cpf Special account shielding

[zoneguard]

This is not a great outcome because OA is only earning 2.5%, and the rest of the $495K is illiquid. The CPF Board will attempt another "sweep" just before CPF LIFE payout start. That can be as late as age 70, so there's up to 15 years of loss of RA interest in the meantime. It would most likely be better to skip OA shielding in this example, to allow your RA to be funded up to the Full Retirement Sum. You would then have $368K of SA/OA liquidity and a Retirement Account earning 4% on another $132K. (I'm using the 2022 Full Retirement Sum of $192K.) You can still withdraw as much as $96K (BRS) from RA with a property pledge/charge any time before payout start for even more liquidity if you need it.

As this example illustrates, the reason you would shield OA is so that you could swoop in an add lots of cash to your new RA — even to push it all the way up to the Enhanced Retirement Sum.

If I am reading this correctly, you are saying this:

Yes, it is possible to do cash top-up to a RA funded with 60K before the 2nd sweep of SA/OA to RA occurs and before LIFE payout starts. This will enable the withdrawal eligibility from SA/OA as previously RA was not funded to BRS/FRS level at 55 due to the SA/OA shielding.

Please confirm.

 

[BBCWatcher]

Yes, it is possible to do cash top-up to a RA funded with 60K before the 2nd sweep of SA/OA to RA occurs and before LIFE payout starts. This will enable the withdrawal eligibility from SA/OA as previously RA was not funded to BRS/FRS level at 55 due to the SA/OA shielding.

That's correct. Once your RA reaches your Full Retirement Sum -- and yes, cash top ups to RA certainly work -- then any remaining funds in your SA and OA are available for lump sum withdrawal(s). And this is precisely the sort of scenario when "double shielding" (shielding both SA and OA just prior to your 55th birthday) makes sense: to allow you to inject a substantial amount of cash into your new RA. (Or possibly to allow a larger incoming OA to RA transfer from a family member.)

 

[decibel.]

Hi, at 55, if I do both of SA and OA shielding which leave RA very low balance (probably < BRS).

Say RA=60k, OA=300k, SA=200k after lowering the shield.

In this case, CPFB will not allow any withdrawal from SA and OA right? Because RA<60k, unless we do a (manual) RSTU cash topup or OA ->RA transfer.. to BRS (and property plesge) or to FRS. Then we can withdraw from SA and OA. Is this understanding correct?

Why need to shield OA too? I thought go up to ERS is better? So if shield SA then ERS all come from OA the balance will probably get stuck in OA but SA will be free to withdraw first right?

 

[Value.Matrix]

Why need to shield OA too? I thought go up to ERS is better? So if shield SA then ERS all come from OA the balance will probably get stuck in OA but SA will be free to withdraw first right?

Some people just have too much cash. They want to earn more interest, whether it is 2.5% or 4%.

For people with limited resources, we would as much money to earn 4% interest as possible.

 

[decibel.]

Some people just have too much cash. They want to earn more interest, whether it is 2.5% or 4%.

For people with limited resources, we would as much money to earn 4% interest as possible.

But you see. If e.g. 500k SA and 500k OA, shield all SA, then FRS from OA will be taken to RA. Then can withdraw starting from SA then OA balance. If shield OA then keep money in OA how to withdraw? Might as well move to RA still get 4%?

 

[BBCWatcher]

The 2022 Enhanced Retirement Sum is $288,000. One possible choice is the following:

1. "Shield" all SA except the minimum $40,000 that cannot be shielded.
2. "Shield" all OA except the minimum $20,000 that cannot be shielded.
3. On your 55th birthday your RA is created and funded at $60,000 (from SA and OA).
4. Deposit $228,000 of cash into your new RA. (And/or receive a transfer into your RA from a family member's OA.)
5. Drop the shields.

The order for #4 and #5 is not critical. Then you end up with a nicely funded Retirement Account and lots of dollars in SA and OA, all liquid.

As Value.Matrix mentioned there are some people who are sitting on piles of cash earning scant bank interest. They'd almost certainly be financially better off performing the maneuver I describe.

 

[vsvs24]

But you see. If e.g. 500k SA and 500k OA, shield all SA, then FRS from OA will be taken to RA. Then can withdraw starting from SA then OA balance. If shield OA then keep money in OA how to withdraw? Might as well move to RA still get 4%?

For me, I want to be able to withdraw whenever needed. So won't want to move to RA more than FRS because it gets locked up with first chance of draw down at 65.

Shield SA, after RA created can draw some spending money from OA before unlock SA shield.

Withdrawal sequence is SA interest, then OA interest, then SA contribution for the month of withdrawal, then OA contribution for the month of withdrawal , then SA balance, then OA balance.

After 55, end of each year can withdraw just the interest for spending if needed, keeping OA and SA capital intact.

If really really need money, then withdraw more which will come from SA.

OA balance can use for investments. Can close CPFIS account and liquidate or transfer the investments if need liquidity hence keeping SA balance intact.

I see a lot of people keen to have more in RA to earn the 4%. I don't know if I will live till 65. I don't want to be in a situation where I need cash due to unforseen circumstances before 65 and money locked in RA.

So I will be happy to have more money in OA and SA for me to draw down when needed.

活在当下。

 

[decibel.]

The 2022 Enhanced Retirement Sum is $288,000. One possible choice is the following:

1. "Shield" all SA except the minimum $40,000 that cannot be shielded.
2. "Shield" all OA except the minimum $20,000 that cannot be shielded.
3. On your 55th birthday your RA is created and funded at $60,000 (from SA and OA).
4. Deposit $228,000 of cash into your new RA. (And/or receive a transfer into your RA from a family member's OA.)
5. Drop the shields.

The order for #4 and #5 is not critical. Then you end up with a nicely funded Retirement Account and lots of dollars in SA and OA, all liquid.

As Value.Matrix mentioned there are some people who are sitting on piles of cash earning scant bank interest. They'd almost certainly be financially better off performing the maneuver I describe.

How about leaving exactly $288k in OA? Then RA will take $40k and whatever left from OA to reach FRS and then use OA to top up RA? Does that work or can only use cash to top up?

 

[decibel.]

For me, I want to be able to withdraw whenever needed. So won't want to move to RA more than FRS because it gets locked up with first chance of draw down at 65.

Shield SA, after RA created can draw some spending money from OA before unlock SA shield.

Withdrawal sequence is SA interest, then OA interest, then SA contribution for the month of withdrawal, then OA contribution for the month of withdrawal , then SA balance, then OA balance.

After 55, end of each year can withdraw just the interest for spending if needed, keeping OA and SA capital intact.

If really really need money, then withdraw more which will come from SA.

OA balance can use for investments. Can close CPFIS account and liquidate or transfer the investments if need liquidity hence keeping SA balance intact.

I see a lot of people keen to have more in RA to earn the 4%. I don't know if I will live till 65. I don't want to be in a situation where I need cash due to unforseen circumstances before 65 and money locked in RA.

So I will be happy to have more money in OA and SA for me to draw down when needed.

活在当下。

How to withdraw from OA if SA is like close to $1M and can only withdraw from SA balance before touching OA? Do you mean if shield SA, can straight withdraw from OA balance? By that time when RA is setup no need keep $40k in SA already is it?

 

[vsvs24]

How to withdraw from OA if SA is like close to $1M and can only withdraw from SA balance before touching OA? Do you mean if shield SA, can straight withdraw from OA balance? By that time when RA is setup no need keep $40k in SA already is it?

When you shield SA, at 55 RA is created with 40k from SA amount that cannot shield) and 152k from OA. Once RA is created, you can than withdraw any amount you need from OA balance. At this point SA balance is 0. You can also transfer any amount from OA to RA upto ERS if you wish.

After these are done, then unshield SA. Once this is done, have to be careful about withdrawal in future because now SA is not zero and withdrawal will be in the sequence I mentioned in the above post.

But really, while we try to preserve SA as much as possible, if need to spend just spend. Don't end up so thrifty on yourself and the $1m SA bring to the grave.

 

[BBCWatcher]

For me, I want to be able to withdraw whenever needed. So won't want to move to RA more than FRS because it gets locked up with first chance of draw down at 65.

My understanding is that if you make a property pledge (or have a property charge) you maintain as much as a BRS level lump sum withdrawal option even when your RA is funded to the ERS. Plus of course you have all SA and OA liquidity, including any/all incoming dollars into those accounts.

As a frequent reminder from me, you only need adequate liquidity. Maintaining excessive liquidity will usually mean you're poorer than otherwise.

How about leaving exactly $288k in OA? Then RA will take $40k and whatever left from OA to reach FRS and then use OA to top up RA? Does that work or can only use cash to top up?

You don't have to "shield" your OA at all if your intention is to fund your RA on your 55th birthday primarily from your OA (except for the $40,000 you must leave in SA).

 

[decibel.]

When you shield SA, at 55 RA is created with 40k from SA amount that cannot shield) and 152k from OA. Once RA is created, you can than withdraw any amount you need from OA balance. At this point SA balance is 0. You can also transfer any amount from OA to RA upto ERS if you wish.

After these are done, then unshield SA. Once this is done, have to be careful about withdrawal in future because now SA is not zero and withdrawal will be in the sequence I mentioned in the above post.

But really, while we try to preserve SA as much as possible, if need to spend just spend. Don't end up so thrifty on yourself and the $1m SA bring to the grave.

Oh nice I didn't know can shield SA then withdraw OA. Like that technically I can just use OA to top up RA to ERS then balance all withdraw to cash from OA, then unshield SA right?

Like that SA like bank account 4% while RA gives monthly $2k, OA $0 but withdrawn to cash I can either invest or spend right?

 

[decibel.]

My understanding is that if you make a property pledge (or have a property charge) you maintain as much as a BRS level lump sum withdrawal option even when your RA is funded to the ERS. Plus of course you have all SA and OA liquidity, including any/all incoming dollars into those accounts.

As a frequent reminder from me, you only need adequate liquidity. Maintaining excessive liquidity will usually mean you're poorer than otherwise.

You don't have to "shield" your OA at all if your intention is to fund your RA on your 55th birthday primarily from your OA (except for the $40,000 you must leave in SA).

Ok so essentially the OA/SA is just like high interest bank account after using OA to top RA up to ERS.

I think not bad since ERS gives like $2k monthly and probably can withdraw $2k from SA every month to spend not bad already. Then OA use for investment. I have SRS should be able to get about $2-$3k per month too without tax. Like this total about $7k per month should be good enough for retirement I think.

So ERS payout on 65 years old is pay until balance $0? E.g. if $288k ad $2k monthly so only pay for 12 years and that's it?

 

[BBCWatcher]

So ERS payout on 65 years old is pay until balance $0? E.g. if $288k ad $2k monthly so only pay for 12 years and that's it?

If you're born in 1958 or later you'll be on a CPF LIFE payout plan, and that's monthly income for life.

You're not required to start CPF LIFE payouts at age 65. Indeed, that's not the default. You can start payouts as late as age 70, the default.

 

[decibel.]

If you're born in 1958 or later you'll be on a CPF LIFE payout plan, and that's monthly income for life.

You're not required to start CPF LIFE payouts at age 65. Indeed, that's not the default. You can start payouts as late as age 70, the default.

I belong to this category. How that works? So as long as I top up to ERS, I get min $2k/mth for life?

 

[swathe]

If you already hit FRS, then no shielding is needed?

 

[vsvs24]

Oh nice I didn't know can shield SA then withdraw OA. Like that technically I can just use OA to top up RA to ERS then balance all withdraw to cash from OA, then unshield SA right?

Like that SA like bank account 4% while RA gives monthly $2k, OA $0 but withdrawn to cash I can either invest or spend right?

Withdraw all OA before unshield SA. You can. But does not mean that you should.

Depends if you have better use of OA money in cash and how much you have in SA. Don't withdraw all OA just because you don't want to deplete SA first.

At age 55, you should not go too aggressive in investment. You don't have the long horizon to hold and weather when markets drop badly.

Have to think carefully what are you going to do with so much cash if withdraw all OA and can you get 2.5% or more.

 

[decibel.]

Withdraw all OA before unshield SA. You can. But does not mean that you should.

Depends if you have better use of OA money in cash and how much you have in SA. Don't withdraw all OA just because you don't want to deplete SA first.

At age 55, you should not go too aggressive in investment. You don't have the long horizon to hold and weather when markets drop badly.

Have to think carefully what are you going to do with so much cash if withdraw all OA and can you get 2.5% or more.

Oh yeah you're right I forgot about age lol.

Need to see when I'm 55 what are the market trends. But if put in those IWDA kind of ETF should be better than 2.5%?

 

[BBCWatcher]

At age 55, you should not go too aggressive in investment. You don't have the long horizon to hold and weather when markets drop badly.

You have the investment time horizon of a 55 year old. However, there's no requirement that you must keep these dollars. You're certainly free to hand them to someone else, such as a child, who has a longer investment time horizon.

But if put in those IWDA kind of ETF should be better than 2.5%?

There's no guarantee. (And the 2.5% interest rate isn't strictly guaranteed either.) However, at age 55 it wouldn't be surprising if your overall investment portfolio consists of about 60% stocks and 40% bonds/bond-likes. If (for example) that's your desired allocation at that age but you're "overweight" bond/bond-likes then you'd have an opportunity to rebalance.

 

[decibel.]

You have the investment time horizon of a 55 year old. However, there's no requirement that you must keep these dollars. You're certainly free to hand them to someone else, such as a child, who has a longer investment time horizon.

There's no guarantee. (And the 2.5% interest rate isn't strictly guaranteed either.) However, at age 55 it wouldn't be surprising if your overall investment portfolio consists of about 60% stocks and 40% bonds/bond-likes. If (for example) that's your desired allocation at that age but you're "overweight" bond/bond-likes then you'd have an opportunity to rebalance.

What would you recommend to do with OA balance if one has ERS in RA, 680k in SA, 400k in SRS, 500k in World ETF? Should one keep 100% balance in OA enjoy 2.5% guaranteed or withdraw in cash to get more bonds, or something else?