CPF SA

[dork32]

That sounds like a very workable strategy, and it is looking possible to literally reduce your OA to zero (esp. good for those already SA-shielded and no more employment contributions).
Of course, there’ll be differences between OA interest and home loan interest. So to get it as close as possible to zero balance for OA when the loan is fully paid, one could consider OA Housing Refund (to add) or withdrawing OA interest (to subtract, but this comes with SA interest withdrawn first).

i am aware that it is quite difficult to get it down to entirely 0. if i have a few hundred dollars left behind, so be it. when i die, my kids will spend it for me. i dont have ocd

i am also aware that i can use housing refund to top up my oa when it is not enuf to cover my installment

 

[karakorum1999]

i am aware that it is quite difficult to get it down to entirely 0. if i have a few hundred dollars left behind, so be it. when i die, my kids will spend it for me. i dont have ocd

i am also aware that i can use housing refund to top up my oa when it is not enuf to cover my installment

Yes, thanks for highlighting. I’ll be trying to do something similar but may not yet have such a large OA to match full home loan…

 

[Value.Matrix]

bbc taught us this. oa can still be used for housing loan even when ra is formed.

you got any other tricks?

Leave FRS, and use OA to top up spouse RA/SA until limit. Then really no more tricks liao except CPFIS account closure.

Or do property pledge, withdraw from RA, then top up your RA from spouse OA.

 

[BBCWatcher]

Or do property pledge, withdraw from RA, then top up your RA from spouse OA.

This doesn't really work if you want to peg your RA at or near the ERS. The ERS limit is calculated inclusive of the RA withdrawal. And if you're chasing CPF interest you want your RA pegged at the ERS.

 

[Value.Matrix]

This doesn't really work if you want to peg your RA at or near the ERS. The ERS limit is calculated inclusive of the RA withdrawal. And if you're chasing CPF interest you want your RA pegged at the ERS.

If you need to withdraw OA monies, you would be in a different position where immediate cash is more important.

But i do agree you may wish to peg it to ERS if you are rich.

 

[twosix]

When the ERS is raised -- the next increase is on January 1, 2022 -- you can swoop in with another top up if you wish. Every time the ERS is raised. For the next ERS increase same thing: top up on January 30 via PayNow QR. The ERS is calculated based on principal only, so you get more top up room every time the ERS rises.

I didn't know that can still top up RA to new ERS when it is revised upwards in the following years. haha...

 

[henrylbh]

2.5% is great and when 2.5% isn't good enough any more, the rules may have changed by then. So there's no need for this move right now.

EDIT: henrylbh let the cat out of the bag in the next post. Yes, that's what I had in mind.

Ha ha I mentioned that a few years ago, at least twice.

After getting the OA you want by closing CPFIA, you can later open another CPFIA and repeat the process.

 

[BBCWatcher]

Invest your OA, then closed it when you want the money. Then liquidate the investment and keep the cash. No need to shield SA as 40k will still be withdrawn first if you need money.

We're still assuming at least $20K has to remain behind in OA, correct? I don't think there's any exception to that rule, but if you've spotted one....

Isn't it possible to transfer the investments within a CPFIA "in kind" to another account (a brokerage account) once a member reaches age 55 and has set aside at least the Full Retirement Sum in his/her RA? I see a reference on DBS's Web site to this possibility.

 

[livingston]

Hi, some query for discussion

which condition will provide maximum return........

Case 1 -
monthly all OA transfer to SA, yet contribute 7k to the SA
this will make the SA achieve FRS soon.
once the FRS is full, unable to contribute 7k to the SA, so losing tax rebate...
say 7%? or 11.5% or 15%

Case 2 -
To delay the SA acheive FRS soon
not transfer monthly OA to SA, but contribute 7k to the SA
delay the SA to achieve FRS
save rebate for the TAX for 7k contribution.
lose OA to SA another 1.5% interest.

May i know which case provide max return?
transfer all monthly OA to SA or delay to tranfer.....

 

[BBCWatcher]

To answer this question you need some more information and a forecast model:

1. How long will the transfer dollars be held in SA (versus OA)?

2. What's the marginal tax bracket (and thus the tax relief amount)? How will your marginal tax bracket change? (Will you be in a higher tax bracket in the future?)

3. What are the dollars saved on income tax going to be doing? Parked in a 0.05% interest bank account, for example?

4. What are the alternative tax relief opportunities, if any, and how will they behave? (Notable examples: Supplementary Retirement Scheme, CPF MediSave Voluntary Contributions.)

5. Is there some other family member in the picture, perhaps with tax relief opportunities?

6. Do you care about being able to withdraw funds to drop your future CPF Retirement Account below the Full Retirement Sum? (SA top ups, plus accrued interest on those top ups, are not available for lump sum withdrawal and must stream out via CPF LIFE.)

7. Do you expect to "shield" Special Account dollars just before your RA is created on your 55th birthday? How do you value this shielding? (SA top ups can sometimes reduce the amount you're able to shield.)

8. (Exceptional case: ) Are you subject to some other tax jurisdiction, and will any income tax relief in Singapore be "clawed back" by that other tax authority?

9. How much do you value housing-related liquidity and the CPF Investment Scheme (OA)?

10. How much do you value the asset protection attributes of CPF against creditors and court judgments (via cash top ups into SA)?

11. Are you, or will you be, self-employed and thus able to make "all three account" CPF Voluntary Contributions with tax relief?

12. How will your compulsory contributions behave over time?

"It's complicated!"

 

[livingston]

make it simple,

assuming SA have 100K, OA = 0
assume tax rebate say 11.5% for 7k, which is 805 sgd per year.
assume the save 805 sgd have no other investment, just pure cash sit there.

if OA monthly is max 6k, contribution is 1260 to OA

do transfer to OA to SA more worth(earn extra 1.5%) ? or not transfer to SA but save 805 sgd per year more worth(losing 1.5% due to not transfer from OA to SA) ?

 

[henrylbh]

We're still assuming at least $20K has to remain behind in OA, correct? I don't think there's any exception to that rule, but if you've spotted one....

Isn't it possible to transfer the investments within a CPFIA "in kind" to another account (a brokerage account) once a member reaches age 55 and has set aside at least the Full Retirement Sum in his/her RA? I see a reference on DBS's Web site to this possibility.

There is no need to assume.

You can invest your CPF savings under the CPF investment Scheme (CPFIS) after setting aside $20,000 and $40,000 in your OA and SA respectively.

If you have come to a situation of needing the last 20k OA, it's also about time that you may need the SA, So not much play left

 

[henrylbh]

make it simple,

assuming SA have 100K, OA = 0
assume tax rebate say 11.5% for 7k, which is 805 sgd per year.
assume the save 805 sgd have no other investment, just pure cash sit there.

if OA monthly is max 6k, contribution is 1260 to OA

do transfer to OA to SA more worth(earn extra 1.5%) ? or not transfer to SA but save 805 sgd per year more worth(losing 1.5% due to not transfer from OA to SA) ?

If you want it simple, just top up SA annually as well as transfer OA to SA monthly as SA still has more than a few years to the ever increasing FRS.

 

[karakorum1999]

make it simple,

assuming SA have 100K, OA = 0
assume tax rebate say 11.5% for 7k, which is 805 sgd per year.
assume the save 805 sgd have no other investment, just pure cash sit there.

if OA monthly is max 6k, contribution is 1260 to OA

do transfer to OA to SA more worth(earn extra 1.5%) ? or not transfer to SA but save 805 sgd per year more worth(losing 1.5% due to not transfer from OA to SA) ?

It’s a bit difficult for us to do detailed calculations for you as there’re still several variables/assumptions. But it’s clear that you wish your SA to hit FRS but also maximising financial aspect in some way.

All I can say:
(1) If you only use OA to transfer $7k per year to your SA, then this option loses as the 1.5% additional interest cannot beat the tax savings from using $7k cash instead.

(2)However, assuming you want to hit FRS asap, you can/should transfer all your OA contributions ($21,420 per year assuming you hit Annual Limit and seeing your OA allocation is 21%) to SA. And you will then hit FRS in about 4 years (a bit more due to increasing FRS annually) compared to pure cash option taking around 12 years. The former option means your SA will accumulate more interest, and could conceivably win over the latter option in some way - but for sure, the former will land you with a larger SA at age 55 (beneficial if doing shielding).

(3) The two options (and hybrids in between) have differing liquidity - you want more $$ in your OA or more cash at hand - something only you can answer based on your needs and forecasted expenditure.

(4) If you can afford it, why not do both, as suggested by an earlier post? You can hit FRS in 3 years. This makes sense as long as what you want is a big fat SA at age 55.

Otherwise, just make decisions in phases..

 

[fr33d0m]

If your tax bracket is 15% for the 7K, I guess, any difference should not be worth of your braincells to calculate it.

 

[livingston]

thanks for the reply, below is some simple assumption.......not sure correct or not..........just want to know compare top up early SA versus tax rebate.........which 1 is more worth..........

	case 1				Case 2
		SA	100000​			SA	100000​
	year 1 - contribute 420x12 + 7k tax rebate+ base 4 % interest		116040​		year 1 - contribute 420x12 + 7k tax rebate+ base 4 % interest + OA transfer to SA 1260x12		131160​
	year 2 - contribute 420x12 + 7k tax rebate+ base 4 % interest		132721.6​		year 2 - contribute 420x12 + 7k tax rebate+ base 4 % interest + OA transfer to SA 1260x12		163566.4​
	year 3 - contribute 420x12 + 7k tax rebate+ base 4 % interest		150070.5​		year 3 - contribute 420x12 + 7k tax rebate+ base 4 % interest + OA transfer to SA 1260x12		197269.1​
	year 4 - contribute 420x12 + 7k tax rebate+ base 4 % interest		168113.3​		year 4 - contribute 420x12 + 7k tax rebate+ base 4 % interest + OA transfer to SA 1260x12		232319.8​
	year 5 - contribute 420x12 + 7k tax rebate+ base 4 % interest		186877.8​
	year 6 - contribute 420x12 + 7k tax rebate+ base 4 % interest		206392.9​		assume 3 year for easy calculation
	Case 1				case 2
gain	11.5% tax rebate from 7k, gain 805 for 6 year	=	4830​		11.5% tax rebate from 7k, gain 805 for 3 year	=	2415​
					lose 3 year for tax because 11.5% tax for 7k	=	-2415​
					additional 1.5% interest from 1260x12x3 year x 1.5%	=	2041​
	conclussion, it seem prevent OA flow to SA, can have better gain for 6 year period of time?
	if for the duration sketch to longer? Is it still the case? It seem complicate math…...

 

[karakorum1999]

Earlier I forgot to include your SA contributions from employment.

your case calculations have neglected the fact that you’re not allowed to top up SA beyond FRS (whether from cash or OA).

 

[dgeralds]

Hi All - I need some urgent guidance:

1. Did a shielding on 1 Jul:
Shielding 238K
OA 270K
SA 40K


2. 10 Jul - 55 years old
- RA will be created by CPF Borad
- RA 186K (FRS) [ i.e. 40K from SA and 146K from OA will be automatically moved to RA]
- OA 124K
- SA 0K

3. 13 Jul
- deshield
- RA 186K
- SA 238K
- OA 124K

4. around 15 Aug
- RA 279 (Put cash 93K into RA to bring it up to ERS)
- SA 238K
- OA 124K

Is step 3 right (i.e. SA is 238K).
Is step 4 allowed (i.e. after a month gap I'm putting cash 93K into RA)? I don't want to transfer 93K from OA which is 124K. For info, I will have the 93K cash only in Aug.

Please advice. Thank you.

Hi All - I have another query on the above.

In step 4, if I don't have 93K cash, can I transfer 93K from OA to RA without touching SA 238K? Or should I should I transfer 93K from OA to RA in step 2 (i.e. before deshield?).

Thank you.

 

[Value.Matrix]

Hi All - I have another query on the above.

In step 4, if I don't have 93K cash, can I transfer 93K from OA to RA without touching SA 238K?

Thank you.

Yes you can. Its automatic. Or initiate OA/SA to top up to RA (but keep the shielding first so SA is protected) and it can go up to ERS.

 

[iMac]

4. around 15 Aug
- RA 279 (Put cash 93K into RA to bring it up to ERS)
- SA 238K
- OA 124K

In Step 4, if TS choose to top up RA...with $OA instead of $cash.

He have to shield his $SA again? And first $40K in SA cannot be shield, right?