CPF chats

[BBCWatcher]

So if my intention is to build an 'annuity' with enhanced nomination for my siblings, then I will contribute some amount subject to annual max to my CPF via my kids for kids to enjoy some tax incentive while building a larger sum?

*a few of my siblings are only primary school level and so better not to give them too much hard cash.

First of all, I assume your siblings are not in primary school, i.e. they are not minors. Special considerations apply when any of your CPF nominees are minors. (The Enhanced Nomination Scheme can sometimes be a good fit when your nominee is a minor. Otherwise your residual takes a trip through the public trustee, with public trustee charges. However, I'm not a huge fan of minor CPF nominees as a general matter.)

I don't think you ought to worry too much about possible tax reliefs -- Henry's point about attractive CPF interest being attractive is valid -- but it is a consideration. Broadly speaking, working adults are eligible for CPF-related tax relief and others aren't. (That's an oversimplification, but it's not a bad one.) Really I'd just fall back to my earlier advice, which is that the ENS is a good fit when you have a reasonable, heightened concern that your recipient will not look after his/her own long-term financial self interest. That doesn't mean the ENS will necessarily succeed in your "parental" goal for your recipient -- we're dealing with an independent adult, after all -- but the ENS can attempt to do so, to some degree.

And you can change your mind as your family situation evolves, which is precisely what I did as it happens.

 

[henrylbh]

A nominee can enjoy both, free: just take the cash distribution and pump it all (or as much as allowed) into CPF.

Can say what you want in your own situation. She wants to protect her bequest in case her kids turn out or turn over to be ........

 

[henrylbh]

let me try ...

going back to CPF's illustration, this case would be Member B where BRS was not met (ie Non Top Up Money less than 90.5k)

My Answer: cannot withdraw the un-shielded 40.5k SA

but what happens after un-shielding ... I have no idea

Go find out can happen later, when one does not meet FRS at 55. There are post 55 transactions and events when money will move from other accounts into RA to meet shortfall.

 

[vsvs24]

Someone told me she went for enhance nomination for her brother because she don't like her sister in law (same logic apply to daughter in law).

Say if they divorce her CPF money if given in cash might go partly to the wife. But if it goes to brother's CPF less chance of it.

Actually we just have to do what we think is the best for the dependents. Personally I feel that giving cash is more flexible.

Those who feel that dependents may not be able to handle cash because primary school level, you think they can manage the complexity of CPF ? Not to forget that CPF policies might change in future.

I have read so many cases of seniors who are sick, have money in CPF but cash poor. So to me cash which I can use when I want to is more important than a larger amount that I cannot touch even under very desperate circumstances.

 

[mummynew]

Actually we just have to do what we think is the best for the dependents. Personally I feel that giving cash is more flexible.

Those who feel that dependents may not be able to handle cash because primary school level, you think they can manage the complexity of CPF ? Not to forget that CPF policies might change in future.

I have read so many cases of seniors who are sick, have money in CPF but cash poor. So to me cash which I can use when I want to is more important than a larger amount that I cannot touch even under very desperate circumstances.

Ya, am aware of such cases coz of life's unpredictability, esp when i see old folks picking carton boxes and drink cans (I have quite a few in my neighbourhood that I will give ang pos to them each year. Then some will fade away (presumably sick/died) and new ones will surface).

I don't really have 'dependents' per se as my kids and my siblings currently are not depending on me financially (my kids giving me 'pocket money' monthly actually). This CPF amount is just a small fraction among my liquid assets that each of my beneficiaries will have a meaningful share when I pass. As I am approaching 55, so just thinking of how to make this residual CPF asset more meaningful to those who may in need instead of giving it as cash.

 

[Kaypohji]

So SA top up money. Can or cannot withdraw after fulfilling FRS at age 55 and 65?
Or age 55 cannot withdraw even if fulfill FRS must wait until 65?

Or age 55 can withdraw straight as long as FRS

 

[BBCWatcher]

If u cannot meet FRS at 55 or want BRS with property pledge or want to be able to withdraw OA/SA monies at 55, try to avoid excessive SA cash topups. SA cash topups is a long long term FD

No, that doesn't necessarily follow. The cash top up distinction only ever matters (if it matters) if you're trying to reduce your Retirement Account somewhere below the Full Retirement Sum. It's the verb that matters (reduce) within that range. If you don't plan and have no need to withdraw from your Retirement Account, regardless of its funding level, then the cash top up distinction simply doesn't matter.

And there are plenty of examples. Here's one example: the nonworking foreign spouse of a Singaporean citizen. Let's suppose this spouse becomes a Permanent Resident at age 52. OK, this newly minted PR has zero CPF balances to start. His wife, the citizen, can make $7,000/year top ups with tax relief into his account, and she does. They jack up his SA to $60,000 as quickly as they reasonably can (consistent with cash flow and liquidity needs), to maximize bonus interest. This PR then celebrates his 55th birthday, his RA is funded below the BRS, and neither one of them have any plan or need of withdrawing anything from his RA. The citizen in the household has lots of income and lots of CPF savings, and they quite correctly believe that 5% interest plus tax relief is comparatively very attractive. And they collaborate to make sure this new PR has a modest CPF LIFE benefit in his future. That all makes perfect financial sense.

As another set of examples, the cash top up distinction doesn't matter one bit among Singaporean citizens and Permanent Residents who terminate their statuses and leave Singapore/West Malaysia. They can withdraw their entire CPF balances any time they wish, or not, inclusive of top up dollars plus accrued interest. Or, if they're already receiving CPF LIFE payouts, they can continue those payouts.

Anyway, you're overstating the case here.

If u want to shield SA before 55, make sure your SA cash topups do not exceed 40k for max benefits.

"Shielding" SA dollars has value, but so does tax relief and earlier accumulation of 4+% annually compounded interest. There's also some risk that SA shielding will be disallowed at some point. Also, the $40K includes accrued interest on the cash SA top ups. This is simply a factor to be aware of, take into consideration, and compare to the benefits of earlier injections of cash with tax relief (and available investment alternatives).

SA shield only provide max benefits to those who can meet FRS at 55, want to keep SA as high interest savings after 55 for many years to come. There is a little cost/risk involved in shielding.

Maximum benefits, I suppose, but there are substantial benefits below the Full Retirement Sum at 55. For example, if you can shield SA dollars, hold them, then inject cash into your Retirement Account when you're age 57 -- let's suppose you're expecting a bequest? -- that works very well, too. True, it's not quite as nice overall as having a Retirement Account funded to the Full Retirement Sum at age 55, but it'll certainly do.

 

[BBCWatcher]

So SA top up money. Can or cannot withdraw after fulfilling FRS at age 55 and 65?
Or age 55 cannot withdraw even if fulfill FRS must wait until 65?
Or age 55 can withdraw straight as long as FRS

Let me ask a question in reply: does it matter?

The only way you're going to be able to test this hypothesis in the real world is to inject quite a lot of cash into your Special Account, and the earlier the better, as a share of total SA inflow to that point. And you can only top up your Special Account before age 55 and up to the Full Retirement Sum.

As long as your SA cash top ups plus accrued interest are less than or equal to your Full Retirement Sum when you celebrate your 55th birthday, there's no way the CPF Board will even attempt to fund your new Retirement Account automatically above the FRS, even hypothetically.

Anyway, is anyone in any "danger" of testing this hypothesis, in the real world? Our hypothetical newborn Singaporean citizen infant with a generous great aunt who immediately deposits $181,000 into her Special Account would test this hypothesis (5.5 decades later), but this isn't exactly common, is it?

 

[moolahloolah]

So SA top up money. Can or cannot withdraw after fulfilling FRS at age 55 and 65?
Or age 55 cannot withdraw even if fulfill FRS must wait until 65?

Or age 55 can withdraw straight as long as FRS

If your total RA at age 55 is >FRS, you can withdraw excess in cash, source (whether from employment or voluntary top-up) of OA/SA not relevant

If your total RA at age 55>BRS, <FRS, the amount of voluntary top-up is excluded from computation of cash >BRS that can be withdrawn.

Yes, these two treatments are different. IRAS rationale is for this is that if RA balance is <FRS at age 55, the balance is too low. Hence, it is better to let the money rest in the account in the hope that the balance would increase when it comes for CPF Life to take effect at age 65.

How i know?

Cause i called CPF yesterday morning to ask exactly this question and got my answer. So fresh from the horse's mouth.

 

[yongsaver]

If your total RA at age 55 is >FRS, you can withdraw excess in cash, source (whether from employment or voluntary top-up) of OA/SA not relevant

If your total RA at age 55>BRS, <FRS, the amount of voluntary top-up is excluded from computation of cash >BRS that can be withdrawn.

Yes, these two treatments are different. IRAS rationale is for this is that if RA balance is <FRS at age 55, the balance is too low. Hence, it is better to let the money rest in the account in the hope that the balance would increase when it comes for CPF Life to take effect at age 65.

How i know?

Cause i called IRAS yesterday morning to ask exactly this question and got my answer. So fresh from the horse's mouth.

i think u meant CPF ba...not iras.

hopefully no more question on whether can or cannot withdraw liao.

 

[moolahloolah]

i think u meant CPF ba...not iras.

hopefully no more question on whether can or cannot withdraw liao.

yes. Jin Ho Chio. moderator should use my posting as Sticky.

 

[rrr2015]

i think your statements are quite misleading

question is if RA is > FRS, can we withdraw this excess from RA?
we already knew we can withdraw excess remaining in OA & SA

If your total RA at age 55 is >FRS, you can withdraw excess in cash, source (whether from employment or voluntary top-up) of OA/SA not relevant

more concerned about cash top via RSTU & not via VC.
we already knew VC topup is excluded. how about RSTU topup?

If your total RA at age 55>BRS, <FRS, the amount of voluntary top-up is excluded from computation of cash >BRS that can be withdrawn.

 

[moolahloolah]

i think your statements are quite misleading

question is if RA is > FRS, can we withdraw this excess from RA?
we already knew we can withdraw excess remaining in OA & SA


more concerned about cash top via RSTU & not via VC.
we already knew VC topup is excluded. how about RSTU topup?

very good question, i actually like the way you use surgeon's scalpel to slice/dice my words.

OA + SA = RA where RA balance = FRS, any excess remaining in OA + SA above FRS is withdrawable.

Secondly, my comment covers both VC and RSTU top-up for situation where >FRS (Source not important). for second case BRS<Balance<FRS, anything contributed under RSTU cannot be counted. I mean to say RSTU.

 

[Andrew833]

Someone told me she went for enhance nomination for her brother because she don't like her sister in law (same logic apply to daughter in law).

Say if they divorce her CPF money if given in cash might go partly to the wife. But if it goes to brother's CPF less chance of it.

Actually we just have to do what we think is the best for the dependents. Personally I feel that giving cash is more flexible.

Those who feel that dependents may not be able to handle cash because primary school level, you think they can manage the complexity of CPF ? Not to forget that CPF policies might change in future.

I have read so many cases of seniors who are sick, have money in CPF but cash poor. So to me cash which I can use when I want to is more important than a larger amount that I cannot touch even under very desperate circumstances.

Agree, cash rich more important

 

[henrylbh]

If your total RA at age 55 is >FRS, you can withdraw excess in cash, source (whether from employment or voluntary top-up) of OA/SA not relevant

At age 55, RA cannot be more than FRS. At most, RA = FRS.

SA can have more than FRS before FRS is transferred to RA at 55, and any balance in SA together with any balance in OA can be withdrawn. Remote, but it is possible for SA to have more than FRS made up of top up money and interest earned, without any working or voluntary contribution and the excess above FRS at 55 can be withdrawn.

Top up in SA before 55 will be first to go into RA to meet FRS.

If your total RA at age 55>BRS, <FRS, the amount of voluntary top-up is excluded from computation of cash >BRS that can be withdrawn.

To CPF, there is no such term as voluntary top-up. It just RS top up to SA or RA and voluntary contribution (never top up) to OA/SA/MA.

Even if RA at 55 = FRS (instead of <FRS), only non topped up money in RA above BRS can be withdrawn with sufficient property charge/pledge. If property charge is not sufficient, which is very unlikely, even non top up money cannot be withdrawn.

Yes, these two treatments are different. IRAS rationale is for this is that if RA balance is <FRS at age 55, the balance is too low. Hence, it is better to let the money rest in the account in the hope that the balance would increase when it comes for CPF Life to take effect at age 65.

CPF's rational for not allowing top-up to be withdrawn is because it's a pre-condition that topping up is for or to fund retirement needs only and hence cannot be withdrawn.

How i know?

Cause i called CPF yesterday morning to ask exactly this question and got my answer. So fresh from the horse's mouth.

Horse's mouth? What CPF said to you and what you said here could be different, unless in writing