CPF SA Shielding hack - RIP (Obsolete)

[reddevil0728]

Looking at nett, both are loss in capital.

Not advocating that should not shield by tbill. But at least they should know there are other options other than tbills. Especially when tbill rates start to drop.

Good thing about tbill is that it is very easy to buy now that ocbc allows online purchase using SA. As long as have ocbc internet banking it is just a few clicks

but one loss in capital might be undefined vs the other

 

[reddevil0728]

Actually tbill loss is also undefined as you don't know the rate at the point of application.

you have a safeguard with comp bid over multiple time period

 

[KeytoFreedom]

Can shield using tbill but note that it will definitely be a loss as tbill interest is below SA's 4% and you lose CPF interest. You need to be careful to pick the 6 mths tbills that has 7 mths interest loss and not those with 8 mths interest loss.
Still worth the effort to shield though if your SA amount is large and you will not need to touch it for many years after 55.
If your birthday is not at beginning or end of the mth, shielding by short term bond is an alternative.

can you explain the part about bday being at beginning or end of month, I don't get it. thanks


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[chong18]

If shield using tbill should hold till maturity or sell after birthday? Can sell anytime?

 

[reddevil0728]

For shielding with 6 mths tbill, can choose any tbill where the SA deduction is before your 55th birthday and matures after your 55th birthday. So if start early, plenty of choice but need to choose those that lose 7 mths cpf interest (those where issue date is not too near beginning of mth and maturity date is not near end of month).

For short term bond, to keep possibility of loss lower, better to hold it as short as possible. Eg apply 1 week before 55th birthday and sell on birthday.

Eg if birthday is on 3 Jul, means you purchase in June (eg 26 Jun) and sell on 3 Jul. So lose CPF interest for June and Jul. 2 mths loss.

If the birthday is on 10 Jul, purchase on 3 Jul and sell on 10 Jul. So lose CPF interest in Jul only. 1 mth loss.

If the birthday is on 29 Jul, purchase on 22 Jul and sell on 29 Jul. The money may not be returned to SA in time in Jul and end up posted in Aug. So lose CPF interest for Jul and Aug. 2 mth loss.

So if short term bond lose 2 mths CPF interest (base on your birthday) , overall sure worse off than shielding with tbill. So should just shield with tbill.

But if short term bond lose 1 mth CPF interest, then can either shield by short term bond or tbill. You have a choice.

Why is shielding with short term bond with loss of interest of 2 month being sure worse than t-bill?

If shield using tbill should hold till maturity or sell after birthday? Can sell anytime?

Can either.

can go back to sell. But whether favourable another matter

 

[KeytoFreedom]

does CPF freeze the SA monies exactly on the 55th bday itself? and is it safe to transfer the SA monies back on the next day after the bday?


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[BBCWatcher]

Because the gap between tbill rate and 4% is smaller than 1 extra month of CPF interest loss.

Currently perhaps. In a world with 2% p.a. or lower yielding T-bills — all the way back in ancient history (2022) for example — that financial math isn’t going to work for T-bills.

 

[dork32]

Currently perhaps. In a world with 2% p.a. or lower yielding T-bills — all the way back in ancient history (2022) for example — that financial math isn’t going to work for T-bills.

no need 2%. if tbills is 3,3%, you lose .7% every month for 6 months, total you lose 4.2% total, + the 1 month of 4%, you lose a total of 8.2%
you lose 2 months, total only 8%.

please note that all the percentages quoted must be divided by 12. if i divide by 12, then the number will looked horrible.

 

[Agate8]

Like to validate if my understanding is correct to apply SA shielding.

I should invest using SA account before 55Yo. By doing this, upon 55yo, RA will draw from OA, ie.(OA-SA) = BRS/FRS.

Is this correct?

IS the maximum "shielding" amount is BFS value at 55yo?

 

[dork32]

IS the maximum "shielding" amount is BFS value at 55yo?

wrong, the max anount that you can shield is your sa amount - 40k

 

[BBCWatcher]

wrong, the max anount that you can shield is your sa amount - 40k

Actually, under current rules the maximum portion of your Special Account that you can "shield" is your SA balance less the greater of $40,000 *or* your Special Account top ups, plus accrued interest on your top ups.

 

[Agate8]

Actually, under current rules the maximum portion of your Special Account that you can "shield" is your SA balance less the greater of $40,000 *or* your Special Account top ups, plus accrued interest on your top ups.

Is it true once you top up your SA, the max one can top up is FRS - SA balance eg 198k (Frs this year) - $100K SA balance) = Top up amount is $98K?

 

[BBCWatcher]

Is it true once you top up your SA, the max one can top up is FRS - SA balance eg 198k (Frs this year) - $100K SA balance) = Top up amount is $98K?

That part is simple. You can top up your Special Account up to the Full Retirement Sum if you wish. But that particular opportunity ends once you reach your 55th birthday.

If you're a 1 day old Singaporean citizen-infant somebody can top up your Special Account to the Full Retirement Sum in one go if desired. That's allowed. All the benefactor needs is your new Singapore birth certificate number (NRIC).

 

[henrylbh]

does CPF freeze the SA monies exactly on the 55th bday itself? and is it safe to transfer the SA monies back on the next day after the bday?


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I have CPF annual statements that showed RA was created on the person's birth date at 55 and another person's RA was created 3 days before that person's birth date. The latter's birth date at 55 was Mon but Fri before, RA was already formed.

 

[Agate8]

That part is simple. You can top up your Special Account up to the Full Retirement Sum if you wish. But that particular opportunity ends once you reach your 55th birthday.

If you're a 1 day old Singaporean citizen-infant somebody can top up your Special Account to the Full Retirement Sum in one go if desired. That's allowed. All the benefactor needs is your new Singapore birth certificate number (NRIC).

Thanks!

If topup at 1yo, this will fulling max SA 4% benefits!

Can i topup MA by cash?

 

[reddevil0728]

Thanks!

If topup at 1yo, this will fulling max SA 4% benefits!

Can i topup MA by cash?

yes can top up MA by cash

 

[Listopad]

Does anyone shield their OA as well? And then top up the RA by cash?

 

[reddevil0728]

Does anyone shield their OA as well? And then top up the RA by cash?

There are talks about shielding OA, but whether worth the effort is another matter.

 

[RedsYWNA]

Does anyone shield their OA as well? And then top up the RA by cash?

I think its a fair consideration, so as to get 2.5% and 4% piggy bank.....

 

[BBCWatcher]

Does anyone shield their OA as well? And then top up the RA by cash?

It's possible. At the moment 2.5% interest isn't attractive. Singapore T-bills (for example) currently offer much higher yields. There's also the fact that you cannot easily withdraw OA dollars ahead of SA dollars. But you may feel that 2.5% interest will be attractive enough again in the future. Also, some people highly value the asset protection aspects of CPF. "Shielding" OA may make sense for them.

As it happens I'm not an OA shielder. I don't think it makes sense for me.