CPF SA

[dork32]

If you watch the video, you will notice interest is only paid from age 55yo-65yo for the sum in your RA. After that, there is no more interest accrued. Take that into consideration, the interest in RA for most people living to age 80-85 is maybe only 2% annually.

if you watch the video properly, you will realize that the guy is tokking about standard. there is cpf life basic which earns substantial business.

this is wat i meant that certain articles are written very badly. they condemn one side but do not state the other alternative. i would not call this fake news because it is correct. i call it half truths.

 

[dork32]

If break even at 82 and you live to 85 means you earn liao.

that guy does not do maths. you should not believe the video. the break even is close to 88 if you compare with cpf life basic.

 

[dork32]

First of all, the basic idea of lifetime gifts is most sensible. You’re in the best, strongest position to give more and earlier when your lifestyle is reliably sufficient and stable for life.

However, there are a couple potential problems with large SA top ups specifically. One is that you may close off some tax relief opportunities they have (the $7,000/year top ups). There are also potential issues with how the MA portion of compulsory contributions behaves when SA “fills up” “too quickly.”

While I think SA is reasonably attractive at 4.0% interest, I don’t think it’s quite attractive enough for children, including young adult children, who have long time horizons. I think there are other, better investments available. However, to reiterate, the ability to be generous starts with being rock solid.

i will not top up my kid's cpf, though the reason is different from yours for the following reasons.

1. my cpf liquid at 55. my kid's cpf is dead at 25. why would i want to transfer mine to theirs? this is a value attached to liquidity. i would rather top up my ra to ers. and if i do not know what to do with the payout, i will use it to top up kid's ra. like wat bbc always say when he compares basic and standard, i will secure my own future first before taking care of my kids. but this is very different. if you choose standard, you will lose the interest to the pool. but if you choose ers and then basic, you will not be losing much interest to the pool.

2. Again on liquidity. it is at our thirties and forties that we need a lot of money. this is when we buy our car, hdb, bring up our kids. money at this stage is very important. at 55, i dont see myself buying anymore big ticket items or need cash for daily running. again i would go for ers, give my kids the monthly payout either as cash to help them run their household, or top up their sa with this cash.

3. did your parents ever top up your cpf? what is your cpf holdings now? what i am trying to say is that the cpf system is quite good. we would be able to accumulate substantial even with 0 top up as long as you hold on to a proper job. i am in my late 40s and i have 230k in my sa. i have never topped up before. though i will not grumble if the number is bigger, i feel that it is enough to hit frs or even ers. hence i do not feel that topping up will help a lot in reaching frs or ers.

when i bought my first property, interest rate was 4%. i borrowed like crazy to buy it. how i wished that i have 100k more so that i dont have to borrow so much then. when i bought my first and second car, i borrowed money at high interest rate to buy them. from my third car onwards, i pay all by cash with 0 car loan. seriously i was quite tight during that time and could make do with some spare cash.

of course, i have checked out ocs woodlands. he probably i has 2x what i have. he may be able to top up the kids cpf and at the same time help them with their expenses.

 

[dork32]

for FRS on standard plan is 82 years old to break even.

For ERS , will take longer then.

Sticking to BRS.

there is very little difference in terms of breakeven age, regardless of the three plan that you choose.

however, there would be difference if you choose to defer your payout.

 

[dork32]

like wat bbc always say when he compares basic and standard, i will secure my own future first before taking care of my kids. but this is very different. if you choose standard, you will lose the interest to the pool. but if you choose ers and then basic, you will not be losing much interest to the pool.

the other thing about comparing standard and basic is the difference is 100++ a month.

if you compare ers and brs, the difference is 1000+++ a month.

 

[dork32]

Thanks. Don't like her idea of temporary parking SA money in Nikko bond fund. Also read somewhere that fix deposit is not allowed for SA investment. I read Singapore government bonds is allowed. can somebody confirm?

can buy t-bills

 

[Kaypohji]

What’s the meaning of breakeven ?

there is very little difference in terms of breakeven age, regardless of the three plan that you choose.

however, there would be difference if you choose to defer your payout.

 

[dork32]

What’s the meaning of breakeven ?

i take breakeven as comparing it with the next better alternative, ie cpf life basic.

 

[Kaypohji]

cannot choose brs then the extra in RA being put in SA？

 

[dork32]

cannot choose brs then the extra in RA being put in SA？

this is one of the options that i have suggested. but you have to do shielding

 

[BBCWatcher]

cannot choose brs then the extra in RA being put in SA？

You could also shield both OA and SA, and you could fund your RA to the ERS. Why is a minimum 3.X%/year interest(*) bond-like vehicle (RA) a bad thing to avoid? It sure seems like a good thing to embrace. Unless you’re planning on not being at least reasonably well to do, but this forum is called Money Mind.

There’s way too much “poverty thinking” going on. Have you all noticed what market interest rates are?

(*) This is RA’s yield for an ERS top up on its very worst day — somewhere around 3.2% it looks like — assuming 4.0% base interest and if you’re striving for a “yield certain” result. Which you shouldn’t necessarily do, but that’s one offer available.

 

[Andrew833]

How to shield SA after 55?
The first 40k cannot be invested. Any withdrawal after 55 will come from this 40k in SA first.

From CPF:

Q. Can I continue to invest under the CPF Investment Schemes beyond age 55?

A. You can continue to invest even after age 55, as long as you have set aside your Full Retirement Sum (FRS) in the Retirement Account. The FRS can be set aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and property. In addition, you will not be able to invest the first $20,000 in your Ordinary Account and the first $40,000 in your Special Account.

https://www.cpf.gov.sg/members/FAQ/... to invest,Basic Retirement Sum) and property.

Yes, you are correct. OA 20K and SA 40K cannot touch.
Shield SA, so that SA 40K + OA ? = RA FRS.
What left example OA 100k, SA 0. Withdraw OA 100k/80k up to you.
After 55, unshield SA.

 

[Andrew833]

for some time, I was toying with ERS + basic plan as the best way to extract max benefit from CPFL in terms of payout AND bequest for my children..

recently I started thinking from another perspective...
There is no doubt that the SA interest rate is attractive and max juice should be squeezed out from there. unfortunately as all of us get older, we will have to suffer CPFL. So choosing the different combinations of retirement sums and payout plans is just to choose the least lousy plan...

But since I have children and like all normal parents, I intend to leave them an inheritance, why don't I leave them the inheritance in their CPF SA instead of the bequest portion of CPFL?

if I think this way, the correct strategy would be:
1) do SA shielding before 55.
2) put some OA money into RA - the min ie BRS.
3) Withdraw whatever bequest amount I have in mind for my children from the OA.
4) Put that withdrawn OA money into my children OA and then transfer to SA. by the time I am 55, my children will only be 25 and 23 yo. I am sure their SA would still have space to be topped up....

In this way, my "early bequest" to them is secure (they can't touch till they are 55, by then i should be either dead or about to die). and the best thing is that this "early bequest" actually grew at 4% pa unlike the bequest in CPFL which does NOT grow from 65 till I die..

as for my own CPFL, I will just go for BRS+basic...

what do you all think

I think you are doing LPPL.
Your "early bequest" can still keep in your SA.
By the time you are 55, you then decide to withdraw how much for your kids, either in cash (liquid) or deposit to CPF (illiquid).

 

[Andrew833]

I no scared minimum sum, but I scared withdrawal age increase.

Sent from . using GAGT

There are so many ppl kpkb on CPF so I don't think they will increase the withdrawal age. They just increase minimum sum, ppl already cannot tahan liao.

That's why, you should not put money in CPF. Unless for tax relief.
Always rem;
1) CPF 4% interest is very good but illiquid (can only withdraw at 55).
2) Your age, if 20-40, still too young to stuck your money in CPF.
3) After 40 years old, if you can afford to stuck your money in CPF for 15 years or less.

 

[dork32]

I think you are doing LPPL.
Your "early bequest" can still keep in your SA.
By the time you are 55, you then decide to withdraw how much for your kids, either in cash (liquid) or deposit to CPF (illiquid).

this is not what he is suggesting. he will want to keep his sa intact.

he will draw out his oa after shielding and use the oa to top up kids sa. the 2.5% is changed to 4 %. but he lost all the liquidity.

 

[BBCWatcher]

he will draw out his oa after shielding and use the oa to top up kids sa. the 2.5% is changed to 4 %. but he lost all the liquidity.

Most liquidity, not quite all. For example, if the children have MediSave Accounts at or above the Basic Healthcare Sum and Special Accounts at or above the Full Retirement Sum (circumstances that are more likely sooner the earlier their MAs and SAs rise), then their Ordinary Accounts are going to swell that much faster and sooner from compulsory contributions and be liquid for housing.

It's also possible the children are eligible for 5.0% interest (i.e. still in bonus interest territory), so the compensation for the liquidity reduction could be even greater.

I'm not a huge fan of topping up children's CPF accounts, even when they're very young adults, but I don't think it's a crazy idea.

 

[Andrew833]

this is not what he is suggesting. he will want to keep his sa intact.

he will draw out his oa after shielding and use the oa to top up kids sa. the 2.5% is changed to 4 %. but he lost all the liquidity.

Ops, I read wrongly
But problem still the same, liquidity is the main question.

 

[BBCWatcher]

But problem still the same, liquidity is the main question.

There's very significant compensation for the liquidity reduction, and sometimes the liquidity reduction is not a problem but instead a major advantage. Let's suppose for example you have a 20-something child who unfortunately has a gambling addiction. In that situation it's possible that the best financial gifts you could make would be CPF Special Account top ups (possibly MediSave as well).

 

[dork32]

There's very significant compensation for the liquidity reduction, and sometimes the liquidity reduction is not a problem but instead a major advantage. Let's suppose for example you have a 20-something child who unfortunately has a gambling addiction. In that situation it's possible that the best financial gifts you could make would be CPF Special Account top ups (possibly MediSave as well).

yes, the kid may have a gambling problem. he loses all his money. he borrow from ah long. he wanted the parents to help. parents say sorry all the money is in your sa, and tell the ah long to wait until kid is 55 before ah long can get money back. ah long chump the kid.

 

[Andrew833]

yes, the kid may have a gambling problem. he loses all his money. he borrow from ah long. he wanted the parents to help. parents say sorry all the money is in your sa, and tell the ah long to wait until kid is 55 before ah long can get money back. ah long chump the kid.

He didn't see, what we saw.
Always like to talk to himself, I just ignore