CPF after 55

[demoforce1]

Don't think too much.

Best is shield OA/SA to the hilt and cash top up RA to FRS. You will still get tax relief for the cash top up and every subsequent year top-up when FRS is increased, unless you top up to ERS. Tax relief is limited to 7k or the amount of increase in FRS, whichever is lower.

the interest rate of RA will be higher than the FRS increase, and if not wrong, your FRS/ERS is fixed once hit 55

 

[Value.Matrix]

Don't think too much.

Best is shield OA/SA to the hilt and cash top up RA to FRS. You will still get tax relief for the cash top up and every subsequent year top-up when FRS is increased, unless you top up to ERS. Tax relief is limited to 7k or the amount of increase in FRS, whichever is lower.

Well that is exactly what many top earners would do.

They can DCA the amount in OA through RSTU and also VC3A again to try and boast SA amount.

And many would ask... what about the huge amount in OA outside? Temporarily park it with other investments.

 

[zoneguard]

the interest rate of RA will be higher than the FRS increase, and if not wrong, your FRS/ERS is fixed once hit 55

BBCWatcher mentioned upthread, the treatment of interest differs between RA and SA when compared against FRS/ERS. RA only considers the principal:

If your recipient is 55 or above, the amount that he/she can receive is the current Enhanced Retirement Sum (ERS) less Retirement Account (RA) savings. RA savings refer to the cash set aside in the RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn such as monthly payouts and payout eligibility age lump sum withdrawal.

 

[ukey]

maybe don’t overthink? If u do the calculations, cpf life based on retirement sum is based on 4 to 5% interest for 10 years using whatever balance u have. Aka my view is, U put in later, you get less interest, and the payout will not be representative. I also believe the additional payouts based on incremental retirement sum limit will be having interest period from the time u put in till 65. And the amount u can put in is based on the difference between the current limit, and the amount of actual $ u put in into the ra from 55. Aka treat the cpf life as a normal annuity with 4% interest (and any additional interest for the first 60k) without fees.

 

[iMac]

Aka treat the cpf life as a normal annuity with 4% interest (and any additional interest for the first 60k) without fees.

If that the case, is it better to put my $ (about $93K) in SA instead of using it to top-up from FRS to ERS.

Since SA also give me 4%, plus it will not be "locked-up" by CPFLife.

 

[a4973]

If that the case, is it better to put my $ (about $93K) in SA instead of using it to top-up from FRS to ERS.

Since SA also give me 4%, plus it will not be "locked-up" by CPFLife.

Can share how to one shot put 93k cash all into SA?

 

[zoneguard]

Since SA also give me 4%, plus it will not be "locked-up" by CPFLife.

Yes, preserve the liquidity by first keeping it in SA and at a much later age if there is concern of longevity risk, then withdraw from SA then top-up RA up to the current ERS and request additional LIFE premium to increase the LIFE payout.

 

[zoneguard]

Can share how to one shot put 93k cash all into SA?

Not possible, even when SA was below FRS. Any cash top-up to SA will be swept into RA at 55 anyway.

 

[demoforce1]

Not possible, even when SA was below FRS. Any cash top-up to SA will be swept into RA at 55 anyway.

including SA from salary?

 

[demoforce1]

BBCWatcher mentioned upthread, the treatment of interest differs between RA and SA when compared against FRS/ERS. RA only considers the principal:

oh, is this means FRS/ERS not fixed when we hit 55?

 

[zoneguard]

including SA from salary?

oh, is this means FRS/ERS not fixed when we hit 55?

Cash top-ups are targeted towards a single account - SA or RA. Top-ups to SA will all be swept into RA at 55.

Contributions go into all 3 accounts (OA/SA/MA) and obey the annual limit $37,740. Salary contributions are in this category.

For RA, the ERS limit is compared against the principal only and not the interest earned and hence you can do cash top-ups every year since ERS increases every year.

 

[demoforce1]

Cash top-ups are targeted towards a single account - SA or RA. Top-ups to SA will all be swept into RA at 55.

Contributions go into all 3 accounts (OA/SA/MA) and obey the annual limit $37,740. Salary contributions are in this category.

For RA, the ERS limit is compared against the principal only and not the interest earned and hence you can do cash top-ups every year since ERS increases every year.

Income Tax relief after 55 is based on FRS, not ERS
https://www.iras.gov.sg/irashome/In...tions-for-Individuals/CPF-Cash-Top-up-Relief/

 

[zoneguard]

Income Tax relief after 55 is based on FRS, not ERS

Income tax relief at any age is based on FRS. The point made earlier by BBCWatcher and henrylbh is that for SA, the limit accounts for interest earned. For RA, interest earned is excluded.

 

[henrylbh]

the interest rate of RA will be higher than the FRS increase, and if not wrong, your FRS/ERS is fixed once hit 55

FRS is initially determined when you reached age 55. Initial FRS is increased annually. As such, you can cash top to current FRS for tax relief up to 7k. Interest and gov top-up do not increase the initial FRS, except by subsequent cash-tops. Initial FRS is only used for purpose of withdrawal above BRS.

 

[culture_counter]

Yes, preserve the liquidity by first keeping it in SA and at a much later age if there is concern of longevity risk, then withdraw from SA then top-up RA up to the current ERS and request additional LIFE premium to increase the LIFE payout.

Concur and agree on this point

 

[culture_counter]

If that the case, is it better to put my $ (about $93K) in SA instead of using it to top-up from FRS to ERS.

Since SA also give me 4%, plus it will not be "locked-up" by CPFLife.

Concur and agree on this point

 

[homedriver]

So the question is, is it worth to go to extreme which opt for BRS and with fully paid hdb, only need to transfer $46,500 to purchase the CPF life. The rest just keep in the SA account to earn 4% interest with the freedom to withdraw anytime.

For members who turn 55 in 2021, their Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are $93,000, $186,000 and $279,000 respectively.

 

[BBCWatcher]

So the question is, is it worth to go to extreme which opt for BRS and with fully paid hdb, only need to transfer $46,500 to purchase the CPF life. The rest just keep in the SA account to earn 4% interest with the freedom to withdraw anytime.

Where are you getting the $46,500 figure from?

For members who turn 55 in 2021, their Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are $93,000, $186,000 and $279,000 respectively.

$46,500 appears to be half of $93,000, i.e. half of the BRS.

"SA shielding" obviously has merit as you cross your 55th birthday, but there are some limitations with SA:

1. Once you reach the Full Retirement Sum or age 55, whichever comes first, you're not allowed to deposit cash into your SA in a directed fashion.

2. Age 55+ withdrawals come from SA first, then OA. OA earns 2.5% interest. As you withdraw funds you tend to drive down the "blended" interest rate across SA+OA. (And I really view SA+OA as a single "bucket" from age 55+.)

So it's not as if you're often going to be deciding between SA and RA except perhaps when you "shield" SA across your 55th birthday. Instead I would look at it from the point of view of whether putting cash into RA (or cross-spousal OA to RA deposits) is a good deal, because that's one of the few deals on offer from CPF once you hit 55. And the answer is an emphatic yes, it's a good deal. If you've got cash lying about, and if you maintain enough liquidity (CPF SA+OA helps), then pushing money into RA and/or MA can be a very wise decision.

 

[zoneguard]

So the question is, is it worth to go to extreme which opt for BRS and with fully paid hdb, only need to transfer $46,500 to purchase the CPF life. The rest just keep in the SA account to earn 4% interest with the freedom to withdraw anytime.

It doesn't work that way. FRS in RA will be funded by drawing from SA first followed by OA into RA at 55. You then withdraw BRS which is half of FRS from RA with the property pledge and hence your CPF LIFE premium deducted from RA will be the remaining BRS value.

If you don't meet FRS (or BRS with property pledge) in RA, there is no unlocked liquidity from SA/OA and you cannot withdraw anything from these 2 accounts. So $46,500 doesn't work.
Any sale of property restores RA back to FRS.

 

[henrylbh]

Well that is exactly what many top earners would do.

You will be surprised that most of them don't bother with CPF and its complicated rulings and let their CPF grow by default. Most only know how to use their OA to finance real estate or don't bother to withdraw CPF as there is no real need