1. I read on a finance blog that we don't need to meet the FRS "tier" amount in order to get the monthly payouts, and that the payout is prorated based on what you have even if it's in between the BRS and FRS, as in my case. Is this true?
That's true. Less money in your eventual Retirement Account means a lower monthly retirement payout. More means a bigger payout.
2. My hubby's SA hasn't reached FRS, so now I know that transferring some of his OA to mine is not an option. We have a HDB loan at 2.6%, which was why I previously planned on doing partial capital repayment with his OA monies exceeding 20k. But we also talked about whether we should transfer to his SA for that compounding effect, or pay off the loan a bit earlier, or do neither. Any thoughts on that is appreciated.
Accelerating repayment on a HDB loan means you get a 2.6% return on your money, and then that money is parked as (variable) equity in the leasehold. Transferring OA dollars to SA mean those dollars earn 4% interest, and then they boost your (your husband's) future retirement income for life and/or provide more funds that can be withdrawn from age 55 onward.
I think the 4% is the much better deal in this comparison. It's still prudent to maintain enough emergency reserve, including in OA, to service the HDB loan during (for example) an extended bout of unemployment. Amounts above that probably ought to be transferred to SA.
I know we need to consider whether we would be using the OA for future home purchase and I can't say with 100% certainty that we will not be needing the OA in future.
That's a consideration, but there's a cost: 1.5 percentage points of interest. Also, as your husband continues to work, his and his employer's compulsory contributions continue to stream into CPF, including into OA. It's a cup that gets refilled at least at some pace. So take that into account, too.
On the surface, it seems to make sense to do partial capital repayment for OA monies above 20k since the interest rate is 2.5%. On the other hand, the difference is only 1%.
I think you mean OA to SA transfers, and that's "only" 1.5 percentage points. Which is a huge difference, actually, when you compound the extra interest annually out to age 55 and beyond.
3. I am also confused on 2 other things I read on CPF's website. About the CPF Life Basic Plan, CPF's website says that "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. Hence, Basic Plan payouts are not level throughout." What is the exact amount it decreases to?
I wouldn't worry too much about payout plan selection since you won't actually make that decision until circa age 64.9 at the earliest. That's many, many years into the future, and by then CPF might have one or a couple new payout plans to choose from. Who knows.
However, to answer your question, yes, the CPF Basic Plan is a little weird. The monthly payouts are relatively flat (in nominal dollars, meaning the purchasing power of those level dollars erodes over time with inflation), but there's a very slight, one-time dip of a couple percentage points several years into the payout stream.
4. For the cash top ups, you guys mentioned that it can't be used during property pledge in future. I tried reading CPF's website on this but I still don't understand what this part means exactly?
This characteristic only ever matters if you decide to choose a monthly retirement payout that's less than Full Retirement Sum level. Meaning, basically, that you're running short of money somewhere between age 55 and age 65, and you need to sacrifice some of your future retirement income in exchange for an immediate withdrawal within that particular decade. Obviously you should hope you don't end up in that situation because a FRS-level monthly payout is certainly not living with fine caviar and champagne -- far from it -- but that's the situation.
OK, with that background, SA/RA top ups, plus accrued interest on those top ups, must be paid out as monthly retirement benefits. So that portion you're not allowed to pull out as immediate cash at age 55+. But $5,000 in cash is practically always available as a withdrawal option from age 55+, and more if you have non-top up funding. For example, if your husband transfers some OA dollars to his SA, those dollars don't fall under this particular rule.
Anyway, if you're aiming for FRS-level monthly payouts or higher, it absolutely doesn't matter. If you're aiming for below FRS-level payouts, it might (depending on how big your top ups are relative to other contributions), but you'll have some number of dollars you can withdraw at age 55+ if you need to.
