From OA to SA

[aKaGiz]

Why would you want to transfer from oa to sa??

 

[BBCWatcher]

Why would you want to transfer from oa to sa??

That's easy: SA interest is 1.5 percentage points higher than OA interest. Higher interest means greater/faster wealth accumulation.

Consider the following scenario: start with $20,000 in your OA, $200 per month added, 20 year time horizon. And assume your SA never reaches the Full Retirement Sum, so that you can always convert. Also assume in this example no bonus interest, so 2.5% for OA and 4.0% for SA. In this scenario, if you do nothing and leave the funds in your OA, then after 20 years they will grow to $94,906. However, if you transfer all those funds to SA immediately and in every month (as the $200/month streams in), they will grow to $116,829 -- nearly $22,000 more. It's a big difference.

The real question is why wouldn't you want to transfer from OA to SA? There might be an answer to that question depending on your particular circumstances, but that's the question.

 

[BBCWatcher]

By the way, BBCWatcher you are spending so much effort and time to type these posts to educate us on CPF. Why?

To educate people like me lah
Why lei?

Because I enjoy the knowledge sharing, and I learn, too! I appreciate having greater wealth and financial security, as most people do. When I describe how I would approach a particular financial situation if I were in somebody else's situation it helps me understand how to optimize better in my own circumstances, or in future personal circumstances that could be more like somebody else's. It's "What if?" analysis for me, to give me some more ideas and gain confidence that I'm optimizing at least reasonably well.

Within the past few months I've learned much more than I expected about CPF. I've better optimized CPF as a result.

Although I think CPFB has many lovely civil servants who are pretty smart, I don't work for any government agency. I don't work for any bank or financial services firm, I don't sell financial advice, and I don't want to sell financial advice.

 

[peaceheart]

Because I enjoy the knowledge sharing, and I learn, too! I appreciate having greater wealth and financial security, as most people do. When I describe how I would approach a particular financial situation if I were in somebody else's situation it helps me understand how to optimize better in my own circumstances, or in future personal circumstances that could be more like somebody else's. It's "What if?" analysis for me, to give me some more ideas and gain confidence that I'm optimizing at least reasonably well.

Within the past few months I've learned much more than I expected about CPF. I've better optimized CPF as a result.

Although I think CPFB has many lovely civil servants who are pretty smart, I don't work for any government agency. I don't work for any bank or financial services firm, I don't sell financial advice, and I don't want to sell financial advice.

Learnt a lot from this thread. Thanks for sharing everyone.

For me personally, I've transferred 2 lump sum over to SA years back.

 

[SBC]

I have transferred small amount like 15 to 18 years when I am not owning any property. Even though they are small amount, their effects over long period can be impacting.

Done another 8k transfer I have tabulated that I will hit FRS beginning of 2017.

Also gotten my wife to transfer, as she is not having any mortgage obligation.

 

[aKaGiz]

Why wouldn't transfer from oa to sa? Because it is a one way traffic.

Besides, after reaching minimum sum, no more tax relief

 

[henrylbh]

Why wouldn't transfer from oa to sa? Because it is a one way traffic.

If have no forseeable use of OA, later at 55, OA will be forced into RA.

 

[edwinttt1978]

Please, sir, enlighten us on the pound wise move.

It needs no enlightening that time is money and hesitation diminishes the money.
Transfer early, transfer now.

 

[athulican]

Yes, SA at 4% is higher interest than OA, but SA cannot be used to pay for house. And once transferred, cannot be transferred back to OA, until your are 55 (then OA merge with SA = RA). SA cannot be used to buy stock. So if a GFC comes along like that of 2008, where DBS is selling for $6, and you do not have the cash to buy, you cannot use OA to buy, like me.

 

[henrylbh]

Yes, SA at 4% is higher interest than OA, but SA cannot be used to pay for house. And once transferred, cannot be transferred back to OA, until your are 55 (then OA merge with SA = RA). SA cannot be used to buy stock. So if a GFC comes along like that of 2008, where DBS is selling for $6, and you do not have the cash to buy, you cannot use OA to buy, like me.

That's not so bad. What if later interest on SA is slowly adjusted to the floor rate of 2.5%. FOS

 

[athulican]

That's not so bad. What if later interest on SA is slowly adjusted to the floor rate of 2.5%. FOS

Seriously was there a time where that happened? I am almost 50 and i can't recall any.

 

[peaceheart]

Yes, SA at 4% is higher interest than OA, but SA cannot be used to pay for house. And once transferred, cannot be transferred back to OA, until your are 55 (then OA merge with SA = RA). SA cannot be used to buy stock. So if a GFC comes along like that of 2008, where DBS is selling for $6, and you do not have the cash to buy, you cannot use OA to buy, like me.

Obviously don't transfer everything over, just a little. Small enough that you don't feel the pinch yet big enough to make a difference in SA.

That's not so bad. What if later interest on SA is slowly adjusted to the floor rate of 2.5%. FOS

If SA is 2.5%, how about OA when that time comes?

 

[edwinttt1978]

Seriously was there a time where that happened? I am almost 50 and i can't recall any.

Almost 23 years ago, to Jul 1993 to Dec 1994, CPF SA rate was 2.5%. The OA rate then was still 2.5%. You were only 27-year-old, probably too young to think of retirement.

https://www.cpf.gov.sg/Assets/common/Documents/InterestRate.pdf

 

[shareholder]

Many people choose to transfer to sa to get the extra 1.5%, but don't forget oa allows one to invest in shares. So far luckily didn't transfer, for the past ten years able to compound at close to 10%. Shares is still the better financial vehicle. Believe in yourself and invest your oa.

 

[henrylbh]

Yes, SA at 4% is higher interest than OA, but SA cannot be used to pay for house. And once transferred, cannot be transferred back to OA, until your are 55 (then OA merge with SA = RA). SA cannot be used to buy stock. So if a GFC comes along like that of 2008, where DBS is selling for $6, and you do not have the cash to buy, you cannot use OA to buy, like me.

Never below 4%.

I think in 2008, government announced floating interest rate for Special, Medisave and Retirement Accounts (SMRA) and the rate will be determined by 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1 per cent.

However, the rate has been 4% since then although all this while 10YSGS plus 1% is below 4%.

But don't be surprised that a day will come when the rate goes down to the statutory minimum rate of 2.5% if market interest rate remain depressed for a long time.

 

[edwinttt1978]

Obviously don't transfer everything over, just a little. Small enough that you don't feel the pinch yet big enough to make a difference in SA.

If SA is 2.5%, how about OA when that time comes?

If there is no pinch, there will be no kick in SA.

I remember my maiden transfer from OA to SA was made when I was aged 24.
It was $12k. The transfer amount ballooned to $50k when I had to bankrupt OA for HDB loan in 2012.

I have never regretted.

 

[henrylbh]

Almost 23 years ago, to Jul 1993 to Dec 1994, CPF SA rate was 2.5%. The OA rate then was still 2.5%. You were only 27-year-old, probably too young to think of retirement.

https://www.cpf.gov.sg/Assets/common/Documents/InterestRate.pdf

You are right. Just checked that from Jul 1993 to Dec 1994, interest rate for SMRA and OA was 2.5%.

 

[endlssorrow]

Many people choose to transfer to sa to get the extra 1.5%, but don't forget oa allows one to invest in shares. So far luckily didn't transfer, for the past ten years able to compound at close to 10%. Shares is still the better financial vehicle. Believe in yourself and invest your oa.

NPNT leh

 

[edwinttt1978]

NPNT leh

It is entirely possible, especially if such shares have been purchased at depressed levels seen in 2008-2009. Many REITs were yielding more than 10% p.a.

SUNTEC REIT, when it was trading at 50c, was giving a 10c dividend. That was a whopping 20% yield for those who dared to buy Suntec REIT then. There were many more such shares.

 

[edwinttt1978]

Ok, posted enough here. Prefer to post in Uber and taxis now.

Happy investing in SA!