Cpf shield advice please

[garchua69]

Hi guys, I am turning 55 in 3 months time and is new to cpf shielding and would need some advice.
I am self employed and topped up my Medisave to $65000, SA $188000 (I shifted most of my OA here) OA just 300 plus in the last few years. I won’t be topping up anymore in the future.
In short is it possible to shield 50% of the SA and keep balance 50% RA (which will be the minimum sum) to be created when I turn 55. I am looking at the basic retirement sum ultimately (I have a HDB flat for pledge) and want to have the SA component as it have withdrawal flexibility as oppose to RA monthly payouts only

 

[BBCWatcher]

You can “shield” SA dollars to keep them from being moved to RA. But I suggest reflecting on what SA shielding actually accomplishes — and doesn’t accomplish.

Let’s suppose you don’t “shield” any SA dollars. On your 55th birthday the CPF Board funds your RA to the Full Retirement Sum. You then have the option to make lump sum withdrawals, and you can make a big one (equal to the BRS) if you make a property pledge or have a property charge. So this part doesn’t really change much. You can withdraw from either RA or SA if you wish. Whether the dollars move or not you can withdraw a lot of dollars.

There are a few differences remaining. One important difference is that shielding isn’t free. You lose at least one month of SA interest on the shielded amount. Another difference is that your RA withdrawal option ends when your CPF LIFE payouts start — at age 70 by default, earlier by option. (But by default the CPF Board will make another attempt to fund your RA to the FRS at that time.) And a third difference is that RA withdrawals will effectively reduce the maximum amount you can put into your RA if you ever want to head in the other direction, above the FRS.

For these reasons “shielding” is really most applicable to those who are going to fund their RAs to at least the FRS. That doesn’t mean you can’t shield SA when you’re aiming below the FRS, just that it’s less compelling. If for example you’re planning to withdraw the BRS from age 60 to 67 then start CPF LIFE payouts at age 68 I don’t know why you’d suffer the one month SA interest loss to do exactly the same thing, or at least very close to the same thing.

 

[BBCWatcher]

On the other hand if you’re going to fund your RA with some cash and/or a spouse’s OA dollars transferred into your RA then SA shielding is more compelling. Even if you’re going to fund your RA somewhere below the FRS, at least initially. And for the first $8,000 of cash you may win some tax relief.

 

[Value.Matrix]

Hi guys, I am turning 55 in 3 months time and is new to cpf shielding and would need some advice.
I am self employed and topped up my Medisave to $65000, SA $188000 (I shifted most of my OA here) OA just 300 plus in the last few years. I won’t be topping up anymore in the future.
In short is it possible to shield 50% of the SA and keep balance 50% RA (which will be the minimum sum) to be created when I turn 55. I am looking at the basic retirement sum ultimately (I have a HDB flat for pledge) and want to have the SA component as it have withdrawal flexibility as oppose to RA monthly payouts only

You can do 2 things.

1 shield SA till left 40k. Your RA will be created with just 40k + OA.

However? There will be a 2nd time where RA will try to pull as much money from SA/OA to RA. You can shield your SA the 2nd time.

So your total will be about BRS, (plus minus).

But I wouldn't do that as you can still pledge your house (if you are not selling it) as a backup so why not just fund to FRS like what BBCwatcher mentioned, and pledge only when you really need to draw the money out (before it funds the cpf life, else once it funds to cpf life, your money in RA is used to bought into cpf life and can no longer be drawn)

 

[BBCWatcher]

There will be a 2nd time where RA will try to pull as much money from SA/OA to RA. You can shield your SA the 2nd time.

It’s fair to mention that we don’t know if SA “shielding” will still be possible 10+ years from now. Also, shielding twice involves at least 2 months of lost SA interest (on the amounts shielded). Moreover, unless and until the RA is adequately funded there’s little or no SA liquidity. On top of all that, in this case there are still going to be some dollars flowing into RA at some point from compulsory self-employment contributions. When MA is at the Basic Healthcare Sum but RA isn’t adequately funded the MA contributions will spill over into RA. That one part (MA spillover) is potentially interesting at the margins, but is it interesting enough?

But I wouldn't do that as you can still pledge your house (if you are not selling it) as a backup so why not just fund to FRS like what BBCwatcher mentioned, and pledge only when you really need to draw the money out (before it funds the cpf life, else once it funds to cpf life, your money in RA is used to bought into cpf life and can no longer be drawn)

Yeah, if you’re interested in “shielding” SA it’s really because you want to fund your RA from other, lower interest earning sources (some combination of your own OA, a qualified family member’s OA, cash, MA spillovers that go into RA instead of OA). Not that you’re trying to avoid funding your RA since SA “shielding” doesn’t really help you do that in the end.

 

[fr33d0m]

Shielding does not apply to you. You can just let CPF sweep and pledge your property to withdraw from CPF RA.