CPF after 55

[henrylbh]

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.

Not sure what you saying. At 55, SA followed by OA will be transferred to RA to meet FRS of 186k. You can withdraw amount up to 93k above BRS with sufficient property pledge but you can't choose put back 93k or leave it in SA.

Even if you shield SA and if RA is formed with less than FRS, you can't subsequently withdraw the amount in SA without making good shortfall in FRS or shortfall in BRS with sufficient property pledge.

 

[Value.Matrix]

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

Because its all done by people who they know and trust haha. That's why they hire people to do it for them. The ones who do are not yet rich, just middle class

 

[homedriver]

Not sure what you saying. At 55, SA followed by OA will be transferred to RA to meet FRS of 186k. You can withdraw amount up to 93k above BRS with sufficient property pledge but you can't choose put back 93k or leave it in SA.

Even if you shield SA and if RA is formed with less than FRS, you can't subsequently withdraw the amount in SA without making good shortfall in FRS or shortfall in BRS with sufficient property pledge.

Understand now. So minimum must transfer 93k to RA with property pledge. If I have 193k in my SA, it will be better only transfer 93k to RA and leave 100k in my SA account which enjoy 4% interest and is not locked. And even better that it continue to earn the 4% interest into my personal account rather then in the common pool which me and my beneficiary not benefited. Unless I can stay Long enough to kick in the pool.

 

[homedriver]

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

$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.

Understand RA is created to fund the premium for CPF life plan. So is the RA account still exist after 65?
Can I say once the money transferred to RA at 55, we are no longer able to touch the money anymore. What we can expect is the monthly payout for life after 65.
This give me a feeling like I give someone 186k to purchase a plan and no matter how urgent I might need the money (which is my hard earn money) due to some emergency. And the person tell me “No, you have no choice, you can only get the monthly payout irregardless of how bad is your situation.” : /

 

[zoneguard]

Understand now. So minimum must transfer 93k to RA with property pledge. If I have 193k in my SA, it will be better only transfer 93k to RA and leave 100k in my SA account which enjoy 4% interest and is not locked.

Please read what we have written so far again.

186K in SA will be transferred from SA to RA at 55 by default - you don't have any choice in the amount at all - however you can do SA shielding but 1st 40K of SA cannot be shielded. So if SA shielding is done, the balance of FRS will come from OA or from cash-topup for SA/OA liquidity to be unlocked.

With the property pledge, you can then withdraw 93K from RA. This happens after 55 and not at the point of RA creation.

 

[zoneguard]

Understand RA is created to fund the premium for CPF life plan. So is the RA account still exist after 65?
Can I say once the money transferred to RA at 55, we are no longer able to touch the money anymore.

Yes, it still exists. The LIFE premium is deducted closer to 65 or whenever you choose LIFE payout to begin - not later than 70. As ERS increases every year, you can top-up RA to current ERS any time after 55. There is another possible payout from RA - AMP. AMP is when there is balance in RA after LIFE payout has begun due to top-ups and yet you didn't choose to increase LIFE premium.

You can withdraw RA monies through property pledging - up to BRS or 93K if you turn 55 this year.

 

[BBCWatcher]

To summarize:

1. Is it good to "shield" Special Account dollars across your 55th birthday? Yes, if for no other reason than your new Retirement Account will be funded more heavily from your Ordinary Account (and/or from a cash top up to RA) on your 55th birthday.

2. Is topping up your RA with cash a good deal? Yes! Starting from the moment your RA is created on your 55th birthday your RA is the second best interest rate deal that CPF offers you. (The first best in interest rate terms is your MediSave Account, although any cash you put into MediSave has to fit within both the CPF Annual Limit and Basic Healthcare Sum.)

I am highly inclined to shove as much cash as allowed into my future Retirement Account as soon and as often as allowed. Where else am I going to get a highly reliable 4.0% yield on Singapore dollars, then leading to a VERY fairly priced life annuity from age 70? Nowhere, and not even close. That's a heck of a great deal. (What I'm describing requires some degree of wealth and liquidity, but there are some who can play this game.)

3. If you care about maximizing interest earned from RA then you would be wise to start CPF LIFE monthly payouts as late as allowed: age 70. (This is the default starting payout age.) That way you get 5 more years (60 months) of 4% interest plus $900 of bonus interest per year.

Bending yourself into a pretzel to minimize your Retirement Account's funding level is generally unwise, especially in the current and similar market interest rate environment. I'm assuming of course you don't actually need to pull dollars from your RA to survive.

 

[culture_counter]

Understand RA is created to fund the premium for CPF life plan. So is the RA account still exist after 65?
Can I say once the money transferred to RA at 55, we are no longer able to touch the money anymore. What we can expect is the monthly payout for life after 65.
This give me a feeling like I give someone 186k to purchase a plan and no matter how urgent I might need the money (which is my hard earn money) due to some emergency. And the person tell me “No, you have no choice, you can only get the monthly payout irregardless of how bad is your situation.” : /

Yes, it's as good and true as what you say

 

[BBCWatcher]

Yes, it's as good and true as what you say

Not exactly. In particular, age 65 is a choice. If you don't start monthly payouts until age 70 then you preserve your lump sum RA withdrawal option for another 5 years. That's yet another reason why it's wise to wait to start monthly payouts until age 70 (the default payout start age).

However, the idea here is that under no circumstances should you throw yourself into permanent destitution for the rest of your elder days. You simply cannot survive in Singapore without some minimum amount of money to get by (food, clothing, shelter, etc.) If you fear the implications of accepting a terrific RA deal then there's a solution: make sure your other wealth (including CPF savings in SA and OA) is more than sufficient so that you won't ever even think about raiding your Retirement Account.

Financially speaking this is kind of like being worried that you aren't allowed to sell both of your kidneys. Well yeah, you aren't allowed to do that. By why would ever want to? Liquidity constraints only matter if they are relevant to real world scenarios. I would never voluntarily choose to attempt to live on less than a FRS-level CPF LIFE income stream. Does anyone at least in this forum plan to do that, or even imagine doing that? I hope not!

 

[homedriver]

Please read what we have written so far again.

186K in SA will be transferred from SA to RA at 55 by default - you don't have any choice in the amount at all - however you can do SA shielding but 1st 40K of SA cannot be shielded. So if SA shielding is done, the balance of FRS will come from OA or from cash-topup for SA/OA liquidity to be unlocked.

With the property pledge, you can then withdraw 93K from RA. This happens after 55 and not at the point of RA creation.

I understand now. 186k always transfer to RA at 55. Then I can choose to withdraw 93k from RA anytime if I pledge my property. Thank you.

 

[homedriver]

Yes, it still exists. The LIFE premium is deducted closer to 65 or whenever you choose LIFE payout to begin - not later than 70. As ERS increases every year, you can top-up RA to current ERS any time after 55. There is another possible payout from RA - AMP. AMP is when there is balance in RA after LIFE payout has begun due to top-ups and yet you didn't choose to increase LIFE premium.

You can withdraw RA monies through property pledging - up to BRS or 93K if you turn 55 this year.

For example, if I have 200k in my RA at 55. This will grow to 230k when I’m 65. If by the time BRS is 100K. Then after I transferred 100k to purchase CPF LIfe Plan, I still have 130k in my RA. I’m assume I no longer eligible to deposit cash into RA anymore. So my RA will become a 130k saving account with 4% interest, free to withdraw anytime but not allow to deposit. Correct me if I’m wrong.

 

[homedriver]

To summarize:

1. Is it good to "shield" Special Account dollars across your 55th birthday? Yes, if for no other reason than your new Retirement Account will be funded more heavily from your Ordinary Account (and/or from a cash top up to RA) on your 55th birthday.

2. Is topping up your RA with cash a good deal? Yes! Starting from the moment your RA is created on your 55th birthday your RA is the second best interest rate deal that CPF offers you. (The first best in interest rate terms is your MediSave Account, although any cash you put into MediSave has to fit within both the CPF Annual Limit and Basic Healthcare Sum.)

I am highly inclined to shove as much cash as allowed into my future Retirement Account as soon and as often as allowed. Where else am I going to get a highly reliable 4.0% yield on Singapore dollars, then leading to a VERY fairly priced life annuity from age 70? Nowhere, and not even close. That's a heck of a great deal. (What I'm describing requires some degree of wealth and liquidity, but there are some who can play this game.)

3. If you care about maximizing interest earned from RA then you would be wise to start CPF LIFE monthly payouts as late as allowed: age 70. (This is the default starting payout age.) That way you get 5 more years (60 months) of 4% interest plus $900 of bonus interest per year.

Bending yourself into a pretzel to minimize your Retirement Account's funding level is generally unwise, especially in the current and similar market interest rate environment. I'm assuming of course you don't actually need to pull dollars from your RA to survive.

To summarize:

1. Is it good to "shield" Special Account dollars across your 55th birthday? Yes, if for no other reason than your new Retirement Account will be funded more heavily from your Ordinary Account (and/or from a cash top up to RA) on your 55th birthday.

2. Is topping up your RA with cash a good deal? Yes! Starting from the moment your RA is created on your 55th birthday your RA is the second best interest rate deal that CPF offers you. (The first best in interest rate terms is your MediSave Account, although any cash you put into MediSave has to fit within both the CPF Annual Limit and Basic Healthcare Sum.)

I am highly inclined to shove as much cash as allowed into my future Retirement Account as soon and as often as allowed. Where else am I going to get a highly reliable 4.0% yield on Singapore dollars, then leading to a VERY fairly priced life annuity from age 70? Nowhere, and not even close. That's a heck of a great deal. (What I'm describing requires some degree of wealth and liquidity, but there are some who can play this game.)

3. If you care about maximizing interest earned from RA then you would be wise to start CPF LIFE monthly payouts as late as allowed: age 70. (This is the default starting payout age.) That way you get 5 more years (60 months) of 4% interest plus $900 of bonus interest per year.

Bending yourself into a pretzel to minimize your Retirement Account's funding level is generally unwise, especially in the current and similar market interest rate environment. I'm assuming of course you don't actually need to pull dollars from your RA to survive.

Can I choose to transfer 279k to my RA which is ERS at 55. Then at 70, I decide to opt for BRS?

 

[homedriver]

Not exactly. In particular, age 65 is a choice. If you don't start monthly payouts until age 70 then you preserve your lump sum RA withdrawal option for another 5 years. That's yet another reason why it's wise to wait to start monthly payouts until age 70 (the default payout start age).

However, the idea here is that under no circumstances should you throw yourself into permanent destitution for the rest of your elder days. You simply cannot survive in Singapore without some minimum amount of money to get by (food, clothing, shelter, etc.) If you fear the implications of accepting a terrific RA deal then there's a solution: make sure your other wealth (including CPF savings in SA and OA) is more than sufficient so that you won't ever even think about raiding your Retirement Account.

Financially speaking this is kind of like being worried that you aren't allowed to sell both of your kidneys. Well yeah, you aren't allowed to do that. By why would ever want to? Liquidity constraints only matter if they are relevant to real world scenarios. I would never voluntarily choose to attempt to live on less than a FRS-level CPF LIFE income stream. Does anyone at least in this forum plan to do that, or even imagine doing that? I hope not!

Yeah, no one know when we will die. Just want to understand each plan pro and con. For CPF LIFE PLAN, we have to live long enough to enjoy the benefit. For example 83. So if based on family history, the possibilities is low, it seems wiser to placed lesser money in the CPF LIFE PLAN but keep more in the RA, SA and OA which still enjoy interest after 65. And the remaining will be pass to my beneficiary.

 

[zoneguard]

For example, if I have 200k in my RA at 55. This will grow to 230k when I’m 65. If by the time BRS is 100K. Then after I transferred 100k to purchase CPF LIfe Plan, I still have 130k in my RA. I’m assume I no longer eligible to deposit cash into RA anymore. So my RA will become a 130k saving account with 4% interest, free to withdraw anytime but not allow to deposit. Correct me if I’m wrong.

RA is an account where you are free to top-up ('deposit') every year to the current ERS (as this increases every year). It is definitely not an account to withdraw freely any time.
The conditions for withdrawal from RA of the BRS amount are the conditions for the property pledge - lease duration requirement and co-owner agreement.

For Standard and Escalating plans, the RA will be wiped clean to pay the LIFE premiums - again you don't have any choice on the amount of LIFE premium to be deducted. Basic plan retains the majority of monies in RA as 10%-20% is deducted as LIFE premium.

 

[BBCWatcher]

For example, if I have 200k in my RA at 55. This will grow to 230k when I’m 65.

At 4% interest compounded annually $200,000 at 55 turns into about $296,049 at 65. There's another $900 per year of bonus interest (which is also compounded annually), so you end up with over $300K at 65.

If by the time BRS is 100K. Then after I transferred 100k to purchase CPF LIfe Plan, I still have 130k in my RA.

No, for lump sum withdrawal purposes the BRS is fixed at 55. So if you can withdraw up to $93K (the 2021 BRS) at age 55 then that withdrawal option persists at that level until just before your payout start age. (Plus up to $5,000 at age 55 and up to 20% from age 65, inclusive of the up to $5,000.)

Basically just assume that interest must stay in RA, and you've got the basic idea.

I’m assume I no longer eligible to deposit cash into RA anymore.

No, you can shove cash into your RA as much as you want and for the rest of your life, subject to an overall limit of the Enhanced Retirement Sum that's based on principal (not interest). If you have reached the ERS limit with your top ups then every time the ERS is raised you get more room to add more funds. If you live to 110 you can do that when you're 110 if you want.

So my RA will become a 130k saving account with 4% interest, free to withdraw anytime but not allow to deposit. Correct me if I’m wrong.

You're not quite right. You can remove a portion of principal from your RA prior to payout start and with a sufficient property pledge or charge. Interest stays in RA. You can add funds any time you wish, up to the ERS (a limit based on principal).

Can I choose to transfer 279k to my RA which is ERS at 55. Then at 70, I decide to opt for BRS?

You can certainly choose to fund your RA to the ERS, and to keep funding it to the new ERS every time the ERS is raised. Cash is usually best, and next best is if a spouse or other eligible family member transfers OA dollars to your RA (or if your SA is depleted but you have OA dollars). That's because a transfer from your own accounts draws from your SA first, and your SA is already earning 4% interest.

Your BRS lump sum withdrawal amount doesn't change. If it's $93K (total) at age 55, it's still $93K before payout start. Top ups and transfers don't increase your optional withdrawal amount. Of course top ups and transfers boost your monthly payout amounts after you start payouts.

 

[iMac]

Can I choose to transfer 279k to my RA which is ERS at 55. Then at 70, I decide to opt for BRS?

I think this is a good option. Put max amount into RA and then take it out later.

 

[BBCWatcher]

For CPF LIFE PLAN, we have to live long enough to enjoy the benefit.

Is that true?

Let's suppose you buy automobile insurance but don't get into a car accident. Did you "lose," or did you benefit? I would argue you still benefited. You were able to drive and reduced your risk on the road.

CPF LIFE is longevity insurance. It effectively eliminates the risk of elder destitution, of outliving your savings -- savings that could be wiped out if/when your own future self does something incompetently foolish, or someone steals your wealth. It reduces your risk no matter how long you actually end up living. You then have more confidence and more flexibility to spend down your savings and (my favorite idea) give more wealth away sooner to loved ones, such as grandchildren, when they can most use it and enjoy it. Pay for that Ivy League education, for example.

Do you benefit from this type insurance? I'd vote yes. It greatly and positively affects my retirement financial planning.

For example 83. So if based on family history, the possibilities is low, it seems wiser to placed lesser money in the CPF LIFE PLAN but keep more in the RA, SA and OA which still enjoy interest after 65. And the remaining will be pass to my beneficiary.

That's not how I'd approach this question. I'd ask, "What amount of income should I have as a baseline that would provide a decent, dignified lifestyle -- albeit not lavish or luxurious?" Then get enough CPF LIFE income to cover that basic lifestyle.

Under no circumstances would I ever voluntarily want to live in Singapore on a BRS-level CPF LIFE income stream. Your mileage may vary, but probably not.

 

[zoneguard]

Then get enough CPF LIFE income to cover that basic lifestyle.

CPF LIFE isn't the only form of income stream available from CPF. Individuals will have to evaluate the merits of the various accounts - SA,OA,RA or LIFE premiums already deducted from RA and their specific circumstances like age differences , life expectancy differences between the couple (ladies tend to outlast their male spouses), their balances' relative sizing and household wealth outside CPF.

(Withdrawal from SA to fund RA to the current ERS is always possible once longevity risk becomes a concern. If the couple has other sources of funds with lower cost of funds than SA's, that's an option too)

 

[BBCWatcher]

CPF LIFE isn't the only form of income stream available from CPF.

It's the only guaranteed lifetime income stream from CPF.

 

[henrylbh]

Understand now. So minimum must transfer 93k to RA with property pledge. If I have 193k in my SA, it will be better only transfer 93k to RA and leave 100k in my SA account which enjoy 4% interest and is not locked. And even better that it continue to earn the 4% interest into my personal account rather then in the common pool which me and my beneficiary not benefited. Unless I can stay Long enough to kick in the pool.

You have no choice and suka suka transfer 93k to RA, leaving 100k in your SA.

At 55 automatically 186k will be transferred from your SA to RA to meet FRS. After that, you are allowed to withdraw up to 93k from RA with sufficient property charge. The withdrawal of 93k cannot be deposited back or transferred into SA.

The only way to prevent SA from being automatically transferred to RA at 55 is to shield SA before 55. Even with shield, the money returning to SA after 55 cannot be withdrawn without making good any shortfall in FRS (or BRS with sufficient property charge) in RA.