CPF SA Shielding hack - RIP (Obsolete)

[jywy2005]

sorry did I get it wrong that those who turn 55 this year, their SA accounts will not get closed, correct? only those who turn 55 next year will be affected by the new ruling? or are you saying that even those already 55 and older will be affected and all their SA accounts will be closed as well?


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If I understand correctly, those who turned 55 this year and those above 55, will have their SA accounts closed in 1 Jan 2025.

 

[chiokcc]

Wait for a year or two, when the SA closures have taken place, hopefully got more clarity going forward .....

I am not clear FRS -> ERS got substantial benefit for the time being ....

 

[fire]

You confused people

BBC post #1281, he said CPF RA earns 4.08% interest…..

Then you reply BBC at post #1283, You say “But the 4% interest it earns doesn't flow back to one's RA…..”

So initially you are implying the interest earned from RA doesn’t flow back to one’s RA lah

So you basically don’t understand from the beginning lah

After people came out to explain, then suddenly it become your understanding…

And to be clear to other readers, interest flow to the pool is not from RA, is from the annuity premium you paid lah.

The interest earned doesn't flow back to one's RA, it flow to the common pool. So what's confusing?

 

[fire]

You don’t be like parrot hor ….

People started to explain “…after 80…”. And then you also repeat “… after 80” ….

After 80 is from common pool, nota from RA what's parrot?

 

[KeytoFreedom]

one question: for those who turn 55 this year, is it still worth to shield the SA ? Since it is not clear when the SA will be closed, so meanwhile will still earn 4% interest, correct?


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[Nofear40]

I think

one question: for those who turn 55 this year, is it still worth to shield the SA ? Since it is not clear when the SA will be closed, so meanwhile will still earn 4% interest, correct?


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Jan 2025

 

[Nofear40]

For those above 55, will you top up RA to the new ERS or withdraw from OA to invest elsewhere

 

[fr33d0m]

From Standard to Basic can be around a 10% reduction in payout. Private annuities outside Singapore seem to reduce by around 12% for joint/survivor option, depending on the age.

Keep in mind, it is just an option — you can still choose “no partner” if you want the higher payment. How is that political suicide?

by option, may not be. There may not be meaningful application though, as the government puts more for people with lower balance.

 

[fr33d0m]

is there a info-diagram on how CPF life is being funded from 55 onwards for the 3 different plans?

plans only matter when you decide to get the payout.

You can defer the decision on the 3 plans just before payout, which can be as late as 70

 

[highsulphur]

plans only matter when you decide to get the payout.

You can defer the decision on the 3 plans just before payout, which can be as late as 70

I'm more curious about the funding of each plan

 

[fr33d0m]

I'm more curious about the funding of each plan

you decide how much you want to fund just before payout

you can withdraw all above FRS or BRS with property pledge before payout.

if you only have $50 in your RA account, you can choose any of the 3 plans with only $50.

 

[Guojing88]

one question: for those who turn 55 this year, is it still worth to shield the SA ? Since it is not clear when the SA will be closed, so meanwhile will still earn 4% interest, correct?


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It doesn't really matter whether you shield or not if you are turning 55 this year.

You don't see the benefit of compound interest anyway.

 

[polyglob]

For those above 55, will you top up RA to the new ERS or withdraw from OA to invest elsewhere

My RA is at FRS. As long as 6-mth t-bill is 3+% (maybe threshold at 3.2%?) I will continue to put OA there. Meanwhile, I'll take my time thinking about topping up RA when SA get closed.

Other than t-bills during last 2 years, I've never invested OA. Early years I used OA for housing. Afterwards I just let OA compound at 2.5%. My investments using cash have done well enough that I never felt the need to put OA into stocks.

On here and in some TG groups, it seems to be taken for granted that 2.5% for OA is lousy, and once SA is closed one should/must pump the formerly SA money into stocks for higher returns. Some idiot was saying SP500 would return 10-20% p.a. based on historical returns, so just hoot.

I suggest caution, especially for people 55 or older, especially for retirees, for various should-be-obvious reasons

 

[BBCWatcher]

My RA is at FRS. As long as 6-mth t-bill is 3+% (maybe threshold at 3.2%?) I will continue to put OA there. Meanwhile, I'll take my time thinking about topping up RA when SA get closed.

SA becomes OA in early 2025. If you’re putting OA dollars (such as a spouse’s) in your RA already it’ll be the same basic decision. OA earns 2.5%.

Depending on your terminal age assumption (95 to 105) you’d need to reliably generate 4.5% to 5.0% p.a. to avoid running out of savings at a CPF LIFE Standard Plan payout level. I think at least 4.5% is a more realistic “hurdle rate” for these purposes (incremental RA dollars).

Other than t-bills during last 2 years, I've never invested OA. Early years I used OA for housing. Afterwards I just let OA compound at 2.5%. My investments using cash have done well enough that I never felt the need to put OA into stocks.

I think this way of thinking is getting less appealing with this age 55+ SA closure. You won’t have the option to have a well funded RA *plus* SA from age 55+. RA (supersized) will be the only long-term CPF option. It always makes sense to put long-term dollars to harder work. It makes even more sense now, I think. And that long-term investment choice (or choices) can be (too?) conservative if you want, for example MBH.

On here and in some TG groups, it seems to be taken for granted that 2.5% for OA is lousy, and once SA is closed one should/must pump the formerly SA money into stocks for higher returns. Some idiot was saying SP500 would return 10-20% p.a. based on historical returns, so just hoot.

The first part is correct for long-term investments. Even the government tells you they’ve set OA’s rate to align with short-term vehicles. But even a “boring” investment grade bond fund (MBH) should run well ahead of OA’s 2.5% over the long term.

I suggest caution, especially for people 55 or older, especially for retirees, for various should-be-obvious reasons

But dragging too much cash at 2.5% (what OA is from age 55+) is the opposite of caution. Too low yields can be even more dangerous. It’s analogous to saying that you shouldn’t run the airplane engines at 88% on takeoff because 80% is safer for the engines. I guess you could make that argument (even though 88% and 80% are both way below safe rated engine output), but expeditiously gaining altitude and clearing terrain is quite important! Most people need a decent “climb rate” approaching and in retirement.

 

[Hot_Dog]

Now hit FRS, withdraw every cent and invest in other instruments already. Huat ah!

 

[artemov]

I wonder if the gahment's intent is to channel more money into RA, but has the opposite effect of people withdrawing funds, would they change the rules again?

Frankly my plan to do SA shielding has been foiled, so my rudimentary plan now is to withdraw all the excess. I'm sure I can do better than 2.5%.

 

[luei74]

I wonder if the gahment's intent is to channel more money into RA, but has the opposite effect of people withdrawing funds, would they change the rules again?

Frankly my plan to do SA shielding has been foiled, so my rudimentary plan now is to withdraw all the excess. I'm sure I can do better than 2.5%.

They need at least 5 -7 years (from 2024 or 2025) to get this data and study again, by the scholar

 

[iMac]

Yesterday go CNY house visit, already got 2 young nephews working as Financial Advisor telling me their company is getting ready to push out various ILP for "55 yr old uncle and aunty".

Anyone of you heard of the 20/80 investment? (eg you come out cash $200K and borrow $800K from Bank for the Financial Advisor to do investment (total $1 million) on your behalf)

 

[vsvs24]

I wonder if the gahment's intent is to channel more money into RA, but has the opposite effect of people withdrawing funds, would they change the rules again?

Frankly my plan to do SA shielding has been foiled, so my rudimentary plan now is to withdraw all the excess. I'm sure I can do better than 2.5%.

I also expect a lot of people to withdraw because their reasoning is cannot trust CPF as can change rules anytime. Some may say better withdraw now in case later govt change the withdrawal rules.

Trying to beat 4% on your own not easy. But 2.5% still manageable.

But don't expect govt to u-turn. They will think of other ways to force in more RA.

 

[BBCWatcher]

I wonder if the gahment's intent is to channel more money into RA, but has the opposite effect of people withdrawing funds, would they change the rules again?

I think it's a safe bet more funds will end up in RA. Some fortunate people will take advantage of the new, higher ERS (like my household). For other people the same withdrawal rules apply (RA at FRS, or at BRS with property pledge/charge), so I don't see how their RAs go down.

Also, for those that don't meet the RA "minimum" at age 55 the previous SA portion of compulsory contributions will now land in RA. Previously the CPF Board attempted a second "sweep" just before CPF LIFE payout start, but this new compulsory contribution stream into RA is every month and earlier, so that'll boost RA funding.

And the Matched Retirement Savings Scheme (MRSS) is being enhanced, so that'll boost RA funding too.

Really the only way RA funding would go down is if lots of people voluntarily shot themselves in their feet (financially) by doing less (with respect to their RAs) than they would have done with SAs from age 55 onward. It's hard for me to imagine there will be enough such people to matter in the aggregate.

Frankly my plan to do SA shielding has been foiled, so my rudimentary plan now is to withdraw all the excess. I'm sure I can do better than 2.5%.

But that would've been your plan for your OA dollars anyway, right? That is, you would've used the CPF Investment Scheme (OA) at least from age 55 onward to invest (and possibly withdraw) funds. And you would've drained all excess OA dollars (if you had any) as part of the shielding operation.

The only difference now is that you'll have that many more OA dollars since SA disappears from age 55 onward. And no withdrawal order complications. So you can push OA dollars to RA (with no cross-spousal OA transfer requirements) and/or invest those OA dollars. It's certainly simpler and cleaner this way, so I suppose that's partial compensation.