CPF SA Shielding hack - RIP (Obsolete)

[Verbatin K]

I hope this is the right thread to post. I find it difficult to read through everything so pardon me for putting here.

I am 54 this year. Here is a hypothetical amount that I have in my CPF.

OA : $15k.
SA : $295k.
No more housing commitment

FRS for my cohort is $205,800. I intend to opt for FRS instead of ERS so I can withdraw around $100k+ (including interest) when I hit 55 next year.

At age 55, your OA and SA will be transferred and form RA account. SA (higher interest rate) will be moved first follow by OA.

Question: -

1. do I need to do CPF shielding? Does min of $20k still apply for OA at age 55? If $20k still apply, then I do not need to do shielding. I read that min of $20k does not apply so I need to shield

2. Do I shield $15k only?

3. If I don’t do shielding, I will have $15k in my OA. Can I withdraw this $15k? If I want to withdraw just $15k, do I need to clear the SA first?

 

[BBCWatcher]

1. do I need to do CPF shielding?

You don’t need to do anything. But you have a couple choices given the scenario you’ve illustrated:

1. “Shield” enough of your SA dollars so that your RA is funded to the Full Retirement Sum using remaining SA dollars and all of your OA dollars (instead of all SA).

2. “Shield“ more SA dollars than #1, then inject cash into your RA to raise it to the Full Retirement Sum, or higher.

If you’re just going to withdraw all your remaining CPF savings on your 55th birthday then neither #1 nor #2 makes sense. That would mean that you don’t sufficiently value a 4.00+% interest earning government guaranteed account to keep dollars in that account, or at least you need the money right away.

Does min of $20k still apply for OA at age 55? If $20k still apply, then I do not need to do shielding. I read that min of $20k does not apply so I need to shield

The $20K figure is only relevant if you’re going to “shield” lower interest earning OA dollars. It’s hard to imagine why you would in the scenario you’ve outlined. And you can’t shield any OA dollars since you have none above $20K.

2. Do I shield $15k only?

You would shield (if you shield) SA, not OA. If your goal is to end up with $205,800 in your Retirement Account using all of your OA dollars and the remainder from your SA then you should “shield” this number of SA dollars:

(your SA balance) - (the Full Retirement Sum) + (your OA balance)

So using your figures that would be:

$295,000 - $205,800 + $15,000 = $104,200

In practice you might not be able to shield exactly $104,200 (or whatever the exact number is), so round it up.

If you want to inject cash into your new RA as part of the Full Retirement Sum then increase this $104,200 figure. For example, if you want leave room to inject $8,000 of cash (for tax relief) into your new RA then “shield” at least $112,200 of SA.

3. If I don’t do shielding, I will have $15k in my OA. Can I withdraw this $15k? If I want to withdraw just $15k, do I need to clear the SA first?

You would need to withdraw remaining SA dollars first, down to zero, before you can withdraw any of that $15K of OA.

 

[highsulphur]

You don’t need to do anything. But you have a couple choices given the scenario you’ve illustrated:

1. “Shield” enough of your SA dollars so that your RA is funded to the Full Retirement Sum using remaining SA dollars and all of your OA dollars (instead of all SA).

2. “Shield“ more SA dollars than #1, then inject cash into your RA to raise it to the Full Retirement Sum, or higher.

If you’re just going to withdraw all your remaining CPF savings on your 55th birthday then neither #1 nor #2 makes sense. That would mean that you don’t sufficiently value a 4.00+% interest earning government guaranteed account to keep dollars in that account, or at least you need the money right away.

The $20K figure is only relevant if you’re going to “shield” lower interest earning OA dollars. It’s hard to imagine why you would in the scenario you’ve outlined. And you can’t shield any OA dollars since you have none above $20K.

You would shield (if you shield) SA, not OA. If your goal is to end up with $205,800 in your Retirement Account using all of your OA dollars and the remainder from your SA then you should “shield” this number of SA dollars:

(your SA balance) - (the Full Retirement Sum) + (your OA balance)

So using your figures that would be:

$295,000 - $205,800 + $15,000 = $104,200

In practice you might not be able to shield exactly $104,200 (or whatever the exact number is), so round it up.

If you want to inject cash into your new RA as part of the Full Retirement Sum then increase this $104,200 figure. For example, if you want leave room to inject $8,000 of cash (for tax relief) into your new RA then “shield” at least $112,200 of SA.

You would need to withdraw remaining SA dollars first, down to zero, before you can withdraw any of that $15K of OA.

assuming if I have 200k in OA and 200k in SA just before 55 and interest rates are low. Can I shield as much OA and SA and then top up my RA with cash after 55?

 

[BBCWatcher]

assuming if I have 200k in OA and 200k in SA just before 55 and interest rates are low. Can I shield as much OA and SA and then top up my RA with cash after 55?

Yes. You can shield all but $20K of OA and all but $40K(*) of SA. Your new RA will then be funded with this $60K when both OA and SA are maximally shielded. You can then boost your new RA up as high as the Enhanced Retirement Sum using cash and/or OA to RA transfers from qualified family members.

(*) This figure will be higher if you topped up your SA with cash and the top ups (plus accrued interest on the top ups) exceeds $40K.

 

[highsulphur]

Yes. You can shield all but $20K of OA and all but $40K(*) of SA. Your new RA will then be funded with this $60K when both OA and SA are maximally shielded. You can then boost your new RA up as high as the Enhanced Retirement Sum using cash and/or OA to RA transfers from qualified family members.

(*) This figure will be higher if you topped up your SA with cash and the top ups (plus accrued interest on the top ups) exceeds $40K.

thank you. still have more than 5 years till 55. Let's see if shielding still works and whether prevailing interest rate then makes sense to top up with cash

 

[BBCWatcher]

1. People doing SA Shielding tend to be those with high OA balance. They shield SA so that RA has FRS mainly coming from OA instead of SA.

I disagree. Cash and/or OA to RA transfers from qualified family members are perfectly fine. And people who transferred their own OA dollars to SA while they could are likely to be low OA/high SA people. They too are candidates for SA shielding.

RA is a good deal, and more SA is a good deal. If you’ve got the cash (and/or other qualified family members have the OA dollars) to grab both offers, grab both offers.

In your case, OA is only 15k. Not worth the effort to do SA shield.

It’s definitely not worth the effort if he/she doesn’t plan to keep SA dollars in SA for at least a “sufficient“ period of time until the $15K earning higher interest offsets the shielding cost. Plus possible tax relief as I illustrated upthread. You can even deposit $8,000 in RA, drop the shield, then immediately withdraw $8,000 from SA if you wish, if you don’t want to be out of pocket for more than a couple days. That’s good enough to claim the tax relief, oddly enough.

Do note that there is loss of CPF interest when you do shielding.

Yup. Run the numbers and see if it makes sense.

2. You can freely withdraw the balance left in SA and OA after RA is formed with FRS. But this does not mean you must withdraw it when you reach 55. Unless you need the cash, you can leave it there. 89k in SA and 15K in OA can continue to earn 4% in SA and 2.5% in OA. Can withdraw bit by bit whenever you need.

SA is currently earning 4.01% and should earn a little higher in 4Q2023.

 

[highsulphur]

How to buy t bills using SA? Currently when I bid for 6 months t bills via dbs online banking, seems like can use opt using OA.

 

[DevilPlate]

thank you. still have more than 5 years till 55. Let's see if shielding still works and whether prevailing interest rate then makes sense to top up with cash

Interesting…..normally js do SA shielding and then top up RA in cash to ERS.

OA 2.5% not worth sitting inside after 55yo imo.

 

[highsulphur]

Interesting…..normally js do SA shielding and then top up RA in cash to ERS.

OA 2.5% not worth sitting inside after 55yo imo.

Thats because current interest rates are high. Don't forget before 2022, interest rates were below 2%

 

[jywy2005]

I have exhausted my OA funds to buy T-bills and left a balance of around $23k.

I have more than $300k in SA.

So if I shield my SA sans the $40k, I should be able to top up my RA in cash to FRS.

So what happens to my T-bill purchased using OA? Upon maturity, can this be returned to my OA acc to earn 2.5% as well as the SA funds from say UT after RA is formed?

I will be 55 yo next year.

 

[DevilPlate]

Thats because current interest rates are high. Don't forget before 2022, interest rates were below 2%

maybe bcoz my OA was vy little all the time lol

If i have few hundred K in OA and also few hundred K cash idling, yah then it make sense.

 

[asiafrenz]

How to buy t bills using SA? Currently when I bid for 6 months t bills via dbs online banking, seems like can use opt using OA.

As per their website: You may visit any DBS/POSB branch to submit your applications from the announcement date to 2 business days (before 10 am) before the auction date.

 

[highsulphur]

As per their website: You may visit any DBS/POSB branch to submit your applications from the announcement date to 2 business days (before 10 am) before the auction date.

I did this using OA. Don't recall there is an option to use SA.

Will check again when the next auction opens

 

[jywy2005]

I did this using OA. Don't recall there is an option to use SA.

Will check again when the next auction opens

If I remember correctly, need to go to the bank to fill up the forms in order to use SA for T-bills. I have only purchased T-bills Online for OA.

 

[vsvs24]

https://www.straitstimes.com/singap...special-accounts-up-slightly-in-final-quarter

https://www.cpf.gov.sg/member/infoh...irement-account-monies-until-31-december-2024

Finally announced ! 4.04% for SA and MA from Oct to Dec 2023

 

[Froggyman]

Once tbill purchased using OA mature, it will be returned to CPFIA. If you do not use it or refund manually, it will auto refund to OA after 1 or 2 mths. This is the norm. I have not come across anyone sharing what happens if they have balance in CPFIA at 55 birthday when RA is formed with less than FRS.

For UT purchased using SA, you need to sell the UT after RA is formed for it to be returned to SA.

With regards to closing of CPFIA-OA, assume I have the cash( after t bill maturity ) in the bank investment account, will this cash be able to go into bank saving account when the investment account is closed?
anyone has experienced this situation?

 

[philips107]

https://www.straitstimes.com/singap...special-accounts-up-slightly-in-final-quarter

https://www.cpf.gov.sg/member/infoh...irement-account-monies-until-31-december-2024

Finally announced ! 4.04% for SA and MA from Oct to Dec 2023

I was wondering why the RA is stuck at 4%, and found out that its reviewed annually, compared to SA & MA, which is reviewed quarterly.

https://www.cpf.gov.sg/member/growi...ng-higher-returns/earning-attractive-interest

SA/MA : 4.04% for the period from August 2022 to July 2023
RA : 3.47% for the period from November 2021 to October 2022 (upped to floor of 4%)

RA referenced rate is up to Oct 2022 as the rate was announced on 29 November 2022.
https://www.cpf.gov.sg/member/infoh...irement-account-monies-until-31-december-2024

While I understand the 4% applies to everything in RA, CPF explains that (refer to the 1st link provided above)

'Reviewed annually, this (RA) rate is computed based on the weighted average interest rate of all the investments that RA monies are put into. New savings credited to RA each year earn the 12-month average yield of 10YSGS plus 1% computed for the year' (subject to the current floor interest rate of 4% per annum)

so it looks like the 'weighted average interest rate of all the investments that RA monies are put into' (excluding the new savings credited to RA each year) is not more than 4%.

 

[dao]

that particular issue. Also, I'm not sure whether that specific bond fund you name is the best available option. Check the list. The "best" fund for these purposes invests in the shortest term investment grade Singapore dollar denominated bonds and won't have an ill timed dividend distribution. The fund's expense ratio really doesn't matter except as a tie breaker since you'll be holding it for such a short period.

Does Nikko AM Shenton Short Term Bond SGD has ill timed dividend distribution? If Nikko AM Shenton Short Term Bond SGD is not the best fund to use, could you advise any other better fund to have very little fluctuation?

 

[BBCWatcher]

Does Nikko AM Shenton Short Term Bond SGD has ill timed dividend distribution?

Any bond fund could. You just have to check the fund's dividend distribution date(s) to see whether there's any potential conflict with your brief holding period.

 

[philips110104]

Call up DBS, they told me that i need to visit the physical branch to buy Unit trust with CPF SA, online is only applicable to CPF OA account. Is there any ways to buy unit trust using CPF SA online? by opening some trading accounts? I did google, but seems not much info. TIA.