CPF SA

[Nofear40]

That article you posted, Nofear40, doesn't make a lot of sense to me. $2,190 of additional interest isn't anything to scoff at. And it's not ridiculous to assume zero withdrawals from CPF for quite some time. This maneuver (shielding) is performed at age 55. Work even another 5 years before withdrawing (i.e. retire at age 60) and that's over $11,000 of additional interest. (The interest compounds annually on the $2,190.) And that's assuming you start drawing down CPF from age 60, not other assets first.

Moreover, that's not the end of it. Shielding also lets you shift more OA dollars into RA, up to the Enhanced Retirement Sum. That's a very good deal, too.

AND the Full Retirement Sum and Enhanced Retirement Sum are increasing every year, and faster than inflation. Today's $2,190 is based on today's shielding amounts. This number is increasing faster than inflation, right along with the FRS/ERS. Next year it'll be bigger in real terms, so the real value of shielding is increasing.

AND the article talks about fees. There are no fees with SA shielding, not when you do it in any sensible way (use a zero fee platform). The author might be confusing SA shielding with the CPF Investment Scheme (OA). The only costs are the one or at most two months loss of CPF interest on the shielded amount and the slight risk of a small capital loss while the funds are inside the low volatility unit trust. (Although there's also a possibility of minor capital appreciation.)

BCC watcher, that is from ST. Think government trying to discourage SA shielding. But I will still go ahead if the opportunity still exits when it comes to my turn. 4% too hard to resist.

 

[homedriver]

That article you posted, Nofear40, doesn't make a lot of sense to me. $2,190 of additional interest isn't anything to scoff at. And it's not ridiculous to assume zero withdrawals from CPF for quite some time. This maneuver (shielding) is performed at age 55. Work even another 5 years before withdrawing (i.e. retire at age 60) and that's over $11,000 of additional interest. (The interest compounds annually on the $2,190.) And that's assuming you start drawing down CPF from age 60, not other assets first.

Moreover, that's not the end of it. Shielding also lets you shift more OA dollars into RA, up to the Enhanced Retirement Sum. That's a very good deal, too.

AND the Full Retirement Sum and Enhanced Retirement Sum are increasing every year, and faster than inflation. Today's $2,190 is based on today's shielding amounts. This number is increasing faster than inflation, right along with the FRS/ERS. Next year it'll be bigger in real terms, so the real value of shielding is increasing.

AND the article talks about fees. There are no fees with SA shielding, not when you do it in any sensible way (use a zero fee platform). The author might be confusing SA shielding with the CPF Investment Scheme (OA). The only costs are the one or at most two months loss of CPF interest on the shielded amount and the slight risk of a small capital loss while the funds are inside the low volatility unit trust. (Although there's also a possibility of minor capital appreciation.)

Yes, the article is misleading. If I have 200k in SA interest is 8K. If I’m withdraw 8K per year it wouldn’t affect my SA account at all. Can’t see any loss by shielding. Is there any propaganda behind the article ????

 

[a4973]

Yes, the article is misleading. If I have 200k in SA interest is 8K. If I’m withdraw 8K per year it wouldn’t affect my SA account at all. Can’t see any loss by shielding. Is there any propaganda behind the article ????

Seems like the writer is under the impression that the sequence of withdrawal is SA interest > SA principal > OA interest > OA principal.

 

[homedriver]

Based on my understanding from the article when we withdraw is always from SA first. Until SA is dry then from OA. But is still good to do shielding to leave more in SA. So not sure I understand wrongly or the article is not make sense at all.

 

[twosix]

Based on my understanding from the article when we withdraw is always from SA first. Until SA is dry then from OA. But is still good to do shielding to leave more in SA. So not sure I understand wrongly or the article is not make sense at all.

that's mine too... so i am a bit confused.

let's say i have earned interests of $10k in OA, $5k in SA, if I withdraw the $15k of interests, does it come all from SA balance first then OA or I can choose $10k from OA and $5k from SA?

 

[highsulphur]

that's mine too... so i am a bit confused.

let's say i have earned interests of $10k in OA, $5k in SA, if I withdraw the $15k of interests, does it come all from SA balance first then OA or I can choose $10k from OA and $5k from SA?

I think it's the former case. Everything comes from SA first

 

[twosix]

I think it's the former case. Everything comes from SA first

if so then the writer is correct. do SA shielding only if one does not intend to withdraw their CPF any time soon.

 

[hmyoth]

I think it's the former case. Everything comes from SA first

Sa interest, Oa interest, Sa then Oa.

 

[Nesplex]

From what I know, those who wish to use property pledge at age 55 (or later) to withdraw as much as possible of your CPF monies, do take note if you have been topping up your SA under RSTU scheme (whether cash or from your OA). The top-up amounts plus accrued interest will have to stay in your RA account, on top of the BRS. Hence you will only “get back” your top-ups from CPF Life payouts.

On the other hand, if you fully intend to retain FRS in your RA account, then this does not matter as there is no “obligation” to retain beyond FRS.

Anyone knows if a person who do Housing Refund to OA, say $100k, and then transfer the money over to own/spouse's SA, does these money get "locked" for the purpose of CPF Life payouts or can they be withdrawn after 55?

 

[Nofear40]

Anyone knows if a person who do Housing Refund to OA, say $100k, and then transfer the money over to own/spouse's SA, does these money get "locked" for the purpose of CPF Life payouts or can they be withdrawn after 55?

Depends on if you meet your FRS, or you pledging your property for BRS?

 

[Nesplex]

Depends on if you meet your FRS, or you pledging your property for BRS?

Say if the spouse is not working and is pledging for BRS, can the money above BRS be withdrawn at 55?

 

[Nofear40]

Say if the spouse is not working and is pledging for BRS, can the money above BRS be withdrawn at 55?

you can’t withdraw top ups for BSR

 

[BBCWatcher]

I don't think it makes much sense to repay OA dollars used for housing expressly for the purpose of transferring OA dollars to someone else's SA or RA. Why burn through any OA repayment opportunity unless there's some good reason to do so? You can already deposit cash into someone else's SA (up to the FRS) or RA (up to the ERS). Depending on how you perform the cash top up, and on the recipient's SA/RA balance, you or your recipient might qualify for some tax relief. What are you trying to accomplish?

 

[Suleyman]

if so then the writer is correct. do SA shielding only if one does not intend to withdraw their CPF any time soon.

Precisely, but what he fails to point out is that beyond the lump sum withdrawal at 55, generally most people do not withdraw from their CPF between the ages of 55 & 62 (or whatever age it is they retire) for their daily living expenses, because they are still working and drawing a salary. That's why people do SA shielding. Instead of earning 2.5% on the OA you are not withdrawing, why not have it in SA for the 4% interest?

But who knows. Maybe he's so rich that the 7 years of $2k+ (& the compounded interest) is insignificant, but hey, I'm not one to turn down free money... But then again, given that his idea of investment is 'contribute to CPF till it hurts, then contribute some more & never use it for anything until retirement!', I don't really put much store in the tripe he writes.

 

[Nesplex]

I don't think it makes much sense to repay OA dollars used for housing expressly for the purpose of transferring OA dollars to someone else's SA or RA. Why burn through any OA repayment opportunity unless there's some good reason to do so? You can already deposit cash into someone else's SA (up to the FRS) or RA (up to the ERS). Depending on how you perform the cash top up, and on the recipient's SA/RA balance, you or your recipient might qualify for some tax relief. What are you trying to accomplish?

Indeed, think RSTU would make more sense given that there is also tax relief. Thanks.

 

[karakorum1999]

Sa interest, Oa interest, Sa then Oa.

Yes, that is correct order.
There is supposed to be a sequence as follows when you request for CPF withdrawal, say in Aug 2021:
(A) SA interest from Jan-July 2021;
(B) OA interest from Jan- July 2021;
(C) Any contributions/refunds credited to SA in Aug 2021;
(D) Any contributions/refunds credited to OA in Aug 2021;
(E) SA balance;
(F) OA balance.

If correct, this is also a way to have earlier access to your SA/OA interests which would otherwise only be credited at year end.

 

[highsulphur]

Yes, that is correct order.
There is supposed to be a sequence as follows when you request for CPF withdrawal, say in Aug 2021:
(A) SA interest from Jan-July 2021;
(B) OA interest from Jan- July 2021;
(C) Any contributions/refunds credited to SA in Aug 2021;
(D) Any contributions/refunds credited to OA in Aug 2021;
(E) SA balance;
(F) OA balance.

If correct, this is also a way to have earlier access to your SA/OA interests which would otherwise only be credited at year end.

Didn't realise its so complicated

 

[zoneguard]

If correct, this is also a way to have earlier access to your SA/OA interests which would otherwise only be credited at year end.

So withdraw interest in months of Feb to Dec. Feb withdraw accrued interest of Jan, Mar withdraw interest of Feb. Every month except Jan withdraw previous month's accrued interest.

 

[karakorum1999]

So withdraw interest in months of Feb to Dec. Feb withdraw accrued interest of Jan, Mar withdraw interest of Feb. Every month except Jan withdraw previous month's accrued interest.

Bingo!
That’s what I plan to do for my SA at age 65.
Would want to let my SA principal accrue interests of 48% from age 55 to 65 (and later if I can afford to wait).

 

[Nofear40]

Yes, that is correct order.
There is supposed to be a sequence as follows when you request for CPF withdrawal, say in Aug 2021:
(A) SA interest from Jan-July 2021;
(B) OA interest from Jan- July 2021;
(C) Any contributions/refunds credited to SA in Aug 2021;
(D) Any contributions/refunds credited to OA in Aug 2021;
(E) SA balance;
(F) OA balance.

If correct, this is also a way to have earlier access to your SA/OA interests which would otherwise only be credited at year end.

So ST article is not correct?