CPF SA Shielding hack - RIP (Obsolete)

[reddevil0728]

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..

don't be penny wise pound foolish

 

[micheritan]

No need to go through agents. Can DIY.

Should make some effort to read the earlier posts in this thread.

Thanks for replying promptly. I read and noted Poems and FSMone platform can buy UTs. Which is better platform to go for and when to enter n exit? How about I buy TBs? I still have at least two TBs 6 month tenor issuance can look at? I m looking to put in 240K for sa shield. How to manage , should I diversify around UTs n Tbills? Also if I have left over 70K balance in OA after SA shield. Should i invest them in Tbills before the shielded funds return back to the SA? Thanks again.

 

[BBCWatcher]

Thanks for replying promptly. I read and noted Poems and FSMone platform can buy UTs. Which is better platform to go for and when to enter n exit?

They’re both fine. Flip a coin.

How about I buy TBs? I still have at least two TBs 6 month tenor issuance can look at? I m looking to put in 240K for sa shield. How to manage , should I diversify around UTs n Tbills?

You can try, but be prepared for the unit trust method at least for a residual.

Also if I have left over 70K balance in OA after SA shield. Should i invest them in Tbills before the shielded funds return back to the SA?

No, probably not. Not unless you want to use (more) cash (or transfers from your spouse’s OA) to fund your Retirement Account. If you want the CPF Board to start funding your new Retirement Account then it’ll need to pull the funds from somewhere. OA is a better choice than SA.

Note that $70K plus $40K in SA (that you cannot invest) totals $110K. That’s well below the Full Retirement Sum much less the Enhanced Retirement Sum. You’ll need to make a property pledge (or have a sufficient property charge) if you then want to make a lump sum withdrawal from SA. Or fund your RA at least to the FRS.

 

[micheritan]

No, probably not. Not unless you want to use (more) cash (or transfers from your spouse’s OA) to fund your Retirement Account. If you want the CPF Board to start funding your new Retirement Account then it’ll need to pull the funds from somewhere. OA is a better choice than SA.

Note that $70K plus $40K in SA (that you cannot invest) totals $110K. That’s well below the Full Retirement Sum much less the Enhanced Retirement Sum. You’ll need to make a property pledge (or have a sufficient property charge) if you then want to make a lump sum withdrawal from SA. Or fund your RA at least to the FRS.

I havd SA of 300K and OA of 230K. The plan is to set aside FRS 198800.i will have SA shield of 260K - from SA of 300K. The 40K combine with OA of 158800 will form the FRS. My OA will still have $70k plus after setting aside FRS.I should use OA balance to fund the ERS? Or should use cash to top up to ERS? Is it better to invest the OA on TB or fixed D? Also if i want to fully draw out from the balance OA, I should do it before SA shielded amount is return back to Cpf right. I plan use this amount to buy Tbills or put to fixed D. What is your advice or recommendation ? I have no other plans for these monies- just want to maximise the value from all the cpf savings.

 

[BBCWatcher]

I havd SA of 300K and OA of 230K. The plan is to set aside FRS 198800.i will have SA shield of 260K - from SA of 300K. The 40K combine with OA of 158800 will form the FRS. My OA will still have $70k plus after setting aside FRS.I should use OA balance to fund the ERS?

You can if you wish. The best time to do that would be while your SA shield is raised. That would "upgrade" your OA dollars to 4.0% interest that then feeds into higher CPF LIFE monthly payouts for life. And you still have a lump sum partial RA withdrawal option before you start CPF LIFE payouts if you make a property pledge or have a property charge (and if you should ever decide you need to do that; hopefully not, but still possible).

Or should use cash to top up to ERS?

As you prefer. Note that you can withdraw OA (if you wish) while your SA shield is raised.

Is it better to invest the OA on TB or fixed D?

It's currently better than the 2.5% interest OA pays. But you can also save cash in T-bills and fixed deposits. As mentioned you have the option to withdraw OA as cash if you wish, but bear in mind you won't necessarily be able to put it back if/when interest rates fall below 2.5%.

Also if i want to fully draw out from the balance OA, I should do it before SA shielded amount is return back to Cpf right.

Right.

I plan use this amount to buy Tbills or put to fixed D. What is your advice or recommendation ? I have no other plans for these monies- just want to maximise the value from all the cpf savings.

If you have "no other plans for these monies" then how about one or a couple long-term investment vehicle(s)? T-bills and fixed deposits are short-term vehicles, best suited to near-term spending goals.

 

[fr33d0m]

I havd SA of 300K and OA of 230K. The plan is to set aside FRS 198800.i will have SA shield of 260K - from SA of 300K. The 40K combine with OA of 158800 will form the FRS. My OA will still have $70k plus after setting aside FRS.I should use OA balance to fund the ERS? Or should use cash to top up to ERS? Is it better to invest the OA on TB or fixed D? Also if i want to fully draw out from the balance OA, I should do it before SA shielded amount is return back to Cpf right. I plan use this amount to buy Tbills or put to fixed D. What is your advice or recommendation ? I have no other plans for these monies- just want to maximise the value from all the cpf savings.

you can buy T-Bills with money still in CPF OA in case later you want to redeposit into OA when T-Bill rate drops to close to 0 and OA stays 2.5%

 

[dork32]

I havd SA of 300K and OA of 230K. The plan is to set aside FRS 198800.i will have SA shield of 260K - from SA of 300K. The 40K combine with OA of 158800 will form the FRS. My OA will still have $70k plus after setting aside FRS.I should use OA balance to fund the ERS? Or should use cash to top up to ERS? Is it better to invest the OA on TB or fixed D? Also if i want to fully draw out from the balance OA, I should do it before SA shielded amount is return back to Cpf right. I plan use this amount to buy Tbills or put to fixed D. What is your advice or recommendation ? I have no other plans for these monies- just want to maximise the value from all the cpf savings.

i can see that you have thought about what to do.

this is what i will do.
1. Shield using tbills
2. withdraw all oa after frs is formed.
3. use withdrawn oa for tbills, uob1, rhb,,,,,
4. when all these high interest instruments die, use the withdrawn oa to push ra to ers.

 

[micheritan]

Can you share the exact date of your 55th birthday ?

20Feb.

 

[BBCWatcher]

i can see that you have thought about what to do.
this is what i will do.
1. Shield using tbills
2. withdraw all oa after frs is formed.
3. use withdrawn oa for tbills, uob1, rhb,,,,,
4. when all these high interest instruments die, use the withdrawn oa to push ra to ers.

That's a pretty good formula, actually! Expanding on it a little...

It's somewhat difficult to shield SA well and reliably using T-bills alone. I suggest getting your unit trust-based approach at least ready to go as a backstop.

The portion of "surplus" cash that you'd plow into RA (to boost it to the ERS) when market interest rates fall makes sense (for now) to put in short-term vehicles such as T-bills and bank deposits. Consider putting the rest in one or a couple long-term vehicles.

 

[philips110104]

i can see that you have thought about what to do.
this is what i will do.
1. Shield using tbills
2. withdraw all oa after frs is formed.
3. use withdrawn oa for tbills, uob1, rhb,,,,,
4. when all these high interest instruments die, use the withdrawn oa to push ra to ers.

Thanks for sharing, for point 4, so still can put in fresh fund to RA after 55 year old?

 

[BBCWatcher]

Thanks for sharing, for point 4, so still can put in fresh fund to RA after 55 year old?

Yes, up to the current Enhanced Retirement Sum (ERS). This limit is based on principal only, so whenever the ERS is raised you have more room for a top up (or inbound transfer).

 

[tyongchi]

CPF will raise the BRS sum every year, meaning the ERS limit will raise too. This year the ERS is raised by $10.2k. In short, you can top up RA every year when BRS limit increases.

Note you can withdraw up to 20% from ERS as a lump sum at 65. You can decide then whether to withdraw or enojoy higher payout. Your call.

 

[BBCWatcher]

Note you can withdraw up to 20% from ERS as a lump sum at 65. You can decide then whether to withdraw or enojoy higher payout. Your call.

Not ordinarily. Top ups, and interest on the tops, are not available for lump sum withdrawals. But existing lump sum withdrawal options (such as the up to 20% of the FRS withdrawal option at age 65) aren’t disrupted with top ups.

 

[micheritan]

i can see that you have thought about what to do.

this is what i will do.
1. Shield using tbills
2. withdraw all oa after frs is formed.
3. use withdrawn oa for tbills, uob1, rhb,,,,,
4. when all these high interest instruments die, use the withdrawn oa to push ra to ers.

For tbills - should i go for competitive or non-competitive. I Should i put in all 260k in one tbill issue or split to two? I think i have left with two chances to apply tbills. Also could i or should i topup RA using the balance OA instead of withdrawing out for investment ?

 

[tyongchi]

Dun think so. Quote from CPF

CPF Withdrawal Rules Unchanged The CPF withdrawal rules remain unchanged.
1. Members can withdraw up to $5,000 unconditionally from their Ordinary Account (OA)/ Special Account (SA) savings from age 55, even if their Retirement Account (RA) savings are less than their cohort BRS; or
2. Members can withdraw their OA/SA savings above their FRS, and/or RA savings above their BRS (if they own a property that can last them up to age 95) from age 55; and
3. Members turning age 65 from 2023 onwards can withdraw up to 20% of their RA savings as at age 65, in a lump sum.

 

[dork32]

For tbills - should i go for competitive or non-competitive. I Should i put in all 260k in one tbill issue or split to two? I think i have left with two chances to apply tbills. Also could i or should i topup RA using the balance OA instead of withdrawing out for investment ?

non comp got 0 advantage over comp, but got a few disadvantage.

all in or not depends on 2 things:
1. How do you view interest rates. if it is going rise you may want to hold back and put later. if it going to drop, then all in. if you not very sure, then put in two tranches. i think it may rise further.

2. How much you enjoy a trip to the bank? if you hate it like crazy, eg you hate queing, you hate wasting your leave, then all in. if a trip to the bank is like visiting Universal Studios, the break your money into half

 

[BBCWatcher]

Dun think so. Quote from CPF...

Yes, fine, but you missed the relevant part where CPF explains that top ups (and interest on those top ups) to a Retirement Account cannot be withdrawn in a lump sum. As I wrote, top ups don't take away any of the RA withdrawal options you already have. But they don't increase any of the withdrawal options either.

Regarding whether to topup RA beyond FRS, you need to decide if liquidity or higher monthly payout from CPFlife after age 65 to 70 till you die is more important.

More important for those specific dollars. This poster already has gobs of liquidity and will still have gobs of liquidity after any RA top ups. Lack of liquidity only ever matters if you need it and you've run out of it. It doesn't matter otherwise.

If liquidity were always so damn important then nobody should ever buy a house, especially not a HDB flat. Adequate liquidity is what's required. Excessive liquidity is typically expensive.

That said, I think Dork32's suggestion is to punt that question to the future. T-bills are currently yielding >4%, so one option is to take dollars that are tentatively earmarked for a RA top up and put them in T-bills for now. When T-bill rates fall then decide. I think that makes sense.

Top up to RA cannot be reversed. RA cannot be withdrawn except at age 65 when there is a chance to withdraw 20% excluding topups.

Well, there's also the up to $5,000 lump sum withdrawal option that starts from age 55. The up to 20% option from age 65 is inclusive of the up to $5,000 option. RA top ups don't affect these RA lump sum withdrawal options. They don't increase them, and they don't decrease them. Although they can make lump sum RA withdrawals more palatable because the reduction in CPF LIFE retirement income would be less biting. For example, reducing monthly income from $2,000 to $1,500 is a lot less painful than reducing it from $1,500 to $1,000.

SA and OA balance can be withdrawn anytime you want after 55 if RA has FRS. But sequence is SA first then OA.

True, although there are a couple possible "bypass" ways to pull from OA first.

If you need tax relief, may be good to topup $8000 every year to RA in cash.

This doesn't work in the poster's situation. He/she would need to shield both SA and OA to maintain room below the Full Retirement Sum in his/her new RA next month. Once the RA reaches the Full Retirement Sum (on a balance basis, i.e. interest inclusive, and including any lump sum withdrawals) then RA tax relief opportunities end.

MA tax relief opportunities are still available.

If you need to withdraw OA in cash, the golden opportunity is before you unshield SA because once you unshield SA, any withdrawal will come from SA first.

Yup.

But this depends on whether you think you can manage this extra cash eg place in high interest savings accounts, tbills, FD.

Currently that's easy, but in the future it might be difficult or impossible to beat OA's floor interest rate (2.5%) via vehicles with broadly comparable risk profiles. Note that it's possible to put some or possibly all money back into CPF via these mechanisms:

1. RA top ups (as mentioned), which can include annual top ups every time the ERS is raised.

2. Voluntary Contributions to MA, which can be done every time there's room below the Basic Healthcare Sum.

3. "All 3 account" Voluntary Contributions which must fit within the CPF Annual Limit ($37,740). With current compulsory contribution rates everyone at least 55 years old by at least November who doesn't have multiple jobs will have some room below the CPF Annual Limit.

4. Repayment of OA (and accrued interest) used for housing and education.

 

[BBCWatcher]

One more important point about liquidity. Liquidity for thee is also liquidity for me, meaning that liquid assets are that much easier for a court or creditor to seize. All dollars stashed in CPF are quite well protected globally from courts and creditors. Some people highly value that aspect of CPF, and so they stuff as many dollars as they can as soon as they can into CPF (and across multiple members of extended households). I can understand that. That's not a major factor in my thinking, and so I'm not that aggressive. But it's a logical argument.

O.J. Simpson is a notorious example. The survivors of two murder victims won a civil judgment against him, and they've been successful in seizing much of his income and wealth. But not anywhere near all of it. Simpson's comfortable home in Florida cannot be touched (protected under Florida's homestead laws), his retirement accounts are untouchable, his Social Security retirement income is probably untouchable, and I'm sure I'm barely scratching the surface of how he's managed to shield much of his wealth. So he's living very comfortably and seems to spend most of his time golfing and Tweeting.

 

[henrylbh]

For tbills - should i go for competitive or non-competitive. I Should i put in all 260k in one tbill issue or split to two? I think i have left with two chances to apply tbills. Also could i or should i topup RA using the balance OA instead of withdrawing out for investment ?

You don't have much time to think of too many things. Your foremost priority is to quickly fix the best available products to shield your SA from now to before 55. Consider the ease and cost of getting the product, the period of holding it and the ease of disposing it after 55 and determining the likely loss of each product in shielding your SA.

The month you buy the product, you already forgone SA interest for that month and if you hold it for more than 1 month, you forgo 2 months of interest of about $1700 excluding charges/fee, capital loss/gain on 260k.

Also deciding what is the last product easily available within a week before 55, keep trying for others that are better until the week before turning 55.

Just after shielding, then think of what to do with the remaining CPF, like topping up RA and withdrawing OA after SA is zeroed. Are you also shielding OA?

If you're going for 6m T-bill, you only have only 2 attempts. For me, I go all in and bid at least 4.6% on the first attempt and if failed, go all in with low Comp bid in the last attempt, unless expected COY for TB becomes unattractive compare to easily available last product/s with least loss, the week before turning 55.

 

[vsvs24]

More important for those specific dollars. This poster already has gobs of liquidity and will still have gobs of liquidity after any RA top ups. Lack of liquidity only ever matters if you need it and you've run out of it. It doesn't matter otherwise.

If liquidity were always so damn important then nobody should ever buy a house, especially not a HDB flat. Adequate liquidity is what's required. Excessive liquidity is typically expensive.

You said "Lack of liquidity only ever matters if you need it and you've run out of it. It doesn't matter otherwise".

He may have liquidity now but who can predict what happens in future especially between age 55 to 65 ?

The point is topping up RA cannot be reversed. You chase for the higher yield of 4% but lose the ability to control withdrawing the excess whenever you want.