CPF after 67

[LKY156]

Hi

My bro will be reaching 55 soon.

He has more than FRS/ERS in his OA + SA account after selling his flat. He has no intention to buy another flat.

After 55, FRS will be taken from SA + OA. Assuming he does SA shielding, there’ll be still some leftover $$$ in both SA and OA.

What will happen to these $$$? How and when will it be distributed? After 67 years old?

In the meantime before 67, an we assume these accounts will still earn the same interest as before?

 

[Value.Matrix]

Hi

My bro will be reaching 55 soon.

He has more than FRS/ERS in his OA + SA account after selling his flat. He has no intention to buy another flat.

After 55, FRS will be taken from SA + OA. Assuming he does SA shielding, there’ll be still some leftover $$$ in both SA and OA.

What will happen to these $$$? How and when will it be distributed? After 67 years old?

In the meantime before 67, an we assume these accounts will still earn the same interest as before?

The money will just be left in the account in OA and Shielded amount of SA, in SA.

So OA earns 2.5% and SA earns 4% and they will continue to earn that interest.

It will not ever be distributed. Your brother can withdraw both OA and SA, but order of withdrawal is SA, then OA. So would suggest to withdraw all, and VC3A again (to push more money into SA). But ultimately its up to your brother.

Money in RA will earn 4% interest, and it starts to be distributed out automatically at 70,
or if you apply for early withdrawal (anytime from 65 can be withdrawn) monthly.

For interest rates, its always dependent on what is the declared CPF interest rate (currently no change for 10 years at 4%)

 

[BBCWatcher]

Your brother can withdraw both OA and SA, but order of withdrawal is SA, then OA. So would suggest to withdraw all, and VC3A again (to push more money into SA).

I don't understand these two sentences at all. Why would you ever do what you describe?

 

[Okenba]

Shield SA, withdraw all remaining OA and VC back into CPF will. Squeeze a little bit more into SA. (Abt 30% I think)

 

[zoneguard]

Shield SA, withdraw all remaining OA and VC back into CPF will. Squeeze a little bit more into SA. (Abt 30% I think)

With 2 caveats:
1. VC (and mandatory contributions) need to work under the annual limit of 37,740.
2. After 55, allocation to SA will drop to 13.46% based on this table. The ratio will change in 2022 to 19.64%.

So withdrawal of all remaining OA may not necessarily be a good move.

 

[BBCWatcher]

I agree with Zoneguard, and moreover a RA top up is likely more attractive ahead of an ”all three account” Voluntary Contribution. A MediSave Voluntary Contribution probably ranks ahead, too.

 

[LKY156]

It will not ever be distributed. Your brother can withdraw both OA and SA, but order of withdrawal is SA, then OA.

Doesn’t sound ideal… with all the $$$ in OA and SA, but we have to withdraw the SA $$$ first.

So you are suggesting to clean out the OA at 55 (after satisfying FRS amount), and then do annual VC back to CPF - some will flow back to SA?

Many thanks again.

 

[Value.Matrix]

Doesn’t sound ideal… with all the $$$ in OA and SA, but we have to withdraw the SA $$$ first.

So you are suggesting to clean out the OA at 55 (after satisfying FRS amount), and then do annual VC back to CPF - some will flow back to SA?

Many thanks again.

Yes. That's the only way to push more money into SA yearly, if given limited budget.

And yes again, you can clean out OA and put into VC3A again.

RA can still be considered to be topped up through your CASH(withdrawn OA) anytime you want.

This arrangement is to put more monies into SA. The bulk of the OA can be put into any other investments so that when its time to VC3A, you can put more money into CPF.

Obviously, it only makes sense to withdraw OA when SA is shielded, but i may have missed out this particular principle. (2.5% risk free is easily beaten when you could invest in equities and wait out the period for VC3A)

 

[Okenba]

With 2 caveats:
1. VC (and mandatory contributions) need to work under the annual limit of 37,740.
2. After 55, allocation to SA will drop to 13.46% based on this table. The ratio will change in 2022 to 19.64%.

So withdrawal of all remaining OA may not necessarily be a good move.

Ah okay. You're saying withdrawing 37,740 is enough, since we can't VC more than that anyway. True.

No reason not to if you're not getting income at 55 really. You're already shielding SA (I assume), so instead of dropping the shield immediately, just do a one time withdrawal of 37,740 from OA and put it back into CPF. Will pump up the SA a bit. No point doing it annually since to shield SA just to do this means you lose more than you pump up since you lose 40k SA every time.

Frankly, it doesn't sound too complicated. No risk that I can see. And probably more worth it than the "wait til end of mth before transferring money to CPF" trick... Except that it's limited to 37,740 and probably only worth it if you're already going to shield for some other reason.

 

[BBCWatcher]

Most people are still working during the year they turn 55, so the full $37,740 CPF Annual Limit won't be available. Some people won't have any room at all below the CPF Annual Limit in their 55th birthday year.

Even if you do have room below the CPF Annual Limit, spinning 2.5% interest earning OA dollars into an "all three account" Voluntary Contribution may not be your best option. If you've got cash lying about and earning 0.5% interest (for example), that'd probably be better to draw from first even if you want to do an "all three account" VC. Also, you can top RA up to the Enhanced Retirement Sum, and in interest rate terms that's more attractive. And if you have room below the Basic Healthcare Sum then injecting funds specifically into MediSave is more attractive in interest rate terms, too.

 

[Okenba]

And for the people not receiving income at 55 and who don't want to top up to ERS but do want to shield their SA, withdrawing all OA and VC back into all 3 accounts is better than not.

 

[zoneguard]

And for the people not receiving income at 55 and who don't want to top up to ERS but do want to shield their SA, withdrawing all OA and VC back into all 3 accounts is better than not.

My view is that this is not a general rule of thumb as only 13.46/19.64% goes back to SA from VC even if all of $37,740 is available for VC. And after 55, CPFIS is still available if you wish to use OA funds to try to beat SA's 4%.

 

[Okenba]

My view is that this is not a general rule of thumb as only 13.46/19.64% goes back to SA from VC even if all of $37,740 is available for VC. And after 55, CPFIS is still available if you wish to use OA funds to try to beat SA's 4%.

It is quite strange to me to leave money in OA for the purpose of CPFIS. Might as well withdraw in cash and use that to invest. CPFIS incurs additional costs I believe.
Pulling it out to VC back in would be the option for those not keen on investing. Or just want more to be in a guaranteed 4% account.

 

[Value.Matrix]

It is quite strange to me to leave money in OA for the purpose of CPFIS. Might as well withdraw in cash and use that to invest. CPFIS incurs additional costs I believe.
Pulling it out to VC back in would be the option for those not keen on investing. Or just want more to be in a guaranteed 4% account.

Exactly. This is precisely for those who knows how to invest. They should optimize as much as possible. Cash is king, literally, and OA is not since SA beats it. Might as well withdraw, invest in cash, and do VC3A yearly until you cannot. This is far better than leaving monies in OA.

Unless, you are so risk adverse, in which that $37,740 doesn;t make sense to withdraw, OR you have 1 million in cash sitting in bank doing nothing. (which is why i put in limited budget)

The reason i didn't put it all in was to
(1) understand each people's opinion, i can really see my own blind spot in its raw form.
(2) to see who is more capable of actual financial planning, which is very wholistic. Even for me, after doing retirement planning for my mum, myself, my dad and others, there are still blindspots which i hope to uncover.

 

[zoneguard]

Exactly. This is precisely for those who knows how to invest. They should optimize as much as possible. Cash is king, literally, and OA is not since SA beats it. Might as well withdraw, invest in cash, and do VC3A yearly until you cannot. This is far better than leaving monies in OA.

If you withdraw all of OA out as cash and then invest, then VC afterwards isn't attractive to me because:

1. 86.54%/80.36% flows right back to OA (assuming MA at BHS) and you've to deal with the SA/OA withdrawal order limitation to touch it.
2. Aim to go above SA's 4% when investing.

The crux of the matter is the dip in allocation rates to SA after the 55th birthday.

 

[Value.Matrix]

If you withdraw all of OA out as cash and then invest, then VC afterwards isn't attractive to me because:

1. 86.54%/80.36% flows right back to OA (assuming MA at BHS) and you've to deal with the SA/OA withdrawal order limitation to touch it.
2. Aim to go above SA's 4% when investing.

The crux of the matter is the dip in allocation rates to SA after the 55th birthday.

I did not touch on how the monies flow after you invest, and sell (but close your CPFIS account), but yea no issue.

Also, 2 is not applicable since you cannot get SA interest if you kept it in OA. I would only focus on beating the blended return of it (2.701% and 2.79%) and with risk (hence 3% returns) with similar or slightly higher sharpe ratio.

RA should be maxed out imho unless you really do not want to do it.

 

[zoneguard]

Also, 2 is not applicable since you cannot get SA interest if you kept it in OA. I would only focus on beating the blended return of it (2.701% and 2.79%) and with risk (hence 3% returns) with similar or slightly higher sharpe ratio.

4% is my personal benchmark of the opportunity cost of doing VC. If my portfolio's XIRR is above 4%, I won't VC after 55.

 

[LKY156]

Hi

For those who are still paying off the housing loan via CPF (after 55 years old), the left over $$$ in OA (after transferring the FRS to RA account) can still be used for housing loan payment right?

Also, the housing loan payment will not draw from SA first, then OA (like cash withdrawal)?

 

[Value.Matrix]

Hi

For those who are still paying off the housing loan via CPF (after 55 years old), the left over $$$ in OA (after transferring the FRS to RA account) can still be used for housing loan payment right?

Also, the housing loan payment will not draw from SA first, then OA (like cash withdrawal)?

Yes. As long as the money is in OA, you are allowed to use the monies to pay off housing loan,

Subjected to the limits allowed depending on whether its a bank loan (LTV not over 100% or 120% depending on the condition of FRS, after which you need to pay cash), or HDB housing loan (no limit from using CPF OA).

Housing loan can only draw from OA.

Edit: Typed too fast, its not LTV but CPF Housing withdrawal limits of 100% and 120% (if BRS has been set aside)

 

[SBC]

Hi

For those who are still paying off the housing loan via CPF (after 55 years old), the left over $$$ in OA (after transferring the FRS to RA account) can still be used for housing loan payment right?

Also, the housing loan payment will not draw from SA first, then OA (like cash withdrawal)?

I still got housing to pay/last till my 75. So most likely I will not do the SA Shield.
had been making efforts to rebuild my OA.
Getting close to 140k now.