CPF SA

[kickass22]

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.)

The ST Invest section articles by this author is getting bad to worst. This is just a personal opinion based on my reading. Most of the articles are about CPF and some the details are really not good advice if you look at his past articles based on my reading and perception.

Maybe I am not the target audience for his articles and it appeals to other people.

 

[kickass22]

Sa interest, Oa interest, Sa then Oa.

Appreciate if you could provide the reference on the CPF website for this?

I tried searching for it on google and CPF website and could find the details.

Thank you.

 

[karakorum1999]

So ST article is not correct?

Actually I think his arguments (or lack thereof, depending on your viewpoint) do not depend sensitively on the detailed correct order, except SA account will be exhausted before OA account (interest sequence is at most a second order effect).

I consider his article “rather atrocious”. Pretty unbalanced (F9 for me if graded as a GP essay). A bit “vomit blood”…

 

[Cobra!]

Not suppose to work this way. The excess cpf supposed to be refunded without interest, including employer contributions.

It means that for those years, my annual total mandatory CPF contributions from employment exceeded $37,740.

Main employer (employer 1) already provided me the maximum mandatory contributions of $37,740. This can be achieved by a monthly pay of $6,000 (or more) and a variable payment (usu. bonus, including AWS) of $30,000.

Suppose my employer 2 gives me monthly pay of $2,000, and no bonus. Then every month, I will get mandatory CPF contributions of $740 (37% of $2,000) for a total annual contribution of $8,880.

So my total mandatory CPF contributions for that year is $37,740 + $8,880 (=$46,620).

From another angle, normally if you have only 1 employer, your mandatory CPF contributions for a particular month arising from Ordinary Wages would be at most $2,220 (capped at $6,000x 0.37) even if your monthly pay far exceeds $6,000. However, in my case, the contributions from Ordinary Wages for each month was $2,960 ($2,220 from employer 1 & $740 from employer 2).

Hope this is sufficient to illustrate how it had worked for me.

I suppose this probably means that with 2 employers, the annual CPF limit of $37,740 becomes doubled, and the same rule applies for 3 or more employers, but I would not be able to vouch for those from my personal experience.

 

[BBCWatcher]

Not suppose to work this way. The excess cpf supposed to be refunded without interest, including employer contributions.

It’s not excess. If you have more than one employer then it’s possible for compulsory contributions to exceed $37,740 per year.

 

[Cobra!]

It’s not excess. If you have more than one employer then it’s possible for compulsory contributions to exceed $37,740 per year.

Ah it's on an employment basis. Learnt something thanks

 

[homedriver]

But if you withdraw cap within the SA interest earn still good to do shielding. Some more if you part the money longer you will earn more interest. So shielding still worth. If 200k capital in SA without touching, after 10 years you will earn extra 30k.

 

[karakorum1999]

But if you withdraw cap within the SA interest earn still good to do shielding. Some more if you part the money longer you will earn more interest. So shielding still worth. If 200k capital in SA without touching, after 10 years you will earn extra 30k.

Absolutely right!
(Due to compounding effect, the accumulated interest difference between OA and SA after 10 years is in fact 20% and not 15%.)

The monthly interest withdrawals from my SA (either starting 65, or even up to 70) will be my second retirement tap to supplement my CPF Life payouts. I estimated for me that this could be as high as $1,3xx - $1,6yy /month, not a bad addition to CPF life (esp. if latter maxed with prevailing ERS cap, if so desired).

 

[henrylbh]

Ah it's on an employment basis. Learnt something thanks

Many people don't know. It's info that I never divulge here. My salary was paid by 3 different but related companies

 

[Suleyman]

The ST Invest section articles by this author is getting bad to worst. This is just a personal opinion based on my reading. Most of the articles are about CPF and some the details are really not good advice if you look at his past articles based on my reading and perception.

Maybe I am not the target audience for his articles and it appeals to other people.

Like I said, his only position is 'put money in CPF until it hurts, then put some more! cos it will all work out!' & for quite sometime, all his articles have been about CPF. It could start out about something else, & end up as a note about how people are not contributing more to their CPF...

Otoh, today we have articles that swung the other way, with glowing reviews of robo-advisers, to the point that I'm beginning to suspect that OCBC paid for at least one of the articles...

 

[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.

 

[hmyoth]

Appreciate if you could provide the reference on the CPF website for this?

I tried searching for it on google and CPF website and could find the details.

Thank you.

I called the CPF hotline. The CS told me the sequence.

 

[henrylbh]

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.

Why cannot start Jan if the intention is to draw interest every month?

 

[iMac]

But if you withdraw cap within the SA interest earn still good to do shielding. Some more if you part the money longer you will earn more interest. So shielding still worth. If 200k capital in SA without touching, after 10 years you will earn extra 30k.

Bro, I though $200K compounded for 10 years in SA (4%) would be $296K ? How come you only $30K?

 

[karakorum1999]

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.

Congratulations! You have taken the most important step on 1 Jul by investing your SA maximally somewhere.
You just need to wait for your big day - 10 Jul, and monitor your CPF accounts to herald the creation of your RA and verify all amounts are as they should be.
Not sure what’s your concern for your Step 3 - it depends on you selling/redeeming your 1 Jul’s SA investments, so the exact date and amounts will vary (probably very slightly if you have chosen accordingly). You need not do it on 13 Jul - you can do it as early as just after RA has been created or as late as late Jul (as long as the funds get credited back to your SA by end Jul in order to be eligible for SA interest for Aug).
Step 4 can be done literally anytime after RA has been created.

 

[zoneguard]

Why cannot start Jan if the intention is to draw interest every month?

Can, forgot that Dec accrued interest isn't added to principal at end of year. So Jan withdraw Dec's interest. Every month got interest of previous month.

 

[dgeralds]

Congratulations! You have taken the most important step on 1 Jul by investing your SA maximally somewhere.
You just need to wait for your big day - 10 Jul, and monitor your CPF accounts to herald the creation of your RA and verify all amounts are as they should be.
Not sure what’s your concern for your Step 3 - it depends on you selling/redeeming your 1 Jul’s SA investments, so the exact date and amounts will vary (probably very slightly if you have chosen accordingly). You need not do it on 13 Jul - you can do it as early as just after RA has been created or as late as late Jul (as long as the funds get credited back to your SA by end Jul in order to be eligible for SA interest for Aug).
Step 4 can be done literally anytime after RA has been created.

Thank you.

In step 3, after deshield, im just worried, that 93K will auto flow from SA or OA to RA, since I choose ERS plan in CPF. I want to put 93K cash into RA (up to ERS) at a later date and not use OA or SA monies.

 

[karakorum1999]

Thank you.

In step 3, after deshield, im just worried, that 93K will auto flow from SA to RA, since I choose ERS plan in CPF. I want to put 93K cash into RA (up to ERS) at a later date and not use OA or SA monies.

Hi, as far as I know, nobody will be asked to choose ERS or not. So you may be .. a little misled.. by something?
CPF’s base requirement is FRS for retirement- that is why they need/will not ask for your permission when they create RA at age 55 and transfer up to FRS into the RA. If you leave the FRS in your RA alone, there is no provision for any other auto transfers by CPF.
The topping up from FRS to ERS (partly or fully) has to be done by you and you alone.

 

[dgeralds]

Hi, as far as I know, nobody will be asked to choose ERS or not. So you may be .. a little misled.. by something?
CPF’s base requirement is FRS for retirement- that is why they need/will not ask for your permission when they create RA at age 55 and transfer up to FRS into the RA. If you leave the FRS in your RA alone, there is no provision for any other auto transfers by CPF.
The topping up from FRS to ERS (partly or fully) has to be done by you and you alone.

Got it. Thank you.

 

[iMac]

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.

Congrat Bro....care to share what is your choice and platform for the shielding? Did you do any dry-run prior to the actual day?