CPF RA / LIFE

[rokawa2]

Hi, I'm just wondering off the top of my head.

There is no way to avoid CPF LIFE isn' it?

As in CPF is an annuity that is "purchased" by the Retirement Account.
What if an individual would not want to be playing lottery on die early or live longer.
But just want to live on the 4% interest generated by his CPF accounts.

If a CPF SA or RA that did not buy in CPF life hold $525k, a 4% interest returns is $21k or $1,750 mthly.
When individual passed away, he had only withdrew his interests, and never touched his capital.
Hence his whole $525k can be transferred as bequest instead of being depleted by the annuity t&c.


How about not topping up SA until 55. But once 55 is reached, retirement account created (where heavyweights income earners play the CPF shielding), SA xfer to RA. SA is now empty, can we start topping up SA which will continue to earn interest 4% and not be eh "forced?" to purchase CPF Life?
I think OA will also be cleaned out to to go to RA to meet FRS? So the top up will start from $0 to "create" CPF SA like a bank account since RA had originally depleted both OA and SA.
Or becoz FRS is not met yet, any subsequent top up to SA when age 55-65 will still be transferred to RA?
Ultimately means that only high income earners who can easily meet FRS is able to utilize CPF SA like a bank account - withdraw 4% annually and capital is secured and untouched.

Or I'm just thinking rubbish haha

 

[BBCWatcher]

Hi, I'm just wondering off the top of my head.
There is no way to avoid CPF LIFE isn' it?

There are a few ways to avoid CPF LIFE. In no particular order:

1. Via surrendering your right of retirement abode in Singapore. For example, if you're a Singaporean citizen then you could acquire another country's citizenship (and therefore lose your Singaporean citizenship -- a few citizenships are available for outright purchase) and live happily ever after elsewhere in the world.

2. Have some other acceptable alternative life annuity, then apply to withdraw all your funds from your CPF Retirement Account and not participate in CPF LIFE. You could buy this life annuity from a life insurer in Singapore, or your employer might provide you with one as part of your total compensation. (Typically the latter would be a senior executive perk.)

3. Die before age 70 (the latest CPF LIFE payout start date). In a very few countries you can schedule this event legally!

4. Avoid CPF contributions, basically meaning avoid employment in Singapore. Work overseas for your entire professional career. If you have no money in CPF then you aren't going to be a CPF LIFE participant. This option isn't available if you already have non-trivial funds in CPF.

As in CPF is an annuity that is "purchased" by the Retirement Account.
What if an individual would not want to be playing lottery on die early or live longer.
But just want to live on the 4% interest generated by his CPF accounts.

With the exceptions above, sorry, the government is not interested in playing this lottery game with you. Specifically, the government doesn't want to run the risk of bailing out more destitute elder Singaporeans. Oversimplifying only slightly, if you want to reserve the right to retire in Singapore, you must indemnify the government (meaning the public at large, i.e. taxpayers) against longevity risks and cannot impose your risk of outliving your savings on the public at large. Even if that risk is slight.

Civil societies and governments reasonably impose a few basic requirements on their citizenries, and this one is one of Singapore's few basic requirements.

If a CPF SA or RA that did not buy in CPF life hold $525k, a 4% interest returns is $21k or $1,750 mthly.
When individual passed away, he had only withdrew his interests, and never touched his capital.
Hence his whole $525k can be transferred as bequest instead of being depleted by the annuity t&c.

OK, but that's not allowed, sorry. The government just isn't interested in paying above market interest rates like that ("rectangularly"), and the government (meaning the public at large and fellow taxpayers) has absolutely no obligation to support your bequest motivations in that way. If you want to leave a large bequest in reliable fashion you won't be able to charge the cost of doing so to the public at large -- not in that way anyway.

How about not topping up SA until 55. But once 55 is reached, retirement account created (where heavyweights income earners play the CPF shielding), SA xfer to RA. SA is now empty, can we start topping up SA which will continue to earn interest 4% and not be eh "forced?" to purchase CPF Life?

No, probably not. You cannot "shield" $40,000 in your Special Account when your Retirement Account is created and funded on your 55th birthday. You cannot shield $20,000 in your OA (if you have OA dollars). So your RA is going to get funded at least to that sort of level, which puts you on a path to CPF LIFE. And then unless you meet at least the Basic Retirement Sum (with property pledge/charge) in your RA, your residual OA and SA dollars will be liquidity restricted -- you can't withdraw them.

But see option #4 above, which is probably "water under the bridge" for you.

I think OA will also be cleaned out to to go to RA to meet FRS?

That's right, although hypothetically you could "shield" OA too. But you have to leave $20,000 behind in OA, so CPF will sweep at least $20,000 from OA if necessary/if there.

So the top up will start from $0 to "create" CPF SA like a bank account since RA had originally depleted both OA and SA.
Or becoz FRS is not met yet, any subsequent top up to SA when age 55-65 will still be transferred to RA?

No, but your withdrawals from SA and OA will be restricted. So you're earning less interest (OA pays only 2.5%) *and* you can't pull the money out. Not a great combination.

Ultimately means that only high income earners who can easily meet FRS is able to utilize CPF SA like a bank account - withdraw 4% annually and capital is secured and untouched.

Not really. If you insist you can fund your RA only up to the Basic Retirement Sum (with property pledge/charge). And you can hit the BRS at rather modest income levels with reasonable assumptions.

And no matter what your income level you can't really inject dollars into SA in directed fashion past the Full Retirement Sum. That particular deal is quite limited.

Or I'm just thinking rubbish haha

Pretty much.

Look, just because the rules require you to play the game a certain way doesn't make the game bad. It's quite the opposite. The government is offering a genuinely great deal here. The same government also bans heroin. That doesn't mean taking heroin is a good idea; it's a perfectly awful idea. Sometimes/often rules are sensible ones.

 

[culture_counter]

Showhand by topping to ERS...take a risk!