CPF SA Shielding hack - RIP (Obsolete)

[reddevil0728]

so if I don't mind paying my share of CPF contribution for both employment, I can sit back and not report. The annual limit of $37740 applies to one employment or for all employment?

I thought the link say per employment? It’s in the first para.

You didn’t see it?

 

[BBCWatcher]

The CPF Annual Limit ($37,740) only applies to the total of compulsory contributions (employer plus employee combined) and "all three account" Voluntary Contributions ("VC3A"). The CPF Annual Limit does not apply to Voluntary Contributions to MediSave, Special Account top ups, Retirement Account top ups, transfers, or repayments to Ordinary Accounts.

 

[firsttimebuyer]

The CPF Annual Limit ($37,740) only applies to the total of compulsory contributions (employer plus employee combined) and "all three account" Voluntary Contributions ("VC3A"). The CPF Annual Limit does not apply to Voluntary Contributions to MediSave, Special Account top ups, Retirement Account top ups, transfers, or repayments to Ordinary Accounts.

Oh thanks for your explanation. That makes more sense!

But.....out of curiosity sake, if the limit applies to the "VC3A", then how does CPF decide to split the payment to which of the 3 accounts?

For example, I do a VC3A contribution of $10,000, how much of the total sum of $10,000 would go into each OA, SA and Medisave? I did search CPF website but it wasn't very clear......

 

[firsttimebuyer]

Mind if I ask how old you are ?

I am aged 39 years old this year.........

 

[BBCWatcher]

But.....out of curiosity sake, if the limit applies to the "VC3A", then how does CPF decide to split the payment to which of the 3 accounts?

VC3As are allocated to SA, MA, and OA in exactly the same way as compulsory contributions from employment. You can find the most common allocation rates for 2024 here.

 

[KeytoFreedom]

That'll depend on your Ordinary Account Balance. Let's suppose you're celebrating your 55th birthday later this year (2024). The Full Retirement Sum this year is $205,800. And let's suppose you "shield" all but $40,000 of your Special Account. (You cannot shield $40,000, sometimes more.) If your OA balance is at least $165,800 then your new Retirement Account will be funded to the Full Retirement Sum with $40,000 from OA and $165,800 from OA. If your OA has less than $165,800 then every dollar will be swept from your OA into your new RA. (Unless you tell the CPF Board otherwise, in advance, because you have housing payments you want to make from OA.)
If your MediSave Account has reached the Basic Healthcare Sum then the MediSave portion of compulsory contributions (and "all three account" Voluntary Contributions, a.k.a. VC3A) will land in your RA. If you're interested in injecting as much cash as possible into your RA then you'll need to raise it quickly at least to the Full Retirement Sum in order to avoid those payroll cycle contributions.
Note that certain qualified family members (especially a spouse) may be eligible to transfer his/her OA dollars into your RA. That's often a really great choice instead of cash, or in addition to a lower amount of cash. And it can be up to the ERS if he/she wishes. Just be aware that it may take a few days for the CPF Board to verify the family relationship if this is the first time that person is transferring OA dollars to you, and the 27th is very close to the end of the calendar month. You could try contacting the CPF Board to see if they'll verify the relationship in advance. Once the relationship is verified (and recorded in CPF's database) those cross-spousal (or other family-based) OA to RA transfers can be instant, or near-instant.

is it worth if I also shield the OA to prevent the RA from extracting up to the ERS ? can I top up the RA at a later date to the ERS?


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[BBCWatcher]

is it worth if I also shield the OA to prevent the RA from extracting up to the ERS ? can I top up the RA at a later date to the ERS?

The CPF Board only attempts to fund Retirement Accounts up to the Full Retirement Sum, not the Enhanced Retirement Sum. If you want your Retirement Account to be funded above the FRS then that requires some action.

 

[vsvs24]

I am aged 39 years old this year.........

Oh thanks for your explanation. That makes more sense!

But.....out of curiosity sake, if the limit applies to the "VC3A", then how does CPF decide to split the payment to which of the 3 accounts?

For example, I do a VC3A contribution of $10,000, how much of the total sum of $10,000 would go into each OA, SA and Medisave? I did search CPF website but it wasn't very clear......

I checked my CPF portal.

It says that my Current Full Retirement Sum (FRS) is $205,800.

Currently, my OA is $102K and SA is $83K. Medisave is currently $69K.

It also says that the maximum amount I can top up using cash is $122,151.05 (I simply don't have that much cash lying around).

It said that I can transfer $102K from my OA to SA.

I still don't understand how is it that on one hand, the portal says the annual limit on CPF contribution is $37K and on thr other hand, the portal also says the max amount I can top up using cash is $122K.....

16 more years to age 55. You need to plan properly because topup to CPF is non-reversible. Make sure you topup only with funds that you are certain you will not need the cash.

What is the reason you are looking at VC3A instead of topping up SA and MA directly ? You mentioned employment CPF, so I presume you are not self employed.

Your SA is below FRS. Generally, if people are looking at retirement planning, they tend to look at topping up SA which earns 4%.

Top up to SA and MA gets tax relief (please check the limits).

If MA exceed the max $71500 for 2024, it will also overflow to SA if SA is less than FRS. So if you topup MA to the max, all subsequent contributions from your employment will flow to SA which will help your SA grow faster.

VC3A tend to be used by those whose SA is already at FRS AS they cannot top up to SA directly any more. So they use VC3A to get as much into SA as possible. There is no tax relief and it is subject to the annual limit of $37740 together with your employment CPF contribution.

Note that for your age group 35 - 45, the allocation for VC3A would be OA 0.5677 SA 0.1891 MA 0.2432. So a large portion goes into OA that earns 2.5% compared to SA and MA that earns at least 4% (Jan to Mar 2024 is 4.08%).

The allocation rate can be found here :
https://www.cpf.gov.sg/content/dam/...nts/CPFAllocationRatesfrom_1_January_2024.pdf

The CPF calculator for allocation can be found here :
https://www.cpf.gov.sg/member/tools-and-services/calculators/cpf-contribution-allocation-calculator

You might want to consider doing topup to SA by cash or transfer from OA (if you do not need the OA for housing or education etc). Again, this is non-reversible. So you need to plan ahead eg might not need OA now but may need it in future eg upgrading.

 

[firsttimebuyer]

VC3As are allocated to SA, MA, and OA in exactly the same way as compulsory contributions from employment. You can find the most common allocation rates for 2024 here.

Thank you very much for explaining

 

[firsttimebuyer]

16 more years to age 55. You need to plan properly because topup to CPF is non-reversible. Make sure you topup only with funds that you are certain you will not need the cash.

Thank you for your reply. I am indeed a little bit worried. I think my problem is cash flow, I feel like my money can only go to a limited number of places.

What is the reason you are looking at VC3A instead of topping up SA and MA directly ? You mentioned employment CPF, so I presume you are not self employed.

Actually it is a misunderstanding on my part. I was confused between VC3A and direct top-ups

Your SA is below FRS. Generally, if people are looking at retirement planning, they tend to look at topping up SA which earns 4%.

Top up to SA and MA gets tax relief (please check the limits).

Thanks

If MA exceed the max $71500 for 2024, it will also overflow to SA if SA is less than FRS. So if you topup MA to the max, all subsequent contributions from your employment will flow to SA which will help your SA grow faster.

VC3A tend to be used by those whose SA is already at FRS AS they cannot top up to SA directly any more. So they use VC3A to get as much into SA as possible. There is no tax relief and it is subject to the annual limit of $37740 together with your employment CPF contribution.

Note that for your age group 35 - 45, the allocation for VC3A would be OA 0.5677 SA 0.1891 MA 0.2432. So a large portion goes into OA that earns 2.5% compared to SA and MA that earns at least 4% (Jan to Mar 2024 is 4.08%).

The allocation rate can be found here :
https://www.cpf.gov.sg/content/dam/...nts/CPFAllocationRatesfrom_1_January_2024.pdf

The CPF calculator for allocation can be found here :
https://www.cpf.gov.sg/member/tools-and-services/calculators/cpf-contribution-allocation-calculator

You might want to consider doing topup to SA by cash or transfer from OA (if you do not need the OA for housing or education etc). Again, this is non-reversible. So you need to plan ahead eg might not need OA now but may need it in future eg upgrading.

 

[adgjl321]

the original link in 1st post dosen't work anymore unfortunately. i'm 31 this year, what is this hack / any optimal strategy for someone my age?

 

[BBCWatcher]

16 more years to age 55. You need to plan properly because topup to CPF is non-reversible. Make sure you topup only with funds that you are certain you will not need the cash.

Some caution is appropriate, but for the record there are several ways to tap CPF savings before age 55 for immediate needs:

• Ordinary Account dollars can be used for housing and education.
• Ordinary Account dollars can be transferred to a qualified family member's Special Account (if the recipient is under age 55) or Retirement Account (if the recipient is 55+). For example, if you transfer OA dollars to a parent's RA, to a parent who's currently receiving CPF LIFE payouts, then those monthly payouts (and residual) will increase. Which could be a great idea in lieu of cash allowances. (But don't specifically inject OA dollars for this purpose. You can already deposit money directly into a someone else's Retirement Account.)
• MediSave Account dollars can be used for any/all MediSave eligible spending, including for qualified family members' medical needs.
• If you become eligible to make a CareShield Life claim (severe disability) then you're also usually eligible to tap your MediSave Account to obtain monthly income.
• Withdrawals on medical grounds, such as a terminal illness diagnosis, are possible.
• If you stop being a Singaporean citizen or Singapore Permanent Resident then you're now required to withdraw all CPF savings. (This is a new rule coming into full effect in April, 2024.)

There's also the fact that if you have more CPF savings sooner (and growing for longer) then you have that much less pressure to save for retirement and future medical needs using other mechanisms. Obviously liquidity isn't everything. If it were then nobody would buy houses, especially not HDB flats.

I generally favor Voluntary Contributions to MediSave as the "first best" way to grab tax relief. MediSave offers somewhat greater pre-age 55 liquidity, the highest available CPF interest rate, and has attractive characteristics in terms of "spillover effects" when it reaches its maximum (the Basic Healthcare Sum). But your mileage may vary a little depending on what you're trying to accomplish.

 

[di_andrei]

• If you stop being a Singaporean citizen or Singapore Permanent Resident then you're now required to withdraw all CPF savings. (This is a new rule coming into full effect in April, 2024.)

Do you have more details on this? How does it work if you have already started receiving CPF Life?

 

[vsvs24]

Thank you for your reply. I am indeed a little bit worried. I think my problem is cash flow, I feel like my money can only go to a limited number of places.


Actually it is a misunderstanding on my part. I was confused between VC3A and direct top-ups

Thanks

If you are worried about cash flow, can top up bit by bit. No need to rush to decide. Also can defer and topup in later years when you have spare cash and more certain of your liquidity. Just note that once your SA hit FRS you cannot direct topup to SA.

I agree with BBCWatcher on topup of MA. Your MA is close to the max MA of $71500. Suggest you topup to the max. Then your employment contribution for MA will flow to SA. That is already quite good for a start.

 

[BBCWatcher]

Do you have more details on this? How does it work if you have already started receiving CPF Life?

The new rule boils down to a simple, curt "bye bye." If you're on CPF LIFE but then lose (or terminate) Singaporean citizenship/Singapore Permanent Residence then the CPF Board shuts you down completely and rapidly, including your participation in CPF LIFE. (For CPF LIFE you'd get the remaining value of the life annuity, if any, paid out to you in a lump sum.) See here for a short official statement. This new rule comes into full effect on April 1, 2024.

To editorialize a bit, maybe there are some other governments that have similar policies, but I don't know of any. For example, there's no citizenship or permanent residence requirement to participate in the U.S. Social Security system. And if you earn benefits in that system they're yours regardless of your U.S. immigration status. The U.S. Social Security Administration will pay benefits practically anywhere in the world. Receiving U.S. Social Security retirement benefits in Singapore (for example) is no problem at all.

 

[kickass22]

Can I check that 20K for OA and 40K for SA will be held back from CPF Life?

Thanx!

 

[BBCWatcher]

Can I check that 20K for OA and 40K for SA will be held back from CPF Life?

There's no such rule. The $20K OA and $40K SA figures refer to the minimum amounts that must be retained in the respective accounts when investing via the CPF Investment Scheme.

 

[kickass22]

There's no such rule. The $20K OA and $40K SA figures refer to the minimum amounts that must be retained in the respective accounts when investing via the CPF Investment Scheme.

Thanks. In a hurry, I wrote CPF-Life, I was referring to Shielding . Your answer cleared my doubt. thanx!

 

[KeytoFreedom]

Appreciate any advice on how much to have in the RA account....should I shield my OA as well so that the RA is only 60k ? Or should I top up the RA with cash up to the FRS or ERS amount?

Or alternatively should I not shield the OA and ensure that the RA is the FRS ?


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[reddevil0728]

Appreciate any advice on how much to have in the RA account....should I shield my OA as well so that the RA is only 60k ? Or should I top up the RA with cash up to the FRS or ERS amount?

Or alternatively should I not shield the OA and ensure that the RA is the FRS ?


Read HWZ Forum Rules!

do you want to establish what your objective is first?