CPF SA Shielding hack - RIP (Obsolete)

[sleep200am]

What's your scenario ? After age 55 with RA at FRS ?

How is this better than investing OA and then close CPFIA, keeping SA intact instead of having to withdraw 40k from SA.

Your 2nd hack method is brilliant. Will consider. Is this a proven method/Has someone done it successfully?

I just want to explore the best option to cash out OA.

 

[Nofear40]

I did.

Don't withdraw SA. Not easy to topup SA and not easy to find 4% nowadays. Rates are going downhill.

Hopefully you know how to utilize your OA better than 2.5%. I dare to withdraw all OA as I could return money to OA using housing refund. Just a few years ago interest was below 2%. If it happens a few years later, I will just return OA

But once you return, how to take out again? Open CPFIS again?

 

[s0crates]

I was told can open again.

Will only return when rates are really low. And return part, not all.

I used part of the OA money to buy SSB. Can slowly redeem and draw down when needed between 55 and 65. Once 65, can activate CPF life.

Cannot buy SSB with cpf

 

[sleep200am]

I did.

Don't withdraw SA. Not easy to topup SA and not easy to find 4% nowadays. Rates are going downhill.

Hopefully you know how to utilize your OA better than 2.5%. I dare to withdraw all OA as I could return money to OA using housing refund. Just a few years ago interest was below 2%. If it happens a few years later, I will just return OA

Thank and appreciate your advice.

 

[henrylbh]

Wow thanks for sharing. Never know there is a transfer fee. It's not extravagant but imagine the cost it you have a portfolio of sgx listed stocks

How much porfolio of sgx shares if one is using CPF? At most 4 or 5 counters and the transfer fee is only $10 per counters. There is also quarterly charges for holding the shares. I have more than 200k OA in CPF shares and only two counters.

 

[KeytoFreedom]

I was told can open again.
Will only return when rates are really low. And return part, not all.
I used part of the OA money to buy SSB. Can slowly redeem and draw down when needed between 55 and 65. Once 65, can activate CPF life.

so CPF OA can freely open and close after age 55?


Read HWZ Forum Rules!

 

[henrylbh]

Help to check if this SA Hack is workable.
Someone is already above 55 years old and has settled the full retirement amount in RA. he still has both 100K in OA and SA and all amounts is withdrawable. Based on current CPF rule, if he want to withdraw 100K, then it will comes from SA account first, so leave the OA 100K in CPF and earn 2.5%.
If he subscribe full SA amount to 6 Month T-bill and deplete it, then he withdraw 100k from CPF which only comes from OA right? after 6 Month, the T-billed SA will return to SA to earn 4%.

No matter how, one still need to leave $40k in SA. And to withdraw the OA, the 40k in SA need to be withdrawn first. It's expensive way of investing SA to protect it from being withdrawn first.

 

[henrylbh]

so CPF OA can freely open and close after age 55?


Read HWZ Forum Rules!

Yes can freely open and close CPFIS-OA after age 55 and meeting FRS.

 

[henrylbh]

I did.

Don't withdraw SA. Not easy to topup SA and not easy to find 4% nowadays. Rates are going downhill.

Hopefully you know how to utilize your OA better than 2.5%. I dare to withdraw all OA as I could return money to OA using housing refund. Just a few years ago interest was below 2%. If it happens a few years later, I will just return OA

It was dumb of me to refund housing loan in the past. If VC, at least some of the money would end up with SA.

 

[KeytoFreedom]

Oh yes ! I forgot about VC. At least some get to SA.
But need to slowly put back due to limit. But ok. Can be planned.

can you pls explain what is VC?


Read HWZ Forum Rules!

 

[reddevil0728]

can you pls explain what is VC?


Read HWZ Forum Rules!

Voluntary contribution to the 3 accounts of CPF

 

[wira]

For SA $40k cannot be invested. So if buy tbills can only buy $60k. And lose more interest using SA.

Since he is above 55 with RA at FRS, use the second hack - CPFIA. Need to also have CDP account.

Buy 6 mths tbills with OA. $20k cannot be invested. So if bal is 100k can buy $80k. Do in one lump sum if want to save on charges.

Then apply to CPF Board to close CPFIA. They will inform the CPFIA bank who will ask you to fill up form to indicate CDP account number and bank account for charges (if CPFIA bal is zero). There is transfer fees of $10 + GST per security.

Once the tbill is transferred to CDP, upon maturity the $80k will be paid to the bank account linked to CDP.

Then can use the OA money freely while keeping SA intact at CPF to earn higher interest

thanks for this tip !
this will definitely help to withdraw OA while still keeping SA intact after reach 55.

 

[GrandJedi]

can someone advice which to use for CPF SA Shielding please?

which is better to do with less risk/reward?

Shield with 6M Tbill or Nikko AM Shenton Short Term Bond fund?

 

[polyglob]

can someone advice which to use for CPF SA Shielding please?

which is better to do with less risk/reward?

Shield with 6M Tbill or Nikko AM Shenton Short Term Bond fund?

t-bill: You have to hold for 6 months. Rate is known. Sure won't lose money.

fund: You can buy the fund just before your BD and sell right after it. May lose money. I lost $50 in the round trip.

You decide which is better for you

 

[reddevil0728]

can someone advice which to use for CPF SA Shielding please?

which is better to do with less risk/reward?

Shield with 6M Tbill or Nikko AM Shenton Short Term Bond fund?

Do you prefer know delta or unknown delta?

 

[BBCWatcher]

can someone advice which to use for CPF SA Shielding please?
which is better to do with less risk/reward?
Shield with 6M Tbill or Nikko AM Shenton Short Term Bond fund?

t-bill: You have to hold for 6 months. Rate is known. Sure won't lose money.

More precisely, at present you're guaranteed to lose money with the T-bill-based "shielding" method. T-bills are yielding 3.77% (based on MAS's market survey), and SA will yield 4.08% in 1Q2024. The amount of the loss is known and predictable based on your bid (and whether it gets filled), but there's a significant loss at current and similar T-bill yields.

fund: You can buy the fund just before your BD and sell right after it. May lose money. I lost $50 in the round trip.

Yes, you're guaranteed to lose at least 1 month of SA interest with the unit trust-based method. Neither of these shielding methods is free. Possibly a 2 month SA interest loss if your birthday is "too close" to the beginning or end of the calendar month. (T-bills involve 7 months of SA interest loss but 6 months of T-bill earnings. If you are a "2 month unit trust shielding candidate" then even with today's lower T-bill yields the T-bill-based method might still be reasonable.) But that's the only guaranteed loss. The remaining loss or gain is variable. It's highly likely to be modest either way — +/-$50 for example — though not strictly guaranteed.

 

[BBCWatcher]

Let's illustrate with some examples. And let's start with the easiest one: the unit trust-based method. We'll assume you're shielding $200K of SA and that the SA interest rate is steady at 4.08%.

Unit Trust-Based Method

Lost SA Interest (1 Month): $680
Unit Trust Price Variation (for the few days you hold it): unknown, but expected to be low
If you have quite bad luck and the price declines by 0.5% over the few days you're holding it then that's a $1,000 loss.
Total result: -$1,680 to +$320 (assuming a +/- 0.5% price wobble band)

T-Bill Based Method

Lost SA Interest (7 Months): $4,760
T-Bill Profit (6 Months @ 3.77% effective net yield): $3,770
Total result: -$990, guaranteed

My personal view is that if your birthday is not at the beginning or end of the calendar month when it's "too close" to move the funds in/out of the unit trust within the same month (and on either side of your birthday) then I think I'd pick the unit trust-based method. Otherwise, I think I'd pick the T-bill-based method (if the interest rate is reasonable). Assuming only 1 month of SA interest loss with the unit trust-based method your average loss ($680 in this example) is lower than the guaranteed $990 T-bill loss (this example). I think that's a very reasonable bet.

Note that you're allowed to combine methods if you wish. For example, there's no harm in placing a "high" competitive T-bill bid when you're still a few months away from your birthday (and the T-bill would mature after your birthday). Your bid probably won't get filled if the bid is too high, but it doesn't hurt to try. Then fall back to the unit trust-based method if you're not satisfied. Or do some of both.

 

[highsulphur]

I also feel that unless birthday is at beginning or end of mth, short term bond is better than tbill.

Firstly, tbills rates are likely to be going downhill.

Secondly, short term bond allows you to invest right down to the nearest $100. If working, can plan to execute after employer contribution is in just before birthday so can maximise the SA amount shielded.

For tbills, min is $1000. Because the discount is deducted from purchase amount, there will always be some bal left to be shielded. Need to do a few rounds to maximise the amount shielded. And to do this, need to plan around tbill schedule and when employer contribution comes in.

What short term bond are you referring to? That is sufficiently liquid and actively traded

 

[Froggyman]

My personal view is that if your birthday is not at the beginning or end of the calendar month when it's "too close" to move the funds in/out of the unit trust within the same month (and on either side of your birthday) then I think I'd pick the T-bill-based method. Otherwise, I think I'd pick the unit trust-based method. Your average loss ($680 in this example) is lower than the guaranteed $990 T-bill loss (this example), and I think that's a very reasonable bet.

shouldn’t it be unit trust- based method for those birthday not at the beginning or end of the month?

Btw, for birthday that falls on 24th of the month, is there sufficient time to do the sales of Unit trust for fund to go back to CPF within the same month?

 

[dork32]

t-bill: You have to hold for 6 months. Rate is known. Sure won't lose money.

actually tbills is sure lose money at current rates