CPF Life Questions

[kelhot2001]

Hi All,

Recently was looking at CPF life and start wondering at a lot of questions. Before I start, I stated that I have read through a lot of CPF line Discussion on HWZ and almost all of CPF website and also on other website. Just want to see if I am wrong, please point out to me as facts.

CPF Life (let assume we all are looking at people born after 1965 and that the FRS will be at this point for discussion although we know it will increase)
Also looking at some assumption for let say it is me or those who can achieve most of CPF requirement in life and you now have the option

Assumption as of today say age 46
1) I own a private annuity by the age of 65, assumption of a amount of SGD$300,000.00 can draw down to 99 years of age

OA : $5,000.00
SA : $176,000.00
MA : $57,200.00
Monthly Contribution is still at $2220 for at least another 9 years (81 mth)
Property HDB: Fully paid up using CPF about $300,000 exclude accrued interest of about $55,000

Let see my understanding at 54 plus, I would have to chose 1 of 3 plans
Basic Retirement Plan (BRS): $88,500.00 + Property pledge
Full Retirement Plan (FRS): $176,000.00
Enhance Retirement Plan (ERS): $264,000.00

At 55, RA (Retirement Account) will be created taking SA+OA amount to say (FRS) $176,000.00 and let it accumulated interest from there and add back to RA

At 65, I will be ask to decide if I want to defer or not to 70 if I decide to take the PEA, I will have to choose for 3 plan

Basic Withdrawal Plan (BWP)
Standard Withdrawal plan (SWP)
Escalating Withdrawal Plan (EWP)

I probably do the BWP which will mean CPF life will deduct a 10-20% of my RA into CPF income life pool, while my RA will still earn interest at (6%+5%+4%)

Eg
FRS Amount at 65 age will accumulated to around $268,000.00, upon choosing BWP, CPF Will deduct say $54,000 from my RA account. MY RA account will be left say $214,000.00 which I will start the drawdown at maybe $1400 per month till 90 years of age and reduced substantially after that . This RA Amt of $214,000.00 will still earn interest which will be pay into the RA account

Am I correct at this point?

 

[SKenny]

There are a few errors in your assumption.

When you turn 55.
- Your RA will be created using money from your OA/SA
- You are allowed to withdraw amount above FRS (or BRS if you pledge your property), or a min of $5k
- You can top up your RA to the prevailign ERS limit, if you want. This option is valid as long as you are alive.
- You do NOT get to choose the plan here.

When you between 65 and 70
- When you are 65, you are allowed to withdraw 20% of your COF balance less $5k.
- You are allowed to choose one of the 3 plans (Basis, Standard or escalating) and start your CPF Life anytime during this period.
- If you do not exercise your option, then nothing will happen.

When you are 70
- If you have not already chosen your plan and started your CPF Life, then your CPF Life will starts automatically with the standard plan option.

 

[kelhot2001]

Thanks Understand that, now additional questions from here

1) As of next month, all interest and contribution that I earn will go to OA instead of SA
as my SA and MA is already at its max, this mean, next month my CPF Contribution of $2220.00 will all be in OA instead of SA ,

2) Can I say choose FRS at 55 and apply to go BRS at 64, I suppose that is not possible ?

3) Say at age 55, I have OA=$300K, SA= $181K, MA=$57200, supposely I choose not to withdraw anything at the moment what will happen, is it going like

OA=$300K, SA=0, MA=$57200, RA=$181K

4) Will my MA=$57,200.00 still draw interest after 55 yr old and where will the interest of My MA go to ? Pay to me directly or go back to CPF OA or SA account or RA?

5) When you say 20% of my COF (What is this ) , does that mean if I put $264,000.00 into RA, At 65, I can withdraw 20% ($78,000.00) from my RA which should be around $390,000.00

 

[SKenny]

Thanks Understand that, now additional questions from here

1) As of next month, all interest and contribution that I earn will go to OA instead of SA
as my SA and MA is already at its max, this mean, next month my CPF Contribution of $2220.00 will all be in OA instead of SA ,

2) Can I say choose FRS at 55 and apply to go BRS at 64, I suppose that is not possible ?

3) Say at age 55, I have OA=$300K, SA= $181K, MA=$57200, supposely I choose not to withdraw anything at the moment what will happen, is it going like

OA=$300K, SA=0, MA=$57200, RA=$181K

4) Will my MA=$57,200.00 still draw interest after 55 yr old and where will the interest of My MA go to ? Pay to me directly or go back to CPF OA or SA account or RA?

5) When you say 20% of my COF (What is this ) , does that mean if I put $264,000.00 into RA, At 65, I can withdraw 20% ($78,000.00) from my RA which should be around $390,000.00

1) No. All interest earned in SA will stay in SA. The FRS limit in the SA applies to top up limit. Your contribution can still flow into SA beyond FRS. For MA, once it reaches the BHS, then the interest will flow to OA (assuming SA above FRS).

2) It is possible to choose BRS at a later date (than 55).

3) Yes, assuming FRS is $181k.

4) MA will continue to earn interest. If your MA is at the BHS limit, then interest earned will flow into SA (or OA if your SA is above FRS)

5) Yes, 20% less $5k.

 

[BBCWatcher]

1) As of next month, all interest and contribution that I earn will go to OA instead of SA
as my SA and MA is already at its max, this mean, next month my CPF Contribution of $2220.00 will all be in OA instead of SA ,

No. When an "all three" contribution is made, including compulsory contributions, the portion earmarked for your Special Account will continue to flow into your Special Account.

If you receive "special" contributions to your MediSave Account then your MediSave balance can increase past the Basic Healthcare Sum, but for normal "all three" CPF contributions the portion allocated to your MediSave Account will overflow into your Ordinary Account (because your MA has reached the BHS and your SA has reached the FRS).

2) Can I say choose FRS at 55 and apply to go BRS at 64, I suppose that is not possible ?

Yes, that's possible. I don't recommend aiming lower, but it's possible.

3) Say at age 55, I have OA=$300K, SA= $181K, MA=$57200, supposely I choose not to withdraw anything at the moment what will happen, is it going like
OA=$300K, SA=0, MA=$57200, RA=$181K

Yes, your Retirement Account is formed on your 55th birthday, and it is funded first from your Special Account then, if there's not enough in your Special Account to fund your RA to the Full Retirement Sum, then from your Ordinary Account.

You can optionally use a technique called "SA shielding" to fund your Retirement Account primarily from your Ordinary Account, assuming that technique is still allowed when the time comes.

4) Will my MA=$57,200.00 still draw interest after 55 yr old and where will the interest of My MA go to ? Pay to me directly or go back to CPF OA or SA account or RA?

Yes, absolutely, it'll continue to earn attractive interest. If your MA is pegged at the Basic Healthcare Sum then interest will overflow into other account(s), but if your MA is below the BHS then MA interest will stay in MA.

5) When you say 20% of my COF (What is this ) , does that mean if I put $264,000.00 into RA, At 65, I can withdraw 20% ($78,000.00) from my RA which should be around $390,000.00

You have the option, but not the obligation, to make an initial, additional lump sum withdrawal just before CPF LIFE payouts start. See CPF's retirement guide ("Your Assurance in Retirement") for details.

 

[kelhot2001]

Thanks for the quick reply from both, so for question 1, based on your reply

Next month onward , the $2220.00 contribution will be as such

OA=1140, SA=$480.00, MA=$600

My SA will still be going to SA even if my SA is already at FRS, while my MA will go to OA since my SA is above FRS ?

I can assume in 9 years time, my SA include contribution plus interest will be around say $312,569.00 which is possible ?

 

[iMac]

5) When you say 20% of my COF (What is this ) , does that mean if I put $264,000.00 into RA, At 65, I can withdraw 20% ($78,000.00) from my RA which should be around $390,000.00

Can our 20% COF (est $78K) be reinvested into RA or SA ?

 

[BBCWatcher]

Next month onward , the $2220.00 contribution will be as such
OA=1140, SA=$480.00, MA=$600
My SA will still be going to SA even if my SA is already at FRS, while my MA will go to OA since my SA is above FRS ?

That all looks correct.

I can assume in 9 years time, my SA include contribution plus interest will be around say $312,569.00 which is possible ?

That's possible, sure.

Can our 20% COF (est $78K) be reinvested into RA or SA ?

Into SA, not easily. Once your Special Account (and future Retirement Account) reaches the Full Retirement Sum the only way to get more funds into SA is via an "all three" top up. Some of those "all three" dollars will always flow into OA, not into SA.

Into your RA, possibly yes, but you'd lose some interest in the process. If you're trying to play games with your CPF LIFE participation level (not something I'd do) then just make a property pledge, then pick your level. There's no lost interest cost that way.

 

[kelhot2001]

BBCwatcher, thank for the answer, I do have alot question, now bring me to BRS(not that I am interested but more to curious)

If say I take (BRS) $88,000 + Property pledge at 65, while I opt for FRS at 55, here come a few confusion, what happen at this point say My RA is now at $268,000.00

So if that is allow, my RA account would be at 268,000.00 - 88,000.00 , which is
$180,000.00. Is that even possible as you mention I can downgrade later at 65

Can I withdraw all $180,000.00 at 65 ?
Can I withdraw as an when like ATM ?
Can I leave it in RA?

Say I sell my property at 66 yr old, and gain back 400,000 in CPF money, I have to put back 88,000 into my RA, how will this affect the payout or the payout still remain the same. I assume that also depend on if you are on BWP, SWP/EWP

Assumption again when I pass on at age 66 on BRS, my property dispose of by my spouse. Does she have to return into RA the $88,000 (which come my next question)

Because I under if you are under BRS and on SWP/EWP, the whole RA amount go into the CPF pool fund , while if I am on BWL, only 10-20% go to the CPF pool funds

Or even better, no need to return, everything go to the spouse, which I dont think so LOL

 

[BBCWatcher]

If say I take (BRS) $88,000 + Property pledge at 65, while I opt for FRS at 55, here come a few confusion, what happen at this point say My RA is now at $268,000.00

So if that is allow, my RA account would be at 268,000.00 - 88,000.00 , which is
$180,000.00. Is that even possible as you mention I can downgrade later at 65

The Basic Retirement Sum for these purposes is based on the BRS at age 55. Accrued interest, including bonus interest, goes toward your BRS-level CPF LIFE participation.

Yes, you can leave the excess in your Retirement Account, partially withdraw it, or fully withdraw it, as you prefer.

Voluntary top ups to your SA/RA basically increase your minimum CPF LIFE participation level. If you top up your Retirement Account beyond the Full Retirement Sum then apparently you're committing to a higher participation level in CPF LIFE. (That point is a little unclear, but that seems to be how it works. And of course more lifetime retirement income is not a bad thing.)

Say I sell my property at 66 yr old, and gain back 400,000 in CPF money, I have to put back 88,000 into my RA, how will this affect the payout or the payout still remain the same. I assume that also depend on if you are on BWP, SWP/EWP

There's a payback to your OA, but if you've already hit the FRS (or BRS with property pledge, plus voluntary top ups), you're done. The repaid OA can be withdrawn, but SA/RA dollars must be withdrawn first, then OA dollars.

Assumption again when I pass on at age 66 on BRS, my property dispose of by my spouse. Does she have to return into RA the $88,000 (which come my next question)

I'm not sure what you mean here. OA repayments (to yourself) are no longer required once you're deceased. The individual inheriting your property, whoever that is, does not inherit your CPF OA repayment obligation.

 

[kelhot2001]

The Basic Retirement Sum for these purposes is based on the BRS at age 55. Accrued interest, including bonus interest, goes toward your BRS-level CPF LIFE participation

.
When you mention this, the accrued interest is based on BRS or FRS
Eg
At 55 on FRS, $181,000 in RA, At 65 in RA will be around $268,000.00
Accrued interest is about S$87,000.00 , this mean is I cannot withdraw any of this except the $90,500.00 or I can withdraw $90,500.00 plus interest earn on this amt of $43,500.00 (half of $87,000.00) ?

There's a payback to your OA, but if you've already hit the FRS (or BRS with property pledge, plus voluntary top ups), you're done. The repaid OA can be withdrawn, but SA/RA dollars must be withdrawn first, then OA dollars.

Sorry my bad, my question is if I am on BRS with property pledge, when i sell my house or if I decease,do I would have to return $90,500.00 (Assuming BRS is $90,500.00) back into the RA plus accured interest ?

 

[BBCWatcher]

When you mention this, the accrued interest is based on BRS or FRS

The minimum CPF LIFE participation level (with property pledge) is based on the interest accruing to the BRS portion in a Retirement Account, including all bonus interest (paid on the first $60,000), plus voluntary top ups and accrued interest on the top ups if applicable.

Sorry my bad, my question is if I am on BRS with property pledge, when i sell my house or if I decease,do I would have to return $90,500.00 (Assuming BRS is $90,500.00) back into the RA plus accured interest ?

Ah, I see. You're wondering what happens when you're no longer eligible to make a property pledge. Yes, the proceeds from the sale have to restore the Retirement Account to the Full Retirement Sum. But if you used OA funds to pay for property, then your CPF LIFE property pledge can be counted toward your property charge.

For example, let's suppose you make a CPF LIFE property pledge of $50,000, in order to withdraw that amount from your Retirement Account. But you've already used $100,000 of OA funds (including accrued interest) for your home, so you're already scheduled to return $100,000. That's enough -- you don't have to "double up" to $150,000. So when you sell the home, $100,000 (plus any further accrued interest) goes back into your CPF account(s), and I think $50,000 of that (plus accrued interest) goes into RA with the rest into OA.

At least, that's how CPF seems to describe how it all fits together.

I don't recommend you decrease your CPF LIFE payouts this way, but you can if you insist.

 

[kelhot2001]

The minimum CPF LIFE participation level (with property pledge) is based on the interest accruing to the BRS portion in a Retirement Account, including all bonus interest (paid on the first $60,000), plus voluntary top ups and accrued interest on the top ups if applicable.


Ah, I see. You're wondering what happens when you're no longer eligible to make a property pledge. Yes, the proceeds from the sale have to restore the Retirement Account to the Full Retirement Sum. But if you used OA funds to pay for property, then your CPF LIFE property pledge can be counted toward your property charge.

For example, let's suppose you make a CPF LIFE property pledge of $50,000, in order to withdraw that amount from your Retirement Account. But you've already used $100,000 of OA funds (including accrued interest) for your home, so you're already scheduled to return $100,000. That's enough -- you don't have to "double up" to $150,000. So when you sell the home, $100,000 (plus any further accrued interest) goes back into your CPF account(s), and I think $50,000 of that (plus accrued interest) goes into RA with the rest into OA.

At least, that's how CPF seems to describe how it all fits together.

I don't recommend you decrease your CPF LIFE payouts this way, but you can if you insist.

Yup thanks that is my question which lead to other questions

If I am on BWP, I will only returned the pledge amount plus accrued interest, of which (10 to 20%) of my pledge amount into LIF and balance to my own RA. Which will also increase the monthly payout too right ?

WHile SWP/EWP will return pledge amount plus accured interest into LIF, which in turn affect (increase) the monthly payout if still alive, if dead no difference

 

[kelhot2001]

My next question is more hypothetical also open to discussion (which probably lead to alot of argument) . Here I stated my stance that I support CPF life plan
that I probably go FRS at $220,000.00 in 9 years time and BWP plan at 65

My question to you is if you have a private life annuities of $400,000.00 at age 65 which can give what you want and accept by CPF. Assume you are cash poor with only 10K at 65, will you (my choice is 1)

1) Apply for waiver for CPF life (Doesnt matter if you keep in CPF or withdrawal)
2) Keep CPF and convert private Annuities into cash
3) Keep Both

 

[ELKYme]

This hypothetical question will likely remain hypothetical.
Nobody in the right frame of mind will be in this situation as it’s really, really poor retirement planning.

My next question is more hypothetical also open to discussion (which probably lead to alot of argument) . Here I stated my stance that I support CPF life plan
that I probably go FRS at $220,000.00 in 9 years time and BWP plan at 65

My question to you is if you have a private life annuities of $400,000.00 at age 65 which can give what you want and accept by CPF. Assume you are cash poor with only 10K at 65, will you (my choice is 1)

1) Apply for waiver for CPF life (Doesnt matter if you keep in CPF or withdrawal)
2) Keep CPF and convert private Annuities into cash
3) Keep Both

 

[BBCWatcher]

This hypothetical question will likely remain hypothetical.
Nobody in the right frame of mind will be in this situation as it’s really, really poor retirement planning.

I think I agree. It's at least an odd hypothetical. Moreover, your retirement plan should combat inflation effectively (i.e. should be oriented toward real lifestyle continuity), otherwise it's not a good plan.

 

[tangent314]

Keep both. $10k is less than what I would be comfortable with as a buffer, but should generally be okay. If you really need more spare cash, you can take the option of withdrawing up to 20% of your RA as cash right before you begin your CPF Life payout.

 

[cscs3]

1) No. All interest earned in SA will stay in SA. The FRS limit in the SA applies to top up limit. Your contribution can still flow into SA beyond FRS. For MA, once it reaches the BHS, then the interest will flow to OA (assuming SA above FRS).

2) It is possible to choose BRS at a later date (than 55).

3) Yes, assuming FRS is $181k.

4) MA will continue to earn interest. If your MA is at the BHS limit, then interest earned will flow into SA (or OA if your SA is above FRS)

5) Yes, 20% less $5k.

For 1). Not sure if I remember correctly. If SA account already reach the max. Over flow amount (including interest earned) will be transfered to OA on the following year.

 

[kelhot2001]

Keep both. $10k is less than what I would be comfortable with as a buffer, but should generally be okay. If you really need more spare cash, you can take the option of withdrawing up to 20% of your RA as cash right before you begin your CPF Life payout.

Sometime it is hard to forecast, when you can blow off $200,000.00 within a year before retirement and caused a situation like this . That is why is not a odd situation that I might face

 

[BBCWatcher]

Sometime it is hard to forecast, when you can blow off $200,000.00 within a year before retirement and caused a situation like this . That is why is not a odd situation that I might face

OK, then I agree with Tangent314's advice. Moreover, an individual who's going to "blow off" practically every dollar as soon as it lands in his/her bank account would be well advised to pick the Escalating Plan, because that plan would be the only inflation fighter in his/her retirement.