CPF SA Shielding hack - RIP (Obsolete)

[yumsang]

really helps alot if can shield most of the SA
otherwise will go for BRS to salvage 60%

 

[tek888]

can we opt for BRS, and later top up RA to FRS with OA?

 

[BBCWatcher]

can we opt for BRS, and later top up RA to FRS with OA?

"Opting for the BRS" means you're making a large, lump sum withdrawal from your Retirement Account facilitated with a property pledge or charge. Assuming that's what you mean, yes, apparently you can make a lump sum withdrawal like that then add funds to your RA later. This isn't generally wise if you can avoid it since RA earns 4.0% interest, and you lose interest on the withdrawn funds for all whole and partial months the money is not in your RA.

The maximum your RA can hold is the current Enhanced Retirement Sum which is based on principal only and evidently includes prior lump sum withdrawals. So you can get back up to the FRS (or approximately that) later on in your scenario because BRS+FRS=ERS, and you've withdrawn the BRS already, which counts against the limit.

....But you cannot usually do this with your OA alone. When you transfer funds to top up your RA you must exhaust SA first before you can transfer from OA. If there's nothing left in your SA when you make this transfer, then all dollars will come from OA.

There is a potential workaround, though, for couples. If your spouse has OA dollars and so do you, and you both want to add dollars to your RAs, then your spouse can transfer his/her OA dollars into your RA and vice versa. (Or just in one direction if you want to do that -- the amounts don't have to be reciprocal.) Of course you can also deposit cash into a RA.

 

[tek888]

"Opting for the BRS" means you're making a large, lump sum withdrawal from your Retirement Account facilitated with a property pledge or charge. Assuming that's what you mean, yes, apparently you can make a lump sum withdrawal like that then add funds to your RA later. This isn't generally wise if you can avoid it since RA earns 4.0% interest, and you lose interest on the withdrawn funds for all whole and partial months the money is not in your RA.

The maximum your RA can hold is the current Enhanced Retirement Sum which is based on principal only and evidently includes prior lump sum withdrawals. So you can get back up to the FRS (or approximately that) later on in your scenario because BRS+FRS=ERS, and you've withdrawn the BRS already, which counts against the limit.

....But you cannot usually do this with your OA alone. When you transfer funds to top up your RA you must exhaust SA first before you can transfer from OA. If there's nothing left in your SA when you make this transfer, then all dollars will come from OA.

There is a potential workaround, though, for couples. If your spouse has OA dollars and so do you, and you both want to add dollars to your RAs, then your spouse can transfer his/her OA dollars into your RA and vice versa. (Or just in one direction if you want to do that -- the amounts don't have to be reciprocal.) Of course you can also deposit cash into a RA.

thanks BBCWatcher.

Not exactly the scenario I was thinking.

for example, assuming I have the following just before turning 55
OA - $60k, SA - $40

so just enough for BRS. But there's plan to downgrade to a smaller property after turning 55, say $200k return to OA after this. Can I transfer $100k from OA to RA to form FRS?

thanks again!

 

[Value.Matrix]

thanks BBCWatcher.

Not exactly the scenario I was thinking.

for example, assuming I have the following just before turning 55
OA - $60k, SA - $40

so just enough for BRS. But there's plan to downgrade to a smaller property after turning 55, say $200k return to OA after this. Can I transfer $100k from OA to RA to form FRS?

thanks again!

Yes, you can.

But the same law applies. Money from SA (if any) will first go into RA.

OA will go into RA next

 

[daewood]

Anybody have this article?
https://www.straitstimes.com/business/invest/no-more-shielding-of-cpf-soon

 

[reddevil0728]

Anybody have this article?
https://www.straitstimes.com/business/invest/no-more-shielding-of-cpf-soon

https://forums.hardwarezone.com.sg/threads/no-more-shielding-of-cpf-soon.6564035/

 

[ocs_woodlands]

CPF is schizophrenic actually.

It is portrayed as virtuous (money wise) to transfer OA to SA when one is between 20 - 55yo and earn as much CPF interest as possible

But when RA is formed and OA& SA becomes withdrawable savings accounts, suddenly it becomes sinful (money wise) and walking on the dark side to continue to earn 4% on as much of your CPF balances as possible.

Must ask CPF and Tan Ooi Boon whether the point is:

It is ok to make 4% from the govt on paper but NOT ok to make it in real withdrawable cash.

I calculated my HH potential per annum loss to be FRS (2028) x 2 x 1.5% = $6.6k.

Am thinking whether that's enough to flip my vote . I am a very logical person who vote according to what benefits me the most.

 

[wira]

thanks BBCWatcher.

Not exactly the scenario I was thinking.

for example, assuming I have the following just before turning 55
OA - $60k, SA - $40

so just enough for BRS. But there's plan to downgrade to a smaller property after turning 55, say $200k return to OA after this. Can I transfer $100k from OA to RA to form FRS?

thanks again!

if you do this way, ie at age 55 only have BRS in RA .
then at age 65 downgrade house and the transfer $100K to RA , the amount of CPF life payout would still be lower compared to having FRS in RA at age 55, is that correct ?

 

[BBCWatcher]

Ten years of foregone 4% p.a. interest is a lot of interest if that’s what you’re asking.

 

[chiokcc]

If someone bothers to put in the work to shield, then they deserve to earn the extra moolah, as long as it is not against the rules.....

 

[chopra]

Soon will be canned.

 

[curious_moo]

If someone bothers to put in the work to shield, then they deserve to earn the extra moolah, as long as it is not against the rules.....

It is not against the rules because this is a loophole of the whole system.
The objective of the SA is for building up the retirement funds going into RA, and not as an high interest ATM. The very reason why there is a contribution limit to SA up to FRS (before 55), is to ensure that members aim to hit the baseline for adequate safety net during retirement.

Anything that goes against the initial objective should be nerfed, if you want FRS system to be doing what its supposed to do, and not simply to benefit the rich getting richer.

 

[BBCWatcher]

Anything that goes against the initial objective should be nerfed, if you want FRS system to be doing what its supposed to do, and not simply to benefit the rich getting richer.

Anyone with at least ~$41,000 in a Special Account just before his/her 55th birthday can benefit from SA "shielding." This group very much includes the great working class.

 

[curious_moo]

Anyone with at least ~$41,000 in a Special Account just before his/her 55th birthday can benefit from SA "shielding." This group very much includes the great working class.

The point of debate is the unfair distribution of returns when you can do more SA shielding compared the general public. It does not matter if majority of the working class also can doing SA shielding. What matters is how much returns one is getting at the expense of the majority.

 

[fr33d0m]

Anyone with at least ~$41,000 in a Special Account just before his/her 55th birthday can benefit from SA "shielding." This group very much includes the great working class.

it unfairly helps the rich get a significantly better interest rate than market interest rate.

 

[BBCWatcher]

Keep in mind that the maximum relevant sum for shielding is the FRS minus $40K ($146K in 2021). Yes, mechanically you shield everything above $40K, but the mechanics don't actually matter for these purposes. Everyone with a Special Account at or above the FRS just before his/her 55th birthday is on equal footing in terms of how much of an absolute interest benefit shielding provides because the most the CPF Board is going to sweep into your new Retirement Account on your 55th birthday is the Full Retirement Sum. SA dollars in excess of the FRS are already "shielded." If you have >FRS in your SA that'll already stay in your SA.

So...what percentage of members celebrating their 55th birthdays have the FRS (or more) in their Special Accounts? It's most probably substantially more than the "rich" by any reasonable definition of the term. And the rich really aren't going to get that much richer with 150 basis points more interest on $146K (~$2,190 of interest). For the middle class that amount is more meaningful.

Basically if you want to whack the rich there are other, much better ways to do it.

 

[fr33d0m]

Keep in mind that the maximum relevant sum for shielding is the FRS minus $40K ($146K in 2021). Yes, mechanically you shield everything above $40K, but the mechanics don't actually matter for these purposes. Everyone with a Special Account at or above the FRS just before his/her 55th birthday is on equal footing in terms of how much of an absolute interest benefit shielding provides because the most the CPF Board is going to sweep into your new Retirement Account on your 55th birthday is the Full Retirement Sum. SA dollars in excess of the FRS are already "shielded." If you have >FRS in your SA that'll already stay in your SA.

So...what percentage of members celebrating their 55th birthdays have the FRS (or more) in their Special Accounts? It's most probably substantially more than the "rich" by any reasonable definition of the term. And the rich really aren't going to get that much richer with 150 basis points more interest on $146K (~$2,190 of interest). For the middle class that amount is more meaningful.

Basically if you want to whack the rich there are other, much better ways to do it.

maybe should say have vs havenot.

It depends on what a person has in his/her OA at the time of creating RA. If s/he has 0 in OA, there is no shielding whatsoever. The haves have larger amount in OA. The havenots don't have enough in neither accounts.

 

[WeiHan]

Hello,

If we want to use money in SA for investment, must we open a CPFSA investment account? Is there such an account? I know there is a CPFOA IA but not sure if a CPFSA IA is needed.

 

[reddevil0728]

Hello,

If we want to use money in SA for investment, must we open a CPFSA investment account? Is there such an account? I know there is a CPFOA IA but not sure if a CPFSA IA is needed.

https://www.cpf.gov.sg/member/growing-your-savings/earning-higher-returns/investing-your-cpf-savings
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