CPF Accounts Value thread

[Nofear40]

it is clear uncle kenny is past 55.

uncle kenny is real smart. past 55 with frs, cpf is like a savings account.

i would put cash into my cpf when i am past my 55.

After 55, any top up will flow to ERS? Or your SA/OA?

 

[crimsontactics]

After 55, any top up will flow to ERS? Or your SA/OA?

Depends.

Can top up RA directly to ERS.

If VC will go to OA/SA/MA.

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[BBCWatcher]

39 this year. Still servicing my HDB till age 60 but thinking of doing early repayment with my current OA so I can finished at 54. Is it recommended?

What's your current mortgage interest rate?

If your mortgage interest rate is about equal to or lower than your 2.5% interest rate on your Ordinary Account funds, absolutely NO, do not accelerate repayment on your mortgage. You have a money making machine running, and you want that machine running for as long as possible. (Your OA savings are running ahead or keeping pace with your mortgage. That's better than excellent.)

If/when your mortgage interest rate rises above your OA interest rate, THEN consider accelerating repayment. But not until then.

Why would it ever make sense to call an early halt to a deal where you're making money, when you have a functioning money making machine? I cannot understand why somebody would voluntarily give up that deal.

 

[lls0101]

What's your current mortgage interest rate?

If your mortgage interest rate is about equal to or lower than your 2.5% interest rate on your Ordinary Account funds,absolutely NO, do not accelerate repayment on your mortgage. You have a money making machine running, and you want that machine running for as long as possible. (Your OA savings are running ahead or keeping pace with your mortgage. That's better than excellent.)

If/when your mortgage interest rate rises above your OA interest rate, THEN consider accelerating repayment. But not until then.

Why would it ever make sense to call an early halt to a deal where you're making money, when you have a functioning money making machine? I cannot understand why somebody would voluntarily give up that deal.

Guess it's the peace of mind of knowing there is no more debt or knowing it's ending soon. Can't put monetary value on that.

Anyway, my mortgage loan is from HDB. That's 0.1% higher than OA. By repaying earlier, that 0.1% won't gain me much. But the peace of mind that the loan will end before 55 do make me sleep slightly better.

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[cal3135]

I used to think likewise fully paid HDB many years back.
Now ... to me It’s better if to continue servicing the loan provided u are protected with HPS.
In the unfortunate event kick the bucket; ur family will receive fully paid HDB via HPS n a good amount of balance $$ of ur CPF.

Guess it's the peace of mind of knowing there is no more debt or knowing it's ending soon. Can't put monetary value on that.

Anyway, my mortgage loan is from HDB. That's 0.1% higher than OA. By repaying earlier, that 0.1% won't gain me much. But the peace of mind that the loan will end before 55 do make me sleep slightly better.

Posted from PCWX using SM-G935F

 

[crimsontactics]

I used to think likewise fully paid HDB many years back.
Now ... to me It’s better if to continue servicing the loan provided u are protected with HPS.
In the unfortunate event kick the bucket; ur family will receive fully paid HDB via HPS n a good amount of balance $$ of ur CPF.

That's a wise move Bro cal3135!

Sent from . using GAGT

 

[BBCWatcher]

Guess it's the peace of mind of knowing there is no more debt or knowing it's ending soon. Can't put monetary value on that.

Oh, yes you can!

If somebody is charging you 0.2% interest and you can take that money and reliably earn 1.0% interest, why would you ever cancel that deal? You would/should take that deal as long as you possibly can. That's making money, exactly what banks do when they take your deposit and pay 0.05% interest (or whatever) then turn around and loan that money out at 2.0% interest. You are the bank if you get that deal, and why would you ever not want to be the bank, making easy money on the interest rate spread?

I can sleep very, very well making easy money. Give me yours if you don't want it.

Whenever that deal ends, THEN you have that much more money to retire the loan. No problem! I once got an interest free and deferred payment loan (from a government), and that deal ran for over 7 years. When the payments were due to start and the interest was due to start accruing, I wrote a check for the full principal and retired the loan. Yes, that's right, a government loaned me $X for over 7 years, and I paid $X thereafter and settled the loan in full. Why on earth would I have repaid that deal even one minute earlier? I didn't.

But OK, you have the HDB loan rate of 2.6%, so let's continue....

Anyway, my mortgage loan is from HDB. That's 0.1% higher than OA. By repaying earlier, that 0.1% won't gain me much. But the peace of mind that the loan will end before 55 do make me sleep slightly better.

OK, so there's marginal savings (the 0.1 percent interest spread) if you accelerate repayment. But there are some other choices available:

1. You could refinance the HDB loan with a bank mortgage if you wish. Bank mortgages have a lower interest rate right now. You could also shorten up the term in the process, if you wish.

I'm not necessarily recommending that. The 2.6% HDB loan rate is "interesting" at the moment. If market interest rates head up to 2.8%, let's suppose, the 2.6% HDB loan rate will stay at 2.6%. The HDB loan rate is adjustable too, but it'd take a more significant interest rate rise to push the HDB loan rate up.

However, in some cases a bank refinance can make sense.

2. If you've got "too many" OA dollars piling up -- a happy problem to have -- then you can transfer at least some of them into your Special Account where they earn 4% interest. That's a lot more than 2.6%. You win. Moreover, to the extent you have more saved for retirement, you can prudently reduce your non-CPF retirement savings flow by a corresponding amount.

 

[Newmaxi]

RA interest cannot be withdrawn (btw MA interest also cannot withdraw). So Uncle K can only access his OA and SA interest

if he wanna withdraw OA+SA interest, he can do it in Dec, but that would only give him Jan-Nov interest (he can't do it in Jan because by then the interest would have been credited into his accounts). So, he can withdraw about 11/12 of what we see above, roughly 27.3k. Not bad :thumbs up:

If he hit 55 years old. Can’t he withdraw current year interest plus principal ?

 

[lls0101]

Oh, yes you can!

If somebody is charging you 0.2% interest and you can take that money and reliably earn 1.0% interest, why would you ever cancel that deal? You would/should take that deal as long as you possibly can. That's making money, exactly what banks do when they take your deposit and pay 0.05% interest (or whatever) then turn around and loan that money out at 2.0% interest. You are the bank if you get that deal, and why would you ever not want to be the bank, making easy money on the interest rate spread?

I can sleep very, very well making easy money. Give me yours if you don't want it.


Whenever that deal ends, THEN you have that much more money to retire the loan. No problem! I once got an interest free and deferred payment loan (from a government), and that deal ran for over 7 years. When the payments were due to start and the interest was due to start accruing, I wrote a check for the full principal and retired the loan. Yes, that's right, a government loaned me $X for over 7 years, and I paid $X thereafter and settled the loan in full. Why on earth would I have repaid that deal even one minute earlier? I didn't.

But OK, you have the HDB loan rate of 2.6%, so let's continue....

OK, so there's marginal savings (the 0.1 percent interest spread) if you accelerate repayment. But there are some other choices available:

1. You could refinance the HDB loan with a bank mortgage if you wish. Bank mortgages have a lower interest rate right now. You could also shorten up the term in the process, if you wish.

I'm not necessarily recommending that. The 2.6% HDB loan rate is "interesting" at the moment. If market interest rates head up to 2.8%, let's suppose, the 2.6% HDB loan rate will stay at 2.6%. The HDB loan rate is adjustable too, but it'd take a more significant interest rate rise to push the HDB loan rate up.

However, in some cases a bank refinance can make sense.

2. If you've got "too many" OA dollars piling up -- a happy problem to have -- then you can transfer at least some of them into your Special Account where they earn 4% interest. That's a lot more than 2.6%. You win. Moreover, to the extent you have more saved for retirement, you can prudently reduce your non-CPF retirement savings flow by a corresponding amount.

Since i have easily almost 2 more decades of loan repayment, I don't think I want to take risk with bank loans with the current rising interest environment.

With regard of OA moving to SA, if I move my OA to SA, that means I will not able to RSTU and forfeit the tax saving. With my current monthly contribution and annual interest, I can do 4 more RSTU ($7000) which is $1960 saving @7% tax bracket. So, no... OA to SA don't make sense in my situation.

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[ocs_woodlands]

It will bro, if u nearing 55.
House fully paid
FRS in OA and SA.

U may consider do the SA shield.
Just share with my colleague whom reaching 55 this year .
He is interested to do similarly

tbh, if this goes on, the govt will close off this tap.. don't tell too many people otherwise, just like HDB decoupling, it will be gone before it's your turn..

 

[BBCWatcher]

With regard of OA moving to SA, if I move my OA to SA, that means I will not able to RSTU and forfeit the tax saving. With my current monthly contribution and annual interest, I can do 4 more RSTU ($7000) which is $1960 saving @7% tax bracket. So, no... OA to SA don't make sense in my situation.

That's only a partial analysis. You should also take into account the additional interest. Dollars transferred from OA to SA -- let's suppose that's $28,000 for sake of argument -- right now start earning 4% interest (1.5 percentage points higher) from January 1, 2019 (for the full year 2019). A $7,000 top-up right now starts earning 4% interest from February 1, 2019, and obviously the $7,000 top-ups that aren't made this year don't earn any interest this year.

So you're not saving $1,960. You're saving something less than that, because you aren't claiming all the 4% interest that you could, sooner. Which is not to say that you don't have the right idea (I think you do), but the actual number is smaller.

Yet another option is the CPF Investment Scheme (OA). If you have OA dollars piling up and your SA is up to the Full Retirement Sum and you have a reasonably long time horizon ahead of you, then I think the CPFIS-OA can make some sense, as long as you choose something low cost and prudent (and UOB's CPF Investment Account, which seems to be the lowest cost one available).

 

[kehyi4]

Can any kind soul explain how it works?

Kind soul reporting in

Purely hypothetical case hor:

54y 10m
OA = 160k
SA = 180k

54y 11m
Action: Use CPFIS-SA to buy 140k worth of whatever approved fund that you like
Result:
OA = 160k
SA = 40k <- this is left behind because of CPFIS rules: first 40k of SA cannot be used
Fund = 140k

55y 0m
Action: RA is created
Result:
OA = 24k
SA = 0
RA = 176k <- This is FRS, funded by available SA and OA
Fund = 140k

55y 1m
Action: Sell the whatever fund, get back 140k (more or less) in SA
Result:
OA = 24k
SA = 140k
RA = 176k
Fund = 0

this should be what it looks like, probably. I'm open to corrections if i'm wrong though...

 

[kehyi4]

If he hit 55 years old. Can’t he withdraw current year interest plus principal ?

AFAIK, yes he can, for OA and SA interest. However, there is no mechanism that allows withdrawal of RA interest

CPF used to include the following in their FAQ, but I can't find it there anymore:
"Please note that the Board processes all withdrawals for members who are 55 and above, using the following deduction sequence:
i) interests earned in the Special Account, then Ordinary Account, from the beginning of the year up to the month before the withdrawal, followed by
ii) contribution/refunds credited to the Special Account, then Ordinary Account, in the same month of the withdrawal, and lastly,
iii) monies in the Special Account, then Ordinary Account."

 

[Newmaxi]

Kind soul reporting in

Purely hypothetical case hor:

54y 10m
OA = 160k
SA = 180k

54y 11m
Action: Use CPFIS-SA to buy 140k worth of whatever approved fund that you like
Result:
OA = 160k
SA = 40k <- this is left behind because of CPFIS rules: first 40k of SA cannot be used
Fund = 140k

55y 0m
Action: RA is created
Result:
OA = 24k
SA = 0
RA = 176k <- This is FRS, funded by available SA and OA
Fund = 140k

55y 1m
Action: Sell the whatever fund, get back 140k (more or less) in SA
Result:
OA = 24k
SA = 140k
RA = 176k
Fund = 0

this should be what it looks like, probably. I'm open to corrections if i'm wrong though...

I think at age 55 is half of FRS amount is deducted to created RA

 

[lls0101]

That's only a partial analysis. You should also take into account the additional interest. Dollars transferred from OA to SA -- let's suppose that's $28,000 for sake of argument -- right now start earning 4% interest (1.5 percentage points higher) from January 1, 2019 (for the full year 2019). A $7,000 top-up right now starts earning 4% interest from February 1, 2019, and obviously the $7,000 top-ups that aren't made this year don't earn any interest this year.

So you're not saving $1,960. You're saving something less than that, because you aren't claiming all the 4% interest that you could, sooner. Which is not to say that you don't have the right idea (I think you do), but the actual number is smaller.

Yet another option is the CPF Investment Scheme (OA). If you have OA dollars piling upand your SA is up to the Full Retirement Sumand you have a reasonably long time horizon ahead of you, then I think the CPFIS-OA can make some sense, as long as you choose something low cost and prudent (and UOB's CPF Investment Account, which seems to be the lowest cost one available).

Yes, will be lesser than $1960 if interest is taken into account. Of course, one can also argue that the $28,000 is sitting in a high yield saving account which will reduce the potential interest loss. But I should come out ahead if RSTU is done instead. Thanks for pointing it out though.

CPFIS-OA is no longer available to me as I already invested a significant amount in a local stock (OCBC) and have exceed the investment limit.

As such, my choices left are;

1) leave them in OA and accumulate 2.5%
2) repay partially to HDB loan to reduce loan period and leave 5-10k as safety buffer
3) OA to SA (not suitable for my situation)

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[JuniorLion]

That's only a partial analysis. You should also take into account the additional interest. Dollars transferred from OA to SA -- let's suppose that's $28,000 for sake of argument -- right now start earning 4% interest (1.5 percentage points higher) from January 1, 2019 (for the full year 2019). A $7,000 top-up right now starts earning 4% interest from February 1, 2019, and obviously the $7,000 top-ups that aren't made this year don't earn any interest this year.

So you're not saving $1,960. You're saving something less than that, because you aren't claiming all the 4% interest that you could, sooner. Which is not to say that you don't have the right idea (I think you do), but the actual number is smaller.

Yet another option is the CPF Investment Scheme (OA). If you have OA dollars piling up and your SA is up to the Full Retirement Sum and you have a reasonably long time horizon ahead of you, then I think the CPFIS-OA can make some sense, as long as you choose something low cost and prudent (and UOB's CPF Investment Account, which seems to be the lowest cost one available).

Also a partial analysis. You're not earning 0% interest on the $21000, unless you put it under your pillow. Say, for example, you put that into a Citi Maxigain account earning 2.5% interest right now. Or, you could also be putting that into some FDs or other alternatives.

 

[crimsontactics]

Yes, will be lesser than $1960 if interest is taken into account. Of course, one can also argue that the $28,000 is sitting in a high yield saving account which will reduce the potential interest loss. But I should come out ahead if RSTU is done instead. Thanks for pointing it out though.

CPFIS-OA is no longer available to me as I already invested a significant amount in a local stock (OCBC) and have exceed the investment limit.

As such, my choices left are;

1) leave them in OA and accumulate 2.5%
2) repay partially to HDB loan to reduce loan period and leave 5-10k as safety buffer
3) OA to SA (not suitable for my situation)

Posted from PCWX using SM-G935F

Bro lls0101, why you lose money from SMRT shares? I thought price quite constant.

Sent from . using GAGT

 

[Nofear40]

Kind soul reporting in

Purely hypothetical case hor:

54y 10m
OA = 160k
SA = 180k

54y 11m
Action: Use CPFIS-SA to buy 140k worth of whatever approved fund that you like
Result:
OA = 160k
SA = 40k <- this is left behind because of CPFIS rules: first 40k of SA cannot be used
Fund = 140k

55y 0m
Action: RA is created
Result:
OA = 24k
SA = 0
RA = 176k <- This is FRS, funded by available SA and OA
Fund = 140k

55y 1m
Action: Sell the whatever fund, get back 140k (more or less) in SA
Result:
OA = 24k
SA = 140k
RA = 176k
Fund = 0

this should be what it looks like, probably. I'm open to corrections if i'm wrong though...

Thanks, kind soul!
This is to push OA into RA to earn 4%

 

[Nofear40]

I think at age 55 is half of FRS amount is deducted to created RA

This is BRS with a property to pledge right

 

[cal3135]

FRS bro, unless insufficient or u property pledge


Q What is the Retirement Account?
A On your 55th birthday, we will create a Retirement Account (RA) for you. Savings from your Special Account and Ordinary Account, up to the Full Retirement Sum (FRS), will be transferred to your RA to form your retirement sum which will provide you with monthly payouts. For higher monthly payouts, you can top up your RA up to the Enhanced Retirement Sum (ERS). If you own a property, you can choose to withdraw your RA savings above the Basic Retirement Sum (BRS). The FRS is two times the BRS, and the ERS is three times the BRS.

I think at age 55 is half of FRS amount is deducted to created RA