CPF SA

[Kaypohji]

I feel the rate at which FRS is raising is more than the inflation rate

Inflation of sg is quite low I think. I saw it was <1%

 

[BBCWatcher]

Can use scenario of FRS 300k?? That's about 18 to 20 years away

It’s the same scenario, just with different BRS/FRS/ERS levels, which are fairly arbitrary.

This is really quite simple. Let’s assume you have at least the Full Retirement Sum, whatever it is, in SA+OA funds on the cusp of your 55th birthday. On your 55th birthday your Retirement Account is created. If you do nothing, the CPF Board sweeps dollars from your SA then, if necessary, from your OA until your Retirement Account reaches the Full Retirement Sum. If, on the other hand, you shield both SA and OA as much as possible, only $40,000 with be drawn from your SA. ($20,000 of your OA goes into a large mortgage repayment. The property equity is not highly liquid, so here’s where you might have a little liquidity reduction when all is said and done. You don’t have to shield the last $20,000 of OA this way, however — it’s optional. And this $20,000 is either going into your RA or your home mortgage, take your pick.) If you don’t fund your RA with cash, then you have a SA+OA withdrawal restriction. That makes no sense since OA is earning only 2.5% interest. Those OA dollars are better to put in RA. So you can either at least decently fund your RA from OA (i.e. don’t shield OA) or fund your RA with cash. If you fund your RA with cash, the amount you can withdraw from SA+OA increases dollar for dollar. And even 2.5% interest on a liquid cash account is attractive these days, never mind 4.0%, so if that’s what you want (a liquid cash account), this is a great way to get it.

It all makes perfect sense. There’s no negative liquidity impact here, except for the $20,000 of final OA shielding as mentioned, which is optional and has to go into your RA if not your home mortgage anyway. You’re increasing RA with cash in order to increase, dollar for dollar, residual SA+OA funds available for withdrawal at any time. And since you’re earning higher interest than the bank pays, very quickly you end up with more liquidity because your SA+OA grows faster.

What’s not to like?

 

[BBCWatcher]

I feel the rate at which FRS is raising is more than the inflation rate

Inflation of sg is quite low I think. I saw it was <1%

It is, and that’s fine. Whatever the FRS is, that’s what the CPF Board will try to sweep from your SA then OA to fund your RA on your 55th birthday. Then the CPF Board will enforce a withdrawal restriction on residual SA+OA if your RA isn’t at least “decently” funded. Fund your new RA with cash to fill the gap to “decent,” and you increase the residual available for withdrawal, dollar for dollar. All sensible, all logical.

 

[BBCWatcher]

So let’s suppose you don’t have the cash rotting in a bank account at age 54.9, but you do have some private property equity you could tap, to take out a home equity loan at 2.0% interest let’s suppose. And let’s suppose you’re employed and could pay the home equity loan from future earned income, just to keep things simple. (Or perhaps rental income would cover it.) Would it make sense to fund your Retirement Account from the home equity loan? Yes it would! The 2.5% Ordinary Account interest surely beats the 2.0% loan interest rate, so you win.

“Crazy,” isn’t it? Not crazy — very, very smart.

 

[Andrew833]

Please don't put our hard earn money at risk. Just take the pay out, enjoy life. Go tracking or climb mountain overseas.

Halo, it's not our money! It's my money lol

 

[BBCWatcher]

OK, let’s pick another scenario: you’re age 53.9, and you’re trying to decide between rolling your 12 month fixed deposit over into a new 1.1% fixed deposit or to repay some OA (just to keep this comparison simple). OA pays 2.5%, and it’ll be available for withdrawal on your 55th birthday. Which should you choose? Probably OA. OA is still probably liquid for your mortgage, and it becomes fully liquid on your 55th birthday.

All of these examples are related to age 55+ CPF “piggybank engineering.” The rules change a lot on your 55th birthday, and you can do some very interesting things if you’re even slightly clever. However, it requires a shift in attitudes. You have to stop thinking that CPF is “locked,” and (putting it a little bluntly) you have to stop thinking like a pauper. You have some new games available to play, even approaching age 55.

 

[Andrew833]

Why the need to keep SA@ BRS when your RA is already at FRS?

And isn’t MA fixed at a specific limit for all? What BRS are u referring to?

Kinda confused by your replies. Pls enlighten me.

My mistake, MA should be fix at 60k not BRS.

If you read this thread, we are talking about the decision to have FRS or ERS in RA at 55.
I'm was thinking of having ERS in RA, but the money is lock.
So split ERS in RA into FRS in RA and BRS in SA. Money in SA after 55 is not lock. You can withdraw yearly interest similar to RA monthly payout at 65.

 

[henrylbh]

After 55 + 1week, my cpf should be;
OA 0
SA BRS ($90.5k for this year, will be more when I reach 55)
RA FRS (as above)
MA BRS (as above)

Not intend to keep too much in SA. Will use the money to invest in stock.

Why the need to keep SA@ BRS when your RA is already at FRS?

And isn’t MA fixed at a specific limit for all? What BRS are u referring to?

Kinda confused by your replies. Pls enlighten me.

It just his arithmetic plan or his dream. No need to try and understand him.

From 55, he planned to zero OA either by usage or by transfer to SA before 55 or auto transfer to RA at 55.

Then he wants half of FRS (which is the amount of BRS) to be in his SA, and that's possible by shielding the BRS amount of 90.5k before balance in SA (together with OA) move to RA at 55 to meet BRS with property charge.

Then he wants to ensure his MA to have half FRS? This one cannot choose. MA is fixed annually and is lower than BRS amount for the time being.

Why he plan that way, only he knows and no point guessing as there are others with other better plans

 

[dork32]

Halo, it's not our money! It's my money lol

you are so right. this is wat i have mentioned all the while. all of us have different needs and wants. the situation will be different for everyone.

you gather as much info as possible and make an informed choice.

 

[dork32]

am i missing something? i thought remaining OA 20k used for mortgage payment so how it end up back in OA again?

then i dont shield the oa lah. it is not very different.

 

[BBCWatcher]

I'm was thinking of having ERS in RA, but the money is lock.

That’s true (locked into CPF LIFE, i.e. higher retirement income fueled with 4.0% interest — certainly not a bad thing), but that’s not the same thing as saying your whole RA is locked. “It depends.”

My current thinking is that I want to end up with ERS RA (and with annual ERS boosts as the ERS increases), as much SA as possible/allowed, and for OA...well it’ll depend on general market interest rates and the investment climate. But it’ll still be possible to inject $37,740/year into OA+SA (mostly landing in OA, and assuming I keep MA pegged at the BHS which I expect), plus OA dollars used for housing (plus accrued interest), and that’s a lot of OA injection opportunity. So I don’t think I’ll be “shielding” OA when the time comes, but we’ll see.

 

[Andrew833]

It just his arithmetic plan or his dream. No need to try and understand him.

From 55, he planned to zero OA either by usage or by transfer to SA before 55 or auto transfer to RA at 55.

Then he wants half of FRS (which is the amount of BRS) to be in his SA, and that's possible by shielding the BRS amount of 90.5k before balance in SA (together with OA) move to RA at 55 to meet BRS with property charge.

Then he wants to ensure his MA to have half FRS? This one cannot choose. MA is fixed annually and is lower than BRS amount for the time being.

Why he plan that way, only he knows and no point guessing as there are others with other better plans

I not going to meet BRS with property charge.
In short after 55
OA 0
SA $90.5K
RA $181K
MA $60K

 

[highsulphur]

Isn't the whole point of shielding is for SA and not OA?

 

[dork32]

I not going to meet BRS with property charge.
In short after 55
OA 0
SA $90.5K
RA $181K
MA $60K

i really dont understand this ers thing. it is just a number set by the garmen which will provide you with $xxxx per month.

why is it that you must to stick to 90.5k? why not 120k or 80k? why do you trust our garmen so much with their calculations.

i do not believe 90.5k is an optimum number for most people.

many people choose ers because it is the max that they can go. they believe in cpf life so they pumped it to the max.

if you believe in sa, then you should pump it to the max. if you dont, let it drop to 0. a neither here nor there number does not makes sense

 

[dork32]

Isn't the whole point of shielding is for SA and not OA?

maple taught us that you can shield for both.

if you have spare cash on hand and would like to earn the 2.5% interest of oa, shielding could be one way for you to achieve.

 

[henrylbh]

I not going to meet BRS with property charge.
In short after 55
OA 0
SA $90.5K
RA $181K
MA $60K

Now you give different or clearer numbers. Now RA 181k instead of 'as above' meaning 90k? 181k in RA of course no need property charge.

 

[Andrew833]

i really dont understand this ers thing. it is just a number set by the garmen which will provide you with $xxxx per month.

why is it that you must to stick to 90.5k? why not 120k or 80k? why do you trust our garmen so much with their calculations.

i do not believe 90.5k is an optimum number for most people.

many people choose ers because it is the max that they can go. they believe in cpf life so they pumped it to the max.

if you believe in sa, then you should pump it to the max. if you dont, let it drop to 0. a neither here nor there number does not makes sense

I understand what you mean.
90.5k is just a example. BRS is just a guide on how much I should keep in SA , can be more.

I believe in SA 4% interest, but I don't intend to put all eggs in 1 basket.

 

[henrylbh]

My mistake, MA should be fix at 60k not BRS.

If you read this thread, we are talking about the decision to have FRS or ERS in RA at 55.
I'm was thinking of having ERS in RA, but the money is lock.
So split ERS in RA into FRS in RA and BRS in SA. Money in SA after 55 is not lock. You can withdraw yearly interest similar to RA monthly payout at 65.

Having BRS amount in SA and FRS amount in RA instead of ERS in RA has merit and it's up to individual to decide. Of course, the higher the SA the better, after RA is formed, and that's workable. For me, I go along with that

 

[highsulphur]

maple taught us that you can shield for both.

if you have spare cash on hand and would like to earn the 2.5% interest of oa, shielding could be one way for you to achieve.

Oh I must have missed that.

Shield both then top up RA with cash after RA is created? Is that how it works?

 

[yokine3a]

After I did shielding for SA & OA before 55, after 55, my CPF is eg :
OA $100K
SA $100K
RA $181K FRS
MA $60K

To make things simple, interest earned from SA is $100Kx4%/12=$333 per mth whilst OA is $100Kx2.5%/12=$208 per mth

Is it possible for me to withdraw every month just the earned interest ($333 + $208) from SA & OA without touching the capital from 56yo?