppl today (aged and retired and/or dead). The Singaporean masses and the natural environment in 30 years time, may also not be the kind that you have today.

Please read below regarding my past post about the major nightmare scenarios.

I'm not saying nightmare scenario won't happen. But if nightmare scenario did happen, all bets are off. In the post I quoted you, why did you specifically focus on CPF? What about everything else?

 

[stanlawj]

I'm not saying nightmare scenario won't happen. But if nightmare scenario did happen, all bets are off. In the post I quoted you, why did you specifically focus on CPF? What about everything else?

Because Singaporean citizen cannot withdraw CPF less than FRS as cash, only extract annuity cash payments after 65 years old. If you below 65 years old, you are a long-term investor in Singapore Inc.

For cash in bank, you can always convert it and TT elsewhere during the short window period of opportunity in the event of a nightmare scenario. But if you wait too late, the window will still close.

If there are no warning signs nor any window of opportunity, then your backup plans (relocation, gold/foreign currency, etc) have to be ready on standby 24/7. This is why the rich Indos flock to SG as insurance against their own Indo govt.

 

[snowcrabramyeon]

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.

Because Singaporean citizen cannot withdraw CPF less than FRS as cash, only extract annuity cash payments after 65 years old. If you below 65 years old, you are a long-term investor in Singapore Inc.

For cash in bank, you can always convert it and TT elsewhere during the short window period of opportunity in the event of a nightmare scenario. But if you wait too late, the window will still close.

I only took issue with the first post I quoted. You used the word "overnight". If it happens overnight, then all bets are off, not just CPF.

 

[stanlawj]

I only took issue with the first post I quoted. You used the word "overnight". If it happens overnight, then all bets are off, not just CPF.

If you watch the financial markets 24/7, there are warning signs preceding any "overnight" event, by a few days.

Currently, the global market is dependent on JPY and USD funding. Watching any major asset priced in JPY and USD serve as very good early warning indicators to any instability.

 

[stanlawj]

I only took issue with the first post I quoted. You used the word "overnight". If it happens overnight, then all bets are off, not just CPF.

Let's use the Malaysia's sudden imposition of capital controls as another example of "overnight" event.

The warning signs preceding it was the financial crash and currency crash. These took months to play out before the announcement.
In the final weeks leading to the imposition of capital controls, there was considerable disagreement between the DPM Anwar acting as finance minister and PM Mahathir. None of these suggest any resolution in the near term.

 

[fr33d0m]

Reply from cpf

The amount you can withdraw based on this example is $78,500.

The formula works in such a way that the [total amount in RA at age 65 will minus your top up monies x 20%] - 5000.

You may refer to the link below to understand on the computation for the withdrawal of 20% at age 65. cpf.gov.sg/member/faq/retirement-income/retirement-withdrawals/how-is-the-withdrawable-amount-computed

nailed it.

this is very clear from the illustration from CPF.

Not sure what to confuse....

 

[fr33d0m]

Because Singaporean citizen cannot withdraw CPF less than FRS as cash, only extract annuity cash payments after 65 years old. If you below 65 years old, you are a long-term investor in Singapore Inc.

For cash in bank, you can always convert it and TT elsewhere during the short window period of opportunity in the event of a nightmare scenario. But if you wait too late, the window will still close.

If there are no warning signs nor any window of opportunity, then your backup plans (relocation, gold/foreign currency, etc) have to be ready on standby 24/7. This is why the rich Indos flock to SG as insurance against their own Indo govt.

please convert all your cash to MYR and let us have a good laugh.

in the past 20 years, SGD is one of the stronger currency. I am not sure why we would think it should just fare worse in the next 20 years.

Singapore has one of the better governments in the world.

 

[sohguanh]

I dunno, but I'm guessing there's probably a very good reason why you're not govt...
So I don't think it's wise to use what you would do as a predictor of what govt would do?

The point I am trying to bring across is the only constant is change and the magnitude of the change can be a lot than what a lot of readers think. So as each reader start to plan need to factor that into your plan the worst case scenario can be very worst. History has shown it does happen not a fantasy.

 

[sohguanh]

A few changes I think would be reasonable to expect in the future would be an increase of the employer 17% contribution rate toward 20% and an inflation increase on the $102k annual salary maximum. Both have not changed in a very long time.

The reason is simple they do not want to scare off foreign investors,employers. They pulling out indicate many more locals out of job. The impact is enormous. In contrast cpf changes like SA removal is easier since there will be no major objections from foreign investors,employers as it does not affect them.

Already we are seeing retrenchment going on in full swing and later this year a financial package for unemployed while looking for job in the works. This indicates securing rice bowl for locals is of highest priority. Scaring the foreign employers off by increasing their cpf contributions to workers is no no (at least for this year I think)

 

[stanlawj]

please convert all your cash to MYR and let us have a good laugh.

in the past 20 years, SGD is one of the stronger currency. I am not sure why we would think it should just fare worse in the next 20 years.

Singapore has one of the better governments in the world.

Hello, I'm looking at MXN, BRL and CHF.

 

[fr33d0m]

Hello, I'm looking at MXN, BRL and CHF.

hmmm,

20 years ago, SGD/BRL was like 1.+, today it is 3.+

20 years ago, SGD/MXN was 6.+, today it is 12.+

they both are worse than MYR in the last 20 years...