CPF SA Shielding hack - RIP (Obsolete)

[dork32]

after this article and the previous one, i googled for more articles by cmi tan and found this:
https://forums.hardwarezone.com.sg/...-tan-oei-boon-on-straits-times-3-jan.6441114/
i copied out the last para. it is clear that it is written by an incompetent guy. maybe we should invite bbc to write something for the straits times instead

When borrowing costs were at 1 per cent, it made sense to use excess cash to invest so that you could try to gain more returns.
But is such a strategy still sound when the condition of the market has changed as well? It really depends whether you are a risk-taker and have excess cash to tide yourself over.
This is because mortgage rates are expected to keep rising while the investment climate is also facing headwinds from the ongoing pandemic, the Ukraine-Russia war, high inflation and the risk of recession.
While there is no guarantee that any investment will definitely be profitable, you can certainly cut your expenses by reducing your home loan quantum with lump-sum payments.
It makes sense to do so because if you let a 30-year, $500,000 mortgage run its course, you would end up paying more than $250,000 in interest to the bank if the rate is 3 per cent.

A preferred way to make lump-sum payments would be to use excess cash, such as your fixed deposits, if you do not need to spend it in the near future.
This is because it does not make sense to earn a much lower interest with it when the bank is charging you more interest for your loan.
Similarly, you can also use excess funds in your CPF to make lump-sum payments.
In times like this, you would want to reduce or pay off your loans as soon as possible so that you can lessen the impact of rate hikes on your cash flow.
After all, you cannot avoid paying the debt, which is a big obstacle to your retirement planning – the sooner it is cleared, the sooner you can start growing your savings again.
Ask any home owners who have no debt and they will tell you that they actually look forward to rate hikes as it means they can enjoy higher fixed-deposit rates soon.

 

[Guojing88]

the article is based on the new withdrawal sequence. if it is based on the old sequence, the principal will not never be depleted. reason

for both cases: first year interest is higher than withdrawal. if interest were to withdrawn first, the principal will not be touched in the first year. second year interest will be more than first year because of interest from first year will earn further interest. so the original oa and sa will never be touched

but if sa were to be withdrawn first, sa interest cannot match withdrawal amount. it has to drain on the principal, after some time, the sa is gone

Can’t be, he said it here:

While shielding gives you $2,190 more initially, this is not sustainable, unless you don't withdraw any money from CPF for your own use, which is a ridiculous notion. So if your plan is to always spend the interest, over $20,000 a year, your balances in the SA will drop and cannot last beyond 10 to 15 years

This paragraph is based on the old withdrawal sequence. It won’t make sense under the new one

 

[dork32]

yes hoh. you are so smart, you raised one more point that cmi tan really cmi.

you wrote this:
If he shields his SA, he will have these balances and interest: OA $554,000 ($13,850 interest), SA $210,000 ($8,400) and MediSave $63,000 ($2,520), giving him a total of $24,770.
psle difficult question
Q1; if this guy withdraw 20k and the sequence of withdrawal is sa interest then oa interest then sa then oa, how much will he have in his sa and oa after withdrawal?

Q2: how long will it take for his sa to be depleted?

and cmi tan does not even know that sa will never hit 0 in the example that he gave, even though he knows that the withdrawal sequence. wow you are good man

 

[dork32]

Can’t be, he said it here:

While shielding gives you $2,190 more initially, this is not sustainable, unless you don't withdraw any money from CPF for your own use, which is a ridiculous notion. So if your plan is to always spend the interest, over $20,000 a year, your balances in the SA will drop and cannot last beyond 10 to 15 years

This paragraph is based on the old withdrawal sequence. It won’t make sense under the new one

actually you are the one that cannot make it. you totally do not understand what your idol is saying.

this is not sustainable coz sa interest is 8400 and withdrawal is 200k. you have to draw down on principal. however, if you can draw your oa interest first, then it would be sustain coz you dont have to to touch your sa

without shielding, the system is sustainable coz
At his 55th birthday this year, $186,000 will be deducted from his SA, leaving him with $64,000. Despite this, he will still earn $17,500 interest from his OA, $2,560 from his SA and $2,520 from MediSave, giving him a total of $22,580.
total ma + oa interest is 20 060 and withdrawal is 20k. this is sustainable

 

[Froggyman]

Can’t be, he said it here:

While shielding gives you $2,190 more initially, this is not sustainable, unless you don't withdraw any money from CPF for your own use, which is a ridiculous notion. So if your plan is to always spend the interest, over $20,000 a year, your balances in the SA will drop and cannot last beyond 10 to 15 years

This paragraph is based on the old withdrawal sequence. It won’t make sense under the new one

The crucial point is when you do the withdrawal of money from CPF. The shielding effort is wasted only IF you withdrawal ALL the shielded $ immediately. Else even after a year later, you still gain some extra interest for the shielding. As what other members pointed out… 4% is always better than 2.5%. The effort will be max out if you Can delay the withdrawal as long as possible. of course most people still want to use the cpf, but mostly will plan after 65 or when they fully retired or depleted their cash. Anyway, SA account works like ATM, so no hurry to withdrawal all out. Put there earns your 4%. Just ask yourself.. you prefer to put your $ to earn 2.5% or 4% even for one month?

 

[Guojing88]

actually you are the one that cannot make it. you totally do not understand what your idol is saying.

this is not sustainable coz sa interest is 8400 and withdrawal is 200k. you have to draw down on principal. however, if you can draw your oa interest first, then it would be sustain coz you dont have to to touch your sa

without shielding, the system is sustainable coz
At his 55th birthday this year, $186,000 will be deducted from his SA, leaving him with $64,000. Despite this, he will still earn $17,500 interest from his OA, $2,560 from his SA and $2,520 from MediSave, giving him a total of $22,580.
total ma + oa interest is 20 060 and withdrawal is 20k. this is sustainable

Under his scenario when the "balances in the SA will drop and cannot last beyond 10 to 15 years", it must be that you are withdrawing more than the OA + SA interest each year.

Of course, if you are withdrawing less than that, it will be sustainable.

 

[Guojing88]

The crucial point is when you do the withdrawal of money from CPF. The shielding effort is wasted only IF you withdrawal ALL the shielded $ immediately. Else even after a year later, you still gain some extra interest for the shielding. As what other members pointed out… 4% is always better than 2.5%. The effort will be max out if you Can delay the withdrawal as long as possible. of course most people still want to use the cpf, but mostly will plan after 65 or when they fully retired or depleted their cash. Anyway, SA account works like ATM, so no hurry to withdrawal all out. Put there earns your 4%. Just ask yourself.. you prefer to put your $ to earn 2.5% or 4% even for one month?

You are correct, but I was just trying to show that he probably had the outdated withdrawal sequence in mind, when he wrote that article.

 

[dork32]

Under his scenario when the "balances in the SA will drop and cannot last beyond 10 to 15 years", it must be that you are withdrawing more than the OA + SA interest each year.

Of course, if you are withdrawing less than that, it will be sustainable.

he draws 20k, his sa interest is 8.4k, his sa interest is 13.8k. why would his sa drop?

 

[dork32]

yes hoh. you are so smart, you raised one more point that cmi tan really cmi.

you wrote this:
If he shields his SA, he will have these balances and interest: OA $554,000 ($13,850 interest), SA $210,000 ($8,400) and MediSave $63,000 ($2,520), giving him a total of $24,770.
psle difficult question
Q1; if this guy withdraw 20k and the sequence of withdrawal is sa interest then oa interest then sa then oa, how much will he have in his sa and oa after withdrawal?

Q2: how long will it take for his sa to be depleted?

and cmi tan does not even know that sa will never hit 0 in the example that he gave, even though he knows that the withdrawal sequence. wow you are good man

and answer Q1 and Q2.

 

[Guojing88]

he draws 20k, his sa interest is 8.4k, his sa interest is 13.8k. why would his sa drop?

He already said "over 20k", and since he said the balance in SA will drop, he obviously means exceeding the OA + SA interest.

 

[dork32]

He already said "over 20k", and since he said the balance in SA will drop, he obviously means exceeding the OA + SA interest.

If you have $700,000 in your OA, you can withdraw about $20,000 in interest annually for life without affecting your capital sum and about $16,000 for the lower sum. This means that if you do not shield your SA and instead choose to preserve your funds in the OA, you stand to gain in the long run, with more interest earned

this is also copied from your post. why he say withdraw 20k here? and over 20k there?

 

[dork32]

a man has 100k. account a give 4% and account b gives 2.5%

which account should the man put his money?

answer:
account b because, if he put in account b, he will withdraw 20k a year. after 5 years, he will have interest left behind

if he puts account a, he will withdraw 28k a year, his money would be gone in 4 years

does this answer make sense?

 

[Guojing88]

Of course, under the old withdrawal sequence, if you withdraw less than the interest, your principal will be untouched.

If that is your point, I agree with you.

 

[dork32]

Of course, under the old withdrawal sequence, if you withdraw less than the interest, your principal will be untouched.

If that is your point, I agree with you.

this is not my point. my point is the entire article is total rubbish. it is made by someone with probably just psle maths and try to do financial analysis.

regardless of whatever the withdrawal sequence is, it totally makes not sense

 

[Okenba]

You are correct, but I was just trying to show that he probably had the outdated withdrawal sequence in mind, when he wrote that article.

Already say does not matter.
In fact, even you have previously mentioned that you agreed it was wrong when it was explained to you.
Suddenly you think it is right again?
Do you have schizophrenia?

 

[Value.Matrix]

Already say does not matter.
In fact, even you have previously mentioned that you agreed it was wrong when it was explained to you.
Suddenly you think it is right again?
Do you have schizophrenia?

I salute you guys man. I didn't even bother since GuoJing88 totally cannot understand maths and still trying to say he understand.

Even with the new withdrawal sequence, we are looking at Total Networth.

Even if Tan assumed withdrawal is from SA directly, total networth is still more. And if you know you are going to spend $20,000 a year. Just withdraw about 1 to 2 years before removing the SA shield and put into fix deposit or something. It can stretch the SA interest for at least 3 years.

 

[Okenba]

I salute you guys man. I didn't even bother since GuoJing88 totally cannot understand maths and still trying to say he understand.

Even with the new withdrawal sequence, we are looking at Total Networth.

Even if Tan assumed withdrawal is from SA directly, total networth is still more. And if you know you are going to spend $20,000 a year. Just withdraw about 1 to 2 years before removing the SA shield and put into fix deposit or something. It can stretch the SA interest for at least 3 years.

I dunno. I feel that he is just trying to prove a point. But somehow cannot prove, so he is stuck and trying to find a way to prove that he can prove a point. Or something.

Anyway, I think most would agree that our dear Mr Tan from ST is wrong, so perhaps we should just leave it at that.

 

[dork32]

I dunno. I feel that he is just trying to prove a point. But somehow cannot prove, so he is stuck and trying to find a way to prove that he can prove a point. Or something.

Anyway, I think most would agree that our dear Mr Tan from ST is wrong, so perhaps we should just leave it at that.

why is he trying to defend cmi tan?

 

[spearhawk]

does anyone here does SA shielding so that SA is below FRS and you can top up to SA again for tax relief?

 

[reddevil0728]

does anyone here does SA shielding so that SA is below FRS and you can top up to SA again for tax relief?

Doesn’t work. The amount shielded is counted