CPF SA

[skpuppy]

Hi gurus, been studying this cpf SA-RA and CPF life for a while.. still quite noob at it - need some guidance:

Based on my own modest estimation and with the help of some web calculators floating around the internet, i should be able to hit ERS purely from my SA alone around 45 (i am in my early 30s now) and without any major cash top ups.

What i understood is that CPF life which starts at 65 (assuming it stays the same) will take the prevailing FRS/ERS amount from our RA as the "premium" right? And whatever amount left in my RA will stay in there, in which i could either opt to withdraw in full and etc. - is my understanding correct?

Let's say - at 55, the total monetary value of my OA+SA+MA less the ERS sum is around 800-900k, would it be possible for me to withdraw the monies in full?

Can you reach ERS in your SA? I thought usually if you reach FRS, there will be no more SA contribution and all will go into OA? I think you can’t withdraw from MA but OA possible if you have excess

 

[Okenba]

ERS is possible if you top up to FRS early and your contributions help to add to ERS. Note that MA overflow goes to OA as soon as you hit FRS and will no longer contribute to SA at that point.

Your RA is created at 55, and FRS amount will be pulled from SA > OA to fund it. If you want your RA to be topped up to ERS, you will need to initiate this yourself.

Payout is at 65-70, creation of RA and funding starts from 55.

After funding to FRS, excess SA and OA can be withdrawn. MA cannot.

 

[walsly]

ERS is possible if you top up to FRS early and your contributions help to add to ERS. Note that MA overflow goes to OA as soon as you hit FRS and will no longer contribute to SA at that point.

Your RA is created at 55, and FRS amount will be pulled from SA > OA to fund it. If you want your RA to be topped up to ERS, you will need to initiate this yourself.

Payout is at 65-70, creation of RA and funding starts from 55.

After funding to FRS, excess SA and OA can be withdrawn. MA cannot.

Thanks for the explanation. Again, if I were to summarize it, this means:
- the first milestone would be the FRS. once my MA+SA reaches FRS then there will not be any contribution to these 2 accounts from my monthly salary; however, the 4% interest will continue to roll
- for ERS, I have to manually top up my MA/SA earlier. The compound interests help to contribute towards that goal as well
- When I hit 55, RA will be created and by default the FRS amount will be pulled from my SA first. If there are insufficient, then they will pull from the OA as well. Altho we cannot touch MA, but its balance also play a part in the computation of FRS/ERS.
- Should I want to opt for an higher CPF LIFE payout, then I need to manually initiate to go for an ERS instead. Again, the same top up/"pull" rules apply.
- Assuming if I have excess leftover inside my SA or OA when I am 55 after the allocation for FRS/ERS, I can either choose to withdraw them in full, partially or in whatever manner I deem fit (assuming gahment don't change the rules then)
- Assuming I no longer am working by then and have finished paying off my mortgages, do i need to transfer all of the balance in my OA to my SA or RA for higher interest rates, or would the higher interest rates at >=55 be applicable to all accounts in my CPF?

 

[zoneguard]

- the first milestone would be the FRS. once my MA+SA reaches FRS then there will not be any contribution to these 2 accounts from my monthly salary; however, the 4% interest will continue to roll
- for ERS, I have to manually top up my MA/SA earlier. The compound interests help to contribute towards that goal as well
- When I hit 55, RA will be created and by default the FRS amount will be pulled from my SA first. If there are insufficient, then they will pull from the OA as well. Altho we cannot touch MA, but its balance also play a part in the computation of FRS/ERS.
- Should I want to opt for an higher CPF LIFE payout, then I need to manually initiate to go for an ERS instead. Again, the same top up/"pull" rules apply.
- Assuming if I have excess leftover inside my SA or OA when I am 55 after the allocation for FRS/ERS, I can either choose to withdraw them in full, partially or in whatever manner I deem fit (assuming gahment don't change the rules then)
- Assuming I no longer am working by then and have finished paying off my mortgages, do i need to transfer all of the balance in my OA to my SA or RA for higher interest rates, or would the higher interest rates at >=55 be applicable to all accounts in my CPF?

Point 1 is wrong, contributions from employment (and/or voluntary contributions) continue to flow into all 3 accounts at all ages, regardless of whether you have reached FRS. Only the allocation ratios change by age. And there's an annual limit of $37,740 for all contributions.

You cannot transfer monies from OA to SA once you have attained FRS and from OA to RA after 55 if ERS is attained. See this for examples. But ERS is raised every year.

Withdrawal/transfer sequence from SA/OA after 55 for the excess above FRS is always SA first followed by OA and there is no choice here. This applies for transfers from SA/OA to RA as well.

 

[henrylbh]

Let's say - at 55, the total monetary value of my OA+SA+MA less the ERS sum is around 800-900k, would it be possible for me to withdraw the monies in full?

If FRS (ERS is optional) in RA is met any time at or from 55, only SA and OA can be withdrawn in full.

RA cannot be withdrawn except for members turning age 65 from 2023 onwards, they can also withdraw up to 20% of their Retirement Account savings in a lump sum anytime from age 65 onwards.

RA above BRS can be withdrawn with property pledge.

 

[Okenba]

1) Before 55, FRS is only relevant for SA. Once SA hits FRS, you cannot top-up (w cash) or transfer (OA to SA). You will continue to receive CPF contributions to SA, as well as interest from SA. Interest from MA overflows to SA until you hit FRS, at which point it overflows to OA.

3) MA does not factor into FRS/ERS. After 55, FRS/ERS is only relevant for your RA. It does not affect anything about your OA/SA/MA. It affects your RA in the sense that ERS is the limit you can top-up to. FRS is the default they will draw into your RA and the limit you can receive tax relief for.

4) To top-up to ERS, you can use cash, or CPf. If CPF, it will be drawn from SA first, then OA. Your spouse can transfer their OA to top-up your RA.

5) Withdrawal is also bound by the SA>OA rule. Your withdrawals will come from SA first. You cannot choose to withdraw from OA first. (Except by shielding.)

6) Interest rates after 55:
OA: 2.5%; SA: 4%; MA: 4%;
RA: 4% (6% for 1st 30k, 5% for next 30k)
You cannot transfer from OA to SA. If you could, noone would care about shielding.

It is good to know the broad strokes of CPF, but minute details may no longer be relevant by the time you are 55. So IMO, no need to fuss too much about the details.

 

[skpuppy]

So meaning to say pump your SA to FRS first. Assuming your FRS is max out, ur job is done because the interest may help you roll it to ERS. If you continue working, even better because employee and employer will help to pump even more. Once your RA has ERS, you are more or less assured because you have $2000+ as baseline. Actually that is already good enough if you are zo bo lan at home.
Now, you can withdraw the rest and then pump it into a bond or some etf. If you already have another $1mil or so already in etf, then I think keeping in cpf is good since you can withdraw anytime.
Although I agree drawing out then investing in etf may get higher returns, I use it as a hedge against the market. At 65, u don’t want any mishap so best to keep some in cpf.

So, all and all:
(1) Draw down from ERS - $2000/ month (for ease of calculation)
(2) Draw down 4% yearly from your own investments of $1mil ($40k per year or $3,300 per month)
Total is $5,300 per month which is already damn sizeable. Lol! Some ppl I know only spend $3000 per month when they are earning like $12000 per month

All these are excluding your sum in OA and all those insurance investment you take back

 

[walsly]

this thread has been very enlightening. thank you all for sharing so much.
Just so i understood correctly (again), if my SA were to hit FRS and with that, there will no longer be any options for me to voluntarily increase the SA balance either by way of cash and/or OA top ups/transfers. So for the SA to hit the ERS threshold, then the dependencies for this condition are: the yearly compound interests + monthly contributions my salary.
So mathematically speaking, it is almost impossible for my SA to hit ERS at 55, if i were to only hit FRS at around 53-54, right?

 

[zoneguard]

So mathematically speaking, it is almost impossible for my SA to hit ERS at 55, if i were to only hit FRS at around 53-54, right?

ERS is always FRS/2 * 3.

Between 51 to 55, the allocation ratio to SA is higher compared to the earlier ages, so you can do voluntary contributions (up to $37,740 annual limit for all contributions) to push SA higher.

Side-note: overflow of contributions from MA to OA happens only if SA is at FRS and MA is at BHS.

 

[Okenba]

this thread has been very enlightening. thank you all for sharing so much.
Just so i understood correctly (again), if my SA were to hit FRS and with that, there will no longer be any options for me to voluntarily increase the SA balance either by way of cash and/or OA top ups/transfers. So for the SA to hit the ERS threshold, then the dependencies for this condition are: the yearly compound interests + monthly contributions my salary.
So mathematically speaking, it is almost impossible for my SA to hit ERS at 55, if i were to only hit FRS at around 53-54, right?

Yes.
It may be worth noting that there is nothing special about ERS before 55. It has no significance for CPF.

And since you can always top up to ERS post-55 using cash, the only reason to bother about pushing SA beyond FRS is if you are a conservative investor relying on CPF to grow most/all your money.

Otherwise, most conventional thinking is that investing will bring about higher returns than 4%. (To be fair, 4% risk free rate in the current landscape is amazing. But the landscape may not last and SA is locked up and unwieldy for investing.)

If CPF is the only vehicle you use to grow your wealth, maximising SA is a good way to do it.

But if you invest in the market, then even for OA, one might decide that it is better used for investment rather than to transfer directly to SA. (There are more options to invest OA as compared to SA.)

 

[skpuppy]

this thread has been very enlightening. thank you all for sharing so much.
Just so i understood correctly (again), if my SA were to hit FRS and with that, there will no longer be any options for me to voluntarily increase the SA balance either by way of cash and/or OA top ups/transfers. So for the SA to hit the ERS threshold, then the dependencies for this condition are: the yearly compound interests + monthly contributions my salary.
So mathematically speaking, it is almost impossible for my SA to hit ERS at 55, if i were to only hit FRS at around 53-54, right?

Don’t pump cash la. Just move ur OA to SA. Although we claim this is a retirement nest, the rule may change. Every month 20% into this pot already alright already. If you top up another $37,000 into this pot, don’t make sense unless your salary is super high till got nowhere to put.
Assuming if I am in your case, I would have top up from my OA to SA. Even if you want to buy a property, can take loan since it is dirt cheap @ 0.8% interest. If not, I would invest in some US/ UK funds which can give me higher returns. Like the VOO, VGT, ARKK or the UK Scottish Mortgage Investment Trust

 

[zoneguard]

The article mention that CPF Board post warning on its website. Anyone have the link ? Thanks

https://www.cpf.gov.sg/members/FAQ/...cpf/cpf-investment-schemes?ajfaqid=faq2186926
Q1

What happens when I sell my investments under the CPF Investment Scheme (CPFIS)?

You selected: CPFIS-SA?

When you sell your investments, the sales proceeds will automatically be credited into your SA.

We are aware that some members have been promoting the use of ‘SA Shielding’ by investing their SA savings shortly before age 55 with the intent of liquidating it after age 55 in order to retain more CPF savings in the SA to take advantage of its attractive interest rates.

Using ‘SA Shielding’ comes with a cost and investment risk to you – there may be transaction fees involved in using CPF for investment and you may lose all or a portion of the amount invested. Financial advisers and insurance brokers who promote ‘SA Shielding’ without highlighting these risks may be guilty of mis-selling, and anybody with knowledge of them should report them to the Monetary Authority of Singapore.

 

[walsly]

Yes.
It may be worth noting that there is nothing special about ERS before 55. It has no significance for CPF.

And since you can always top up to ERS post-55 using cash, the only reason to bother about pushing SA beyond FRS is if you are a conservative investor relying on CPF to grow most/all your money.

Otherwise, most conventional thinking is that investing will bring about higher returns than 4%. (To be fair, 4% risk free rate in the current landscape is amazing. But the landscape may not last and SA is locked up and unwieldy for investing.)

If CPF is the only vehicle you use to grow your wealth, maximising SA is a good way to do it.

But if you invest in the market, then even for OA, one might decide that it is better used for investment rather than to transfer directly to SA. (There are more options to invest OA as compared to SA.)

Indeed - But it is reassuring to know that I would have some form of steady income in my later years. I work in the banking industry and the general "retirement age" for folks in my specialization is around the late 50s.
I am currently single, and have plans to settle down soon (early 30s now) hopefully - so i am also sceptical about moving huge chunks of my OA over to SA at this juncture of my life. On the flip side, I am very likely to stick with a HDB nonetheless, so more or less can agar agar how much OA i roughly need to set aside assuming if my SO earns very little.
When it comes to investments, i am a rather conservative person. I've been DCA-ing into Roboadvisors around 1-1.5k every month. YTD returns have been ok so far with the exception of my StashA portfolio which is currently dragged down by its China tech lol.

I'm at the crossroad (perhaps a little bit late) pondering about my retirement strategies haha.

 

[Okenba]

For someone willing to look into investing, you may wish to look at investing your OA. As you are familiar with Robos, check out Endowus. There are some threads on this forum about them.

To build up SA, you can do a annual cash top up of 7k to also maximise tax relief. You can also top up MA if that is not at BHS of $63k. That also allows for tax relief, and MA interest helps build SA below FRS.

If you are conservative, read up more about passive index investing and see if that suits your risk level. Note that many Singaporeans are unintentionally conservative due to the amount we have in CPF.

You're still young honestly. I was 40 by the time I started. 15-20 years of lost time. Shrug. It is what it is. We do what we can here on.

Edit: Steady income is from CPF life, which you can use cash to top up. It is not a requirement to build up those monies in CPF itself. So CPF or not is really about your choice of vehicle based on your comfort level to invest.

 

[walsly]

For someone willing to look into investing, you may wish to look at investing your OA. As you are familiar with Robos, check out Endowus. There are some threads on this forum about them.

To build up SA, you can do a annual cash top up of 7k to also maximise tax relief. You can also top up MA if that is not at BHS of $63k. That also allows for tax relief, and MA interest helps build SA below FRS.

If you are conservative, read up more about passive index investing and see if that suits your risk level. Note that many Singaporeans are unintentionally conservative due to the amount we have in CPF.

You're still young honestly. I was 40 by the time I started. 15-20 years of lost time. Shrug. It is what it is. We do what we can here on.

Edit: Steady income is from CPF life, which you can use cash to top up. It is not a requirement to build up those monies in CPF itself. So CPF or not is really about your choice of vehicle based on your comfort level to invest.

Yes I am thinking of that too. Somewhere along the lines of $7k cash top up + moving some of my OA to my SA on an annual basis - accelerating the build up of my SA with a pace I am comfortable with.
I do have about 40K of my OA with endowus now since early this year, and the returns are quite ok from my perspective.
For passive index investing, would it be of any difference if I am already vested into various ETFs and index funds in my robo?

 

[Okenba]

For passive index investing, would it be of any difference if I am already vested into various ETFs and index funds in my robo?

Most robos in SG are not passive. They actively choose what ETFs to invest in. Tilting by sector or geography or both. Not so much market cap weighted, so in that sense not passive. When you buy their portfolios, you're essentially banking on their investing team or CIO to make the right picks. Especially since they revise portfolios every six months so even if you're happy with their portfolio now, it doesn't mean you will be in agreement six months later.

Most robos also invest in US etfs so you're also paying more through dividend taxes.

DIY allows you to buy a simple market cap weighted index and just accept market returns. Sure, you won't outperform the market, but you won't underperforming it either.

If you're set on Robos and don't want to DIY, I personally think Endowus DFA funds would be a good choice. They tilt to small value, so not quite passive, but they have a far longer history than some Robo CIO and more research backed decision making. (Fama and French factor model)

 

[skpuppy]

Most robos in SG are not passive. They actively choose what ETFs to invest in. Tilting by sector or geography or both. Not so much market cap weighted, so in that sense not passive. When you buy their portfolios, you're essentially banking on their investing team or CIO to make the right picks. Especially since they revise portfolios every six months so even if you're happy with their portfolio now, it doesn't mean you will be in agreement six months later.

Most robos also invest in US etfs so you're also paying more through dividend taxes.

DIY allows you to buy a simple market cap weighted index and just accept market returns. Sure, you won't outperform the market, but you won't underperforming it either.

If you're set on Robos and don't want to DIY, I personally think Endowus DFA funds would be a good choice. They tilt to small value, so not quite passive, but they have a far longer history than some Robo CIO and more research backed decision making. (Fama and French factor model)

Actually DBS digibank robo is good. They invest in uk etf. No need withholding tax

 

[reddevil0728]

Actually DBS digibank robo is good. They invest in uk etf. No need withholding tax

I don't think there is such thing as no withholding tax but rather it's baked in

 

[Okenba]

Actually DBS digibank robo is good. They invest in uk etf. No need withholding tax

15% instead of the 30% that goes to US ETFs. Downside to DBS is the 0.75% fee.

So when you include the ETF management fee, total fees probably work out on the higher side.
Personally, would still prefer Endowus.

 

[walsly]

hi Okenba, quick qns on cpf again:
At 55, my RA will be created and start pooling its funds first from my SA, then OA if it is insufficient. And between 55 and 65, I can continue to choose to top up my RA. is there a ceiling for the ra top ups? ERS or FRS limit?

Also, say at 65 where my CPF life payouts r set in stone, am i able to withdraw my RA balance thereafter without affecting the amt of the CPFL payout?