CPF SA Shielding hack - RIP (Obsolete)

[BBCWatcher]

except once u take out from OA u cannot put back when the returns from banks drop below OA again in that 10 years

Think harder.

There are some ways to get money into CPF, but they’re limited. Examples:

• “All 3 account” Voluntary Contributions (VC3As). VC3As must fit within the CPF Annual Limit. Unfortunately due to the 2025 discontinuation of Special Accounts from age 55 onward you could easily end up with every VC3A dollar landing in OA, for 2.5% interest.
• Repaying OA dollars used for housing.

 

[BBCWatcher]

Personally I think this move will push property higher...

I think it’s rather the opposite at the margins. Before 2025 if you’re age 55+ with SA and OA dollars it’s fairly difficult to withdraw OA dollars ahead of SA dollars. But one popular, “easy” way is via housing payments. But from 2025 there won’t be any SA dollars from age 55 onward. You don’t need to use housing as an outlet to withdraw OA dollars ahead of SA. You can just withdraw OA dollars, assuming of course you have an adequately funded Retirement Account. Since the OA dollars are just cash at that point then you’ll use them for any purposes, not skewed toward housing.

 

[BBCWatcher]

…But there’s at least one potential home price boosting measure in Budget 2024: ITE graduates will get $10,000 in their Ordinary Accounts. At the margins that’ll boost housing demand.

 

[elvintay07]

I think it’s rather the opposite at the margins. Before 2025 if you’re age 55+ with SA and OA dollars it’s fairly difficult to withdraw OA dollars ahead of SA dollars. But one popular, “easy” way is via housing payments. But from 2025 there won’t be any SA dollars from age 55 onward. You don’t need to use housing as an outlet to withdraw OA dollars ahead of SA. You can just withdraw OA dollars, assuming of course you have an adequately funded Retirement Account. Since the OA dollars are just cash at that point then you’ll use them for any purposes, not skewed toward housing.

That is what the general public thinks. You withdraw and it grows at 2.5%? Even u got $500k inside, every year get $12,500 buy medication for chronic disease also not enough. U need instrument to compound min at 6%.

 

[yuppieboy]

except once u take out from OA u cannot put back when the returns from banks drop below OA again in that 10 years

How many more 10 years can one expect to have in a lifetime? 2x or 3x? Honestly, One should aim to enjoy spending their own hard earned money and not just concern on leaving it behind for others to enjoy the wealth on your behalf.

 

[BBCWatcher]

That is what the general public thinks. You withdraw and it grows at 2.5%? Even u got $500k inside, every year get $12,500 buy medication for chronic disease also not enough. U need instrument to compound min at 6%.

I think you’re making some other argument. I’m merely pointing out that CPF members age 55+ had some incentive to use OA for housing, because that was the easiest way to pull money out of OA without touching SA. From 2025 they won’t have that particular incentive. Therefore, at the margins they’ll be less inclined to use OA specifically for housing.

How many more 10 years can one expect to have in a lifetime? One should aim to spend their own hard earned money and not just concern on leaving it behind for others to enjoy the wealth on your behalf.

Or how about giving away more money to younger loved ones while you’re still alive to see how much of a difference it makes? Go to a lovely restaurant together, for example. It’s mystifying to me why so many people think it’s a good idea to make heirs wait until you’re dead, and for the elder to do elderly things with their wealth like park it in fixed deposits for decades. This behavior really makes no financial or utilitarian sense for anyone. Be more generous now!

I try to practice what I preach here. The primary way I’m being more generous now is to help pay for my nieces’ and nephews’ higher educations. That’s just the opening bid, though. More to come, soon. And way, way before I inhabit an urn.

 

[seikatsu]

I am fully aware that I am not well versed in retirement strategies, just voicing my jumbled thoughts and seeking confirmation/opinions.

With shielding no longer possible, does it impact doing VCMA first and doing that whole supercharging thing?
I am thrown off by the fact that after 55, there is no longer an SA account@4% and instead only an OA account@2.5%.
4% virtually risk free and liquid was a huge draw but something about 2.5% just doesn't cut it.


It might be a case of whether someone believes in CPF or not.
A believer should probably still continue topping up.

It might depend on income brackets for tax reliefs.
Someone in the 7% bracket should consider topping up.
For 11.5% bracket, definitely consider topping up.

If the goal is to now hit FRS/ERS and earn 4% from there instead, it's still not liquid and only usable after 65.
So topping up for the purpose of reaching FRS/ERS faster doesn't make sense.
I am also not seeing the rationale behind raising ERS to 4x.


I don't know man, I feel like gov is telling me to go invest money in the market instead.

Thanks

 

[JustDoLor]

The snowball got so big it end up in Parliament lor . There is always a cause and an effect…

I believe the hack was know for many years to a few and especially those who have invested using their SA , like some of you here but keeping it very low profile.

After this was officially exposed in the printed media 2019, I heard lots of financial planners start to promote it openly, even broadcast the hack on radio.

Blame MP Melvin Yong lah as mentioned in the article whahaha
https://www.channelnewsasia.com/singapore/budget-2024-retirement-account-special-account-cpf-4128816

 

[JustDoLor]

You r Lorna Tan?

yea but no choice right.

what to do. it's inevitable.

 

[PhantomOpera]

Hi, I am a noob when it comes to CPF. Am reading with interest about the removal of SA for those reached 55years old. I have a question:

1) When I reach 55, my SA will be transferred to RA. Assuming it is less than ERS of $426k, can I top it up from OA to $426k?

2) I can only receive monthly payouts from 65 years old (is it called CPF Life?). I read that interest on RA cannot take out until I reached 80 years old? If I were to die prior to 80, the interest earned on RA will go to a common pool instead of to my beneficiaries. May I know is this true?

 

[jeffong]

Hi, I am a noob when it comes to CPF. Am reading with interest about the removal of SA for those reached 55years old. I have a question:

1) When I reach 55, my SA will be transferred to RA. Assuming it is less than ERS of $426k, can I top it up from OA to $426k?

2) I can only receive monthly payouts from 65 years old (is it called CPF Life?). I read that interest on RA cannot take out until I reached 80 years old? If I were to die prior to 80, the interest earned on RA will go to a common pool instead of to my beneficiaries. May I know is this true?

The only way to take out any money from RA other than the monthly CPF Life payments is when you go six feet under. That's where the remaining funds not withdrawn by CPF Life (if any) will go to your beneficiaries. If you opted for Standard or Escalating plans, all interests earned will go to the common pool.

At 55, only the equivalent FRS will be transferred to RA, the balance of your SA will go to your OA. At that point, you can choose to transfer from OA to RA up to the ERS level for that year.

 

[DevilPlate]

For the rich here, js beware estate duty tax very likely to reinstate in the coming years ahead.

Govt been more generous to the lower income and the monies goto replenish from somewhere else.

 

[Mickey01]

For the rich here, js beware estate duty tax very likely to reinstate in the coming years ahead.

Govt been more generous to the lower income and the monies goto replenish from somewhere else.

... fully aware. They (including the academics and some who write commentary in our newspaper) have been hinting.

 

[castafarian]

Is there still a case to shield SA?

So that we can top-up the RA with excess cash instead, to earn 4% on surplus cash? Does this method assume that bank accounts can't match 2.5%?

to me it's still a yes.
In my 40s right now and have hit FRS.

So instead of topping up to ERS (which i NEVER have the intention of doing so), will try to grow my OA stash instead.

 

[narutos]

For the rich here, js beware estate duty tax very likely to reinstate in the coming years ahead.

Govt been more generous to the lower income and the monies goto replenish from somewhere else.

What things to prepare for estate duty tax?

 

[reddevil0728]

You r Lorna Tan?

Why does it matter?

 

[DevilPlate]

What things to prepare for estate duty tax?

Nothing much….js don’t die too rich….lol

 

[highsulphur]

What things to prepare for estate duty tax?

give away all your money!

 

[bluezzy]

Can I check if I have a property, I can withdraw RA down to BRS? Can this be done many times over the year from 55 to 65 years old or can it be done once? If only once, can the lump sum be drawn when we are closer to 65 or must it be taken out at 55?

 

[lzydata]

...Associate Professor Walter Theseira, an economist from the Singapore University of Social Sciences, said: "This whole system only benefits a very small minority of CPF account holders, who have way too much in their CPF account.

"On a system basis, (this) means that more interest is going to the group of CPF account holders with more funds, which is not really the intent because you want to help the lower income with retirement adequacy."

With the increase to the Enhanced Retirement Sum, these CPF members who have used the "shielding" hack might choose to park more money in their Retirement Account that way, though they might see this as a "compromise", Assoc Prof Theseira added.

https://www.todayonline.com/singapore/budget-2024-cpf-special-account-shielding-hack-experts-2364316