Does HDB wipe the minimum OA amount?

[starfish.starfish]

i see quite a lot of people talk about the extra 1% interest... keeping 20k in OA just to earn that interest. Do you know that:
---
CPF FAQ:
How is my CPF interest computed and credited into my accounts?

A: (edited for brevity)
An extra 1% interest per annum will also be paid on the first $60,000 of a member's combined balances.

The priority of the accounts that make up the $60,000 is as follows:

1st: Retirement Account (RA), including balances used to pay for the annuity premium under CPF LIFE
2nd: Ordinary Account (OA), up to $20,000
3rd: Special Account (SA)
4th: Medisave Account (MA)

The extra interest received on the OA will go into the member's SA if he is below 55 years old or RA if he is 55 and above to enhance his retirement savings.
---

This means:

1. As long as you have 60k total balance in CPF, you will be earning the max amt of extra 1% extra interest. You DO NOT have to keep 20k in OA to earn it.

2. The extra interest from OA goes into your SA if you are under 55, NOT into your OA. Thus all those who think they are earning 3.5% OA interest is, erm, wrong. You are still earning 2.5% OA interest, but contributing that extra 1% to your SA. ie, it doesn't help you pay your housing instalments or whatever.

3. Effectively, if you have more than 60k in your SA, you can just think of the first 60k in SA as earning 5% and ignore your OA balance for the extra 1%. The maths work out the same, but it's a much simpler calculation.

Good to know but actually I kept min 20k in my OA so that I the event of income lost my cpf can still service my loan for 2 years.

 

[doody_]

If people are discussing about wiping OA, they likely don't have 60k in SA...

 

[BBCWatcher]

If people are discussing about wiping OA, they likely don't have 60k in SA...

I don't follow that logic.

 

[badsector]

Good to know but actually I kept min 20k in my OA so that I the event of income lost my cpf can still service my loan for 2 years.

can defer payment for hdb loan

 

[havetheveryfun]

If people are discussing about wiping OA, they likely don't have 60k in SA...

I don't follow that logic.

welp, its that even if you have 0 $ in OA but 60k in SA, you will still get the extra 1%. The extra 1% interest goes into your SA anyway even if you had still had 20k in your OA.

I know this fact but somehow I also seem to forget it when thinking about housing loans..

 

[BBCWatcher]

welp, its that even if you have 0 $ in OA but 60k in SA, you will still get the extra 1%.

I follow that logic. I don't follow the logic why someone concerned about a "sweep" of OA would not have $60,000 or more in SA.

 

[BBCWatcher]

I don't follow the logic why someone concerned about a "sweep" of OA would not have $60,000 or more in SA.

OK, after thinking about it, I assume the idea here is that somebody taking a HDB loan has a capped income (maximum $12,000 household income per month), is typically fairly young (in the 6 to 8 percent conpulsory contribution range to SA), and thus wouldn't typically have a SA balance of $60,000 or more yet. Maybe, but I still question that assumption. At even 6% of maximum CPF covered earnings ($6,000x17, so well within the $12,000/month cap) the annual inflow to SA would be about $2,265. Many people make their $7,000/year SA contribution for the tax relief (more should), so an inflow of about $9,000/year would not be too surprising. After only 6 years at that pace, and with compound interest, the SA hits about $60,000.

I wouldn't assume, in other words.

 

[havetheveryfun]

OK, after thinking about it, I assume the idea here is that somebody taking a HDB loan has a capped income (maximum $12,000 household income per month), is typically fairly young (in the 6 to 8 percent conpulsory contribution range to SA), and thus wouldn't typically have a SA balance of $60,000 or more yet. Maybe, but I still question that assumption. At even 6% of maximum CPF covered earnings ($6,000x17, so well within the $12,000/month cap) the annual inflow to SA would be about $2,265. Many people make their $7,000/year SA contribution for the tax relief (more should), so an inflow of about $9,000/year would not be too surprising. After only 6 years at that pace, and with compound interest, the SA hits about $60,000.

I wouldn't assume, in other words.

if u are fairly young and still not earning a lot, you wont get a lot from the tax relief from topping up the whole $7000 per year so a lot wouldn't. Some people with lower to middle income can still manage to pay $0 worth of tax due to other reliefs like NS, children, etc

 

[chopra]

TS. yes. It will wipe.


I think If u dont want wipe, invest beyond 20k in bonds. Collect ur key. Sell ur bond.

 

[BBCWatcher]

if u are fairly young and still not earning a lot, you wont get a lot from the tax relief from topping up the whole $7000 per year so a lot wouldn't.

If you're at $4K/month (or even less) you'd probably get tax relief for every one of those 7,000 SA dollars, at least if you're single without children. Regardless, there's a lot of room between SA tax relief and the $12,000/month HDB loan cap.

 

[Singleton]

i see quite a lot of people talk about the extra 1% interest... keeping 20k in OA just to earn that interest. Do you know that:
---
CPF FAQ:
How is my CPF interest computed and credited into my accounts?

A: (edited for brevity)
An extra 1% interest per annum will also be paid on the first $60,000 of a member's combined balances.

The priority of the accounts that make up the $60,000 is as follows:

1st: Retirement Account (RA), including balances used to pay for the annuity premium under CPF LIFE
2nd: Ordinary Account (OA), up to $20,000
3rd: Special Account (SA)
4th: Medisave Account (MA)

The extra interest received on the OA will go into the member's SA if he is below 55 years old or RA if he is 55 and above to enhance his retirement savings.
---

This means:

1. As long as you have 60k total balance in CPF, you will be earning the max amt of extra 1% extra interest. You DO NOT have to keep 20k in OA to earn it.

2. The extra interest from OA goes into your SA if you are under 55, NOT into your OA. Thus all those who think they are earning 3.5% OA interest is, erm, wrong. You are still earning 2.5% OA interest, but contributing that extra 1% to your SA. ie, it doesn't help you pay your housing instalments or whatever.

3. Effectively, if you have more than 60k in your SA, you can just think of the first 60k in SA as earning 5% and ignore your OA balance for the extra 1%. The maths work out the same, but it's a much simpler calculation.

Thanks for the explanation...my SA exceed 60K already... I am collecting my BTO keys this year ..initially i thought the 60k must include (20k OA) , glad to know that i still earn the extra 1% interest despite my OA will be wiped off upon collecting the keys..

 

[starfish.starfish]

can defer payment for hdb loan

Really? That's nice, but mine is bank loan, don't think banks are that kind...

 

[what88]

Really? That's nice, but mine is bank loan, don't think banks are that kind...

That's is the advance of HDB loan.

 

[goh6570]

Hello. I understand that during the collection of flat keys, HDB will wipe our OA account. I'm wondering if anyone has the first hand experience if HDB would wipe the minimum OA sum as well?

So what I'm asking is, does HDB only wipe the amount about the minimum sum? Or the entire OA (including minimum sum of 20k) ?

wipe out all! the moment after the 1st appt with HDB

 

[BBCWatcher]

To recap, if you don't like the CPF OA "sweep" then, before buying your HDB unit, you can:

(a) Take a bank loan instead of a HDB loan; or
(b) Convert your OA to SA (as long as your SA has not reached the Full Retirement Sum yet); and/or
(c) Invest your OA funds through the CPF Investment Scheme, preferably in something extremely safe and affordable such as a Singapore Government Security purchased at initial auction.

Option (b) is the easiest. You can do it online, and the conversion occurs within seconds. Even if you're picking up the keys tomorrow, you can still choose option (b) today. The conversion is irrevocable, but your SA earns better interest.

 

[boiboi86]

To recap, if you don't like the CPF OA "sweep" then, before buying your HDB unit, you can:

(a) Take a bank loan instead of a HDB loan; or
(b) Convert your OA to SA (as long as your SA has not reached the Full Retirement Sum yet); and/or
(c) Invest your OA funds through the CPF Investment Scheme, preferably in something extremely safe and affordable such as a Singapore Government Security purchased at initial auction.

Option (b) is the easiest. You can do it online, and the conversion occurs within seconds. Even if you're picking up the keys tomorrow, you can still choose option (b) today. The conversion is irrevocable, but your SA earns better interest.

I'm currently on Option C. In the event that I am not working, I can always choose to pull out my investment to put back to OA for my HDB loan deductions.

 

[luei74]

TS better don't let HDB wipe out ALL your OA (we donno in future whether we will be out of the current Job, keep some for the rainy days) ....if u have CDP account can try to buy in some blue-chip...

 

[kzonexx]

TS better don't let HDB wipe out ALL your OA (we donno in future whether we will be out of the current Job, keep some for the rainy days) ....if u have CDP account can try to buy in some blue-chip...

how much would a good amount to set aside for this?

 

[luei74]

how much would a good amount to set aside for this?

I will think minimum should be between 20K-30K. It's really depend on individual... We get additional 1% for 20K in our OA. I transferred to purchase some funds with prudential during my time many years ago.....

 

[Wilb87]

Hi guys need some advice, lets say i am taking my keys on Mar 2017.

With OA:85k, SA: 26k, MA: 26k, is it better just to transfer 10k over to SA before OA wipe, so as to ensure that i still have 60k in my combined interest for the additional 1% interest?

If i do not do that i will have only around 52k (OA: 0, SA and MA: 52k), where i still need some time to build up to the 60k combined, of add 1% interest, while servicing the loan. I dont have any liabilities and have cash reserve as warchest, which i will not wish to top up with cash to hit 60k combined of add 1% interest.