CPF SA Shielding hack - RIP (Obsolete)

[BernardWYF]

can summarise?

Quote -

Assumption: You already understand what CPF shielding is and why you have to do it
- Withdrawal Sequence: SA+SA interest, OA+OA interest
- SA will be fully depleted before start withdrawing from OA
- At 54 year 11 months, Shield your SA by investing it in short term funds
- Once SA Shielded and RA formed at age 55, Fully withdraw any available OA, while SA is still shielded
- Top up RA up to $8K for Tax Relief - VC3A after 55 (Around 20% of contribution goes to SA)
- Then you can Un-shield your invested SA

The main purpose:
1. Pump in more SA (converted from withdrawn OA)
2. Get some Tax relief from topping up RA

 

[reddevil0728]

Quote -

Assumption: You already understand what CPF shielding is and why you have to do it
- Withdrawal Sequence: SA+SA interest, OA+OA interest
- SA will be fully depleted before start withdrawing from OA
- At 54 year 11 months, Shield your SA by investing it in short term funds
- Once SA Shielded and RA formed at age 55, Fully withdraw any available OA, while SA is still shielded
- Top up RA up to $8K for Tax Relief - VC3A after 55 (Around 20% of contribution goes to SA)
- Then you can Un-shield your invested SA

The main purpose:
1. Pump in more SA (converted from withdrawn OA)
2. Get some Tax relief from topping up RA

Not sure if that’s factually correct.

by investing funds from SA, it doesn’t create more room for tax relief too up per the formula.

also VC3A even if don’t shield also works the same way

 

[dork32]

Quote -

Assumption: You already understand what CPF shielding is and why you have to do it
- Withdrawal Sequence: SA+SA interest, OA+OA interest
- SA will be fully depleted before start withdrawing from OA
- At 54 year 11 months, Shield your SA by investing it in short term funds
- Once SA Shielded and RA formed at age 55, Fully withdraw any available OA, while SA is still shielded
- Top up RA up to $8K for Tax Relief - VC3A after 55 (Around 20% of contribution goes to SA)
- Then you can Un-shield your invested SA

The main purpose:
1. Pump in more SA (converted from withdrawn OA)
2. Get some Tax relief from topping up RA

point 1 is wrong. you cannot pump money from oa to sa after 55 anymore. even if you vc, only a small amount end up in sa, most will go to oa

point 2. need to consider the interest lost in the ra. withdrawing from your oa instead of letting it go to the ra will lose you quite a bit of 4% interest. of course, under the high rate environment now. it is a good idea to do that coz the amount withdrawn can easily earn more than 4% outside,

 

[dork32]

Quote -

Assumption: You already understand what CPF shielding is and why you have to do it

- At 54 year 11 months, Shield your SA by investing it in short term funds

why must buy short term funds? why cannot buy tbills?

 

[BernardWYF]

point 1 is wrong. you cannot pump money from oa to sa after 55 anymore. even if you vc, only a small amount end up in sa, most will go to oa

point 2. need to consider the interest lost in the ra. withdrawing from your oa instead of letting it go to the ra will lose you quite a bit of 4% interest. of course, under the high rate environment now. it is a good idea to do that coz the amount withdrawn can easily earn more than 4% outside,

perhaps U listen to his explanation in video will be much clearer than reading the "summary" in his page

 

[BBCWatcher]

Not sure if that’s factually correct.
by investing funds from SA, it doesn’t create more room for tax relief too up per the formula.

Tax relief is computed separately for RA from age 55, without reference to SA. However, in SA "shielding" scenarios your new RA is typically funded to the Full Retirement Sum on your 55th birthday. Once your RA hits the FRS there's no more tax relief available there.

Tax relief (for self) associated with RA, SA, and MA within a calendar year all counts toward the single combined $8,000 limit. But the FRS limit is computed separately for RA, so you get a "fresh start" in that sense.

You can get very fancy and also "shield" OA, then pump at least $8,000 of cash into RA (including some with tax relief). And right now you might be doing that by default anyway (example: 6 month T-bills in your CPF Investment Account).

also VC3A even if don’t shield also works the same way

VC3As aren't eligible for tax relief unless self-employed.

One thing he didn't mention is that even if you're a high income earner who routinely hits the CPF Annual Limit you will (per current compulsory contribution rates) have some room below the CPF Annual Limit starting in your 55th birthday year as long as your 55th birthday isn't in December. You can compute what this minimum amount is then make a VC3A in late January of your 55th birthday year. (And you can repeat this every January thereafter if you wish until the CPF Board equalizes the compulsory contribution rates for age 55+.) By December you may have a better idea if there's still any room below the CPF Annual Limit, and there might be room for another VC3A.

point 1 is wrong. you cannot pump money from oa to sa after 55 anymore. even if you vc, only a small amount end up in sa, most will go to oa

I don't think you're refuting anything in the video itself.

point 2. need to consider the interest lost in the ra. withdrawing from your oa instead of letting it go to the ra will lose you quite a bit of 4% interest. of course, under the high rate environment now. it is a good idea to do that coz the amount withdrawn can easily earn more than 4% outside,

I think you're saying that it's worth considering a OA to RA transfer while your SA is shielded. Yes, but (even better) if you have a younger spouse who can transfer his/her OA dollars to your RA, do that. Then pay your spouse back (even from your OA while your SA is shielded) if you'd like to do it that way. Releasing your younger spouse's OA dollars is surely better since he/she has months or years to go until age 55 and cannot withdraw OA dollars as unrestricted cash.

To do this you might need to "shield" OA as well as SA just before your 55th birthday, but see above (the T-bill comment).

 

[BBCWatcher]

why must buy short term funds? why cannot buy tbills?

T-bills currently work decently, but at some point (perhaps very soon) T-bill rates are going to fall. When they fall T-bills will not work well for SA shielding.

 

[dork32]

perhaps U listen to his explanation in video will be much clearer than reading the "summary" in his page

i did not watch his video. i read your summary. no interested in watching this sort of video. more efficent to read

 

[dork32]

T-bills currently work decently, but at some point (perhaps very soon) T-bill rates are going to fall. When they fall T-bills will not work well for SA shielding.

glad you know that tbills is probably the best tool for shielding now. in the future, who knows?

 

[dork32]

I think you're saying that it's worth considering a OA to RA transfer while your SA is shielded. Yes, but (even better) if you have a younger spouse who can transfer his/her OA dollars to your RA, do that. Then pay your spouse back (even from your OA while your SA is shielded) if you'd like to do it that way. Releasing your younger spouse's OA dollars is surely better since he/she has months or years to go until age 55 and cannot withdraw OA dollars as unrestricted cash.

yes. this is a good method. it is like topping up our parents cpf is better than topping up our own cpf which is better than topping up our kids cpf

but for most of us, our wife is just a few years younger than us. but if you are sultan of kelantan, yes it may be good that your consort transfer some of their oa to you.

 

[BBCWatcher]

glad you know that tbills is probably the best tool for shielding now. in the future, who knows?

I didn't use the word "best," with or without "probably." I used the word "decent" with the word "currently."

 

[Value.Matrix]

Enhanced method of shielding .... maybe better than T-bills shielding?

Honestly this is a waste of time. I suggest others not to see the video, especially those who have been on this forum long enough.

The strategy here is what what's discussed before. Draw out OA money (just after 55) to VC3A / do RSTU but this is applicable when you have limited sum of money to put into CPF and VC3A is not affected by employment.

In fact this guy is did not even test out and just put his idea, whereby most of us already have tried and tested those methods.

 

[BBCWatcher]

Honestly this is a waste of time. I suggest others not to see the video, especially those who have been on this forum long enough.

It’s not a great video, but I think it has some value.

The strategy here is what what's discussed before. Draw out OA money (just after 55) to VC3A / do RSTU but this is applicable when you have limited sum of money to put into CPF and VC3A is not affected by employment.

If you can spare the VC3A funds (and have nothing better to do with them) from late January until your 55th birthday month the same year then you’re good to go. If you have a single job (most people) and will celebrate your 55th birthday before December then you’ll have some room below the CPF Annual Limit. That’s because compulsory contribution rates currently decrease starting the month after you turn 55. The CPF Annual Limit is the same ($37,740), so you’ll have some room.

In fact this guy is did not even test out and just put his idea, whereby most of us already have tried and tested those methods.

Well, you can’t really test everything that occurs at 55 until you turn 55. But there are other, older people who can report their experiences.

 

[henrylbh]

Not sure if that’s factually correct.

by investing funds from SA, it doesn’t create more room for tax relief too up per the formula.

also VC3A even if don’t shield also works the same way

Did you really watch the video till the end?

Honestly this is a waste of time. I suggest others not to see the video, especially those who have been on this forum long enough.

The strategy here is what what's discussed before. Draw out OA money (just after 55) to VC3A / do RSTU but this is applicable when you have limited sum of money to put into CPF and VC3A is not affected by employment.

In fact this guy is did not even test out and just put his idea, whereby most of us already have tried and tested those methods.

It’s not a great video, but I think it has some value.
.........
Well, you can’t really test everything that occurs at 55 until you turn 55. But there are other, older people who can report their experiences.

It's a waste for time for me as well as those who are guru in CPF matters. But it's useful to those who are not clear what to do with CPF when nearing 55. And there are many here still not clear or got ideas. The topic is simply confined to CPF only and this idea is simple in thoughts. Those who know, know that his idea is workable without testing.

 

[reddevil0728]

Did you really watch the video till the end?

commented based on summary provided

 

[henrylbh]

commented based on summary provided

Then go watch and think whether he made sense and where he need to be shot.

 

[reddevil0728]

Then go watch and think whether he made sense and where he need to be shot.

Actions can be independent of each other

 

[henrylbh]

Actions can be independent of each other

Like my pri sch teacher said do what i say and not what i do.

 

[reddevil0728]

Like my pri sch teacher said do what i say and not what i do.

 

[micheritan]

An agent is touting Manulife singapore bond fund with no fees but need to park funds there for minimum 6 weeks for SA shielding. Is this a good bargain ? Gurus, please advise. I m hitting 55 next month and actively seeking Shielding advise. Time is running out. Mega Thanks in Advance..