FRS vs ERS

[tornedo]

Interesting....

All experts, just to confirm my understanding, is the following correct:

At 55, 2019 FRS 176k, top up to ERS using cash 88k to 264k ERS.

10years, later 264K will be ~390K (with RA ~4% compounding interest for 10years).

Choose BRS with property pledge before 65y payout - take out 88k, RA will be left with 390k - 88k = 302k which will form the cpf life ?
* or 88k + compounding 4% interest for 10years taken out?

Is the above correct?

That's your view! U are still considered at ERS, ie cannot topup anymore unless ERS goes up and actually has property charge/pledge to withdraw the 88k.

What I posted was below:



There is nothing in the CPF website that say u cannot, my query double confirmed

Disclaimer: I am not going for BRS

 

[yokine3a]

Don't think so. Once you opt for BRS, whatever balance in RA will be cash out to you, cannot retain in RA.

 

[kelhot2001]

Interesting....

All experts, just to confirm my understanding, is the following correct:

At 55, 2019 FRS 176k, top up to ERS using cash 88k to 264k ERS.

10years, later 264K will be ~390K (with RA ~4% compounding interest for 10years).

Choose BRS with property pledge before 65y payout - take out 88k, RA will be left with 390k - 88k = 302k which will form the cpf life ?
* or 88k + compounding 4% interest for 10years taken out?

Is the above correct?

Your 88k plus interest earned cannot be taken out. But you still can take out your RA 88k based on the mount from your FRS, not from your topup, if I am not wrong

 

[a4973]

hi all, can anyone advise me when is a good date in a month to do VC to all 3 accounts via ecashier?
thanks

 

[zuppeur]

Based on 2019

ERS(264k) = with Top up 88K + RA(176k)

Suppose I choose BRS = Property pledge + 88k top up

1. Is it I can withdraw $176k from my RA account anytime after 55?

2. Can this $176k be park in the RA account to draw out as and when I want.

If cannot act like a bank account, how will the 176 funds be payout to me

 

[kelhot2001]

Based on 2019

ERS(264k) = with Top up 88K + RA(176k)

Suppose I choose BRS = Property pledge + 88k top up

1. Is it I can withdraw $176k from my RA account anytime after 55?

2. Can this $176k be park in the RA account to draw out as and when I want.

If cannot act like a bank account, how will the 176 funds be payout to me

No, cannot be refunded this way, any Monies topup are not refundable with BRS

 

[henrylbh]

No, cannot be refunded this way, any Monies topup are not refundable with BRS

He definitely cannot take out 176k leaving 88k as BRS with property charge/pledge even if there was not cash-top in his ERS.

Let put it this way -

At 55,

(1) 176k moved to RA to meet FRS (no cash top-ups before)

Then,

(2) cash top up RA by 88k to meet ERS of 264k, or

(3) transfer 88k from SA/OA to meet ERS of 264k.

The question is how much can one take out with property charge/pledge subsequently?

Regardless of (2) or (3), at most 88k can be taken out based on half of FRS even though in (3) there was no cash top-up.

But I have reservation whether that 88k in (2) or (3) can be taken out at all.

If allowed, member should top up cash of 88k to ERS and earn interest song song from 55 to date of withdrawal with property charge/pledge. Nevermind interest thereon cannot be taken out. Besides, if 88k is withdrawn, there will be a balance of 176k which is FRS amount and hence why is there a need for pledge/charge?

Previous telecommunication with CPFB, no option of BRS subsequently if one decides to go for ERS.

Now awaiting written answer from CPFB.

 

[madtari]

Based on my understanding, RA account cannot be withdrawn at lumpsum. After you have chosen your cpf life plan (eg. Basic, standard, escalating), your RA will be used to pay for the premium for the cpf life once you start your monthly payout. The remaining money, will be paid out monthly till 90yo (aka retirement sum scheme).

Pls correct me if I'm wrong.

My plan is to do top up to my RA up to ERS at 55 so as to enjoy the max interest compounding effect at 4%.

Question is:
1) can I top up from FRS to ERS at 55yo by transferring my OA to RA w/o first depleting SA (assuming SA still got remaining money after creation of RA)? I think we can only do so using cash top up. Even if we want to withdraw money from cpf above FRS after 55, money will be taken out from SA first, then OA.

2) After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

Based on 2019

ERS(264k) = with Top up 88K + RA(176k)

Suppose I choose BRS = Property pledge + 88k top up

1. Is it I can withdraw $176k from my RA account anytime after 55?

2. Can this $176k be park in the RA account to draw out as and when I want.

If cannot act like a bank account, how will the 176 funds be payout to me

 

[maple96]

He definitely cannot take out 176k leaving 88k as BRS with property charge/pledge even if there was not cash-top in his ERS.

Let put it this way -

At 55,

(1) 176k moved to RA to meet FRS (no cash top-ups before)

Then,

(2) cash top up RA by 88k to meet ERS of 264k, or

(3) transfer 88k from SA/OA to meet ERS of 264k.

The question is how much can one take out with property charge/pledge subsequently?

Regardless of (2) or (3), at most 88k can be taken out based on half of FRS even though in (3) there was no cash top-up.

But I have reservation whether that 88k in (2) or (3) can be taken out at all.

If allowed, member should top up cash of 88k to ERS and earn interest song song from 55 to date of withdrawal with property charge/pledge. Nevermind interest thereon cannot be taken out. Besides, if 88k is withdrawn, there will be a balance of 176k which is FRS amount and hence why is there a need for pledge/charge?

What is important is u withdraw monies above BRS (50% FRS) from RA, so property charge/pledge is required. If CPFB do not allow BRS after u topup to ERS, there will be more complaints and throwing of rotten eggs, people will complain " there is an emergency need for funds, why cannot pledge to withdraw"

Previous telecommunication with CPFB, no option of BRS subsequently if one decides to go for ERS.

Never use teleconversation for any doubts u have or to obtain confirmation of understanding. U might have miscommunicated or CPFB recipient misunderstood your question. Plus no evidence to fall back on.

Now awaiting written answer from CPFB.

See my comments above.
Below was my written question to CPFB and their written reply below.

Q5. After topup to ERS in Q3, can I later pledge property to withdraw above BRS (ie 50% of FRS)?

You can pledge your property (with more than 30 years remaining lease and not a short-lease 2-room Flexi or Lease Buyback Scheme flat) to withdraw the difference between your FRS and BRS.

 

[BBCWatcher]

1) can I top up from FRS to ERS at 55yo by transferring my OA to RA w/o first depleting SA (assuming SA still got remaining money after creation of RA)? I think we can only do so using cash top up. Even if we want to withdraw money from cpf above FRS after 55, money will be taken out from SA first, then OA.

No, the order is always to draw from SA first, then OA once SA is depleted. That’s for both age 55+ withdrawals and SA/OA to RA transfers. A SA/OA to RA transfer is merely two transactions lumped into one for convenience: a SA/OA withdrawal (according to standard rules) followed by a RA deposit.

However, if you are using the “SA shielding” technique (hack) when your Retirement Account is formed on your 55th birthday, you can then (on your 55th birthday) request a transfer to RA. That transfer will draw from your OA because your SA dollars are shielded. Then lower the shield.

That doesn’t necessarily mean you should do this. OA’s 2.5% interest rate is still fairly attractive, and if your cash is languishing in some other place and earning less, cash would be a superior source of funds to push up your RA.

2) After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

It seems like it’s possible. A strict reading of CPF’s rules is that top ups (and interest on those top ups, including bonus interest) must be paid out as CPF LIFE annuity flows — except evidently if you get a CPF LIFE waiver because you have an acceptable substitute life annuity. So non-top up principal should be available for withdrawal provided the annuity is large enough. That said, I wouldn’t view this arcane corner of CPF rules as fixed in stone.

Also, this way of thinking is quite bizarre to me. I don’t know anybody who thinks even ERS-level retirement income provides a too lavish standard of living. Maybe I just don’t hang out in the right places. Presumably you’re not going to take every dollar of savings you have at age 55 and top up your Retirement Account. No, you’re presumably going to be in good or better financial shape, and so pushing up your RA won’t be a heavy lift. And then, with that much more lifetime income from age 65 (or from age 70, or from anywhere in between) you can enjoy life that much more from age 55. There just isn’t a problem here, at least not a big one. The 4% interest is attractive, and even if you don’t like life annuity payouts it’s still 4% interest from a AAA rated government in a quality currency — it’s still very attractive.

 

[maple96]

Based on my understanding, RA account cannot be withdrawn at lumpsum. After you have chosen your cpf life plan (eg. Basic, standard, escalating), your RA will be used to pay for the premium for the cpf life once you start your monthly payout. The remaining money, will be paid out monthly till 90yo (aka retirement sum scheme).

A few mths before u hit 65, CPFB will write to u with options: U can withdraw 20% of RA (excluding all topups) as lump sum. If u opt to start mthly payout and choose Basic Plan, your CPF Life policy will be issued and 10-20% of RA transferred to to CPF Life Pool, and mthly payout starts from RA.

Pls correct me if I'm wrong.

My plan is to do top up to my RA up to ERS at 55 so as to enjoy the max interest compounding effect at 4%.

Question is:
1) can I top up from FRS to ERS at 55yo by transferring my OA to RA w/o first depleting SA (assuming SA still got remaining money after creation of RA)? I think we can only do so using cash top up.

If u transfer from OA/SA, monies from SA will be transferred first to RA. I will do cash topup to earn 4%, your transfer only give u 1.5% more from OA.

Even if we want to withdraw money from cpf above FRS after 55, money will be taken out from SA first, then OA.

After 55, u cannot withdraw monies from RA (other than at 65 or with property pledge). U can only withdraw monies in OA/SA any time.

2) After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

U cannot choose the "amt RA at 65" that u want to join CPF Life. All balances in RA at 65 will go CPF Life if u opt for Standard/Escalating and start payout, for Basic ony 10-20% will be transferrred.

See my comments above

 

[zuppeur]

After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

U cannot choose the "amt RA at 65" that u want to join CPF Life. All balances in RA at 65 will go CPF Life if u opt for Standard/Escalating and start payout, for Basic ony 10-20% will be transferrred

Q:

if choose basic.Is the the rest of the money remaining in RA will be payout under RSS?

 

[zuppeur]

After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

U cannot choose the "amt RA at 65" that u want to join CPF Life. All balances in RA at 65 will go CPF Life if u opt for Standard/Escalating and start payout, for Basic ony 10-20% will be transferrred

Q:

if choose basic.Is the the rest of the money remaining in RA will be payout under RSS till age 90?

 

[madtari]

Thanks BBC. Ya, if I do cash top up to ERS at 55yo, it will certainly come from my spare cash (instead of FD or SSB/SGS, I rather put in cpf for 4%).

My main consideration for choosing basic FRS (instead of ERS) is to leave more for bequest in the event I die early. If I managed to live longer, I would be better off choosing escalating plan but so be it... I think I can still be financially dependant on my own.

 

[madtari]

Thanks maple. For my qns 2, I am aware 100% of RA will be used for standard n escalating plan. What I was asking is that can I top up to ERS at 55 yet, wanting to use only 10%-20% of FRS to join cpf life basic plan so I can maximise the remaining money inside RA for monthly drawdown on top of cpf life payout?

See my comments above

 

[madtari]

Yes it should be.

After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

U cannot choose the "amt RA at 65" that u want to join CPF Life. All balances in RA at 65 will go CPF Life if u opt for Standard/Escalating and start payout, for Basic ony 10-20% will be transferrred

Q:

if choose basic.Is the the rest of the money remaining in RA will be payout under RSS till age 90?

 

[maple96]

Thanks maple. For my qns 2, I am aware 100% of RA will be used for standard n escalating plan. What I was asking is that can I top up to ERS at 55 yet, wanting to use only 10%-20% of FRS to join cpf life basic plan so I can maximise the remaining money inside RA for monthly drawdown on top of cpf life payout?

No, u cannot choose amt, ie if u choose Basic Pan, 10-20% of total RA balance at 65 will be transferred to CPF LIfe pool as premium, the balance in RA at 65 is still part of CPF Life Basic Plan.

How Basic Plan works: u first drawdown monies from RA as mthly payout, until it gets depleted by 90, then mthly payout comes the CPF Life Pool.

 

[BBCWatcher]

My main consideration for choosing basic FRS (instead of ERS) is to leave more for bequest in the event I die early.

That doesn't really make sense, though, even with the objective you're describing. You have a choice of payout plans, including the Basic Plan. All plans include residuals if you die at age 66, for example. (The Basic Plan's residual extends the longest.) And 4% interest is still 4% interest -- it still feeds directly into the annuity and residual calculations. Where would you put the $88K (2019 figure) withdrawal otherwise that'd earn about 4% from a AAA rated government?

Maybe you're assuming you can keep BRS-level principal on deposit in your RA? No, it doesn't work that way I'm afraid.

I don't think you should be focused on using your Retirement Account for "What if I die early?" bequest purposes -- it's not well designed for that -- but if you insist then the best thing you can do is to defer payouts until age 70. Then, if you die at age 67, for example, your CPF nominated heirs get every penny plus accrued interest, including that sweet 4% RA/SA/MA interest plus bonus interest. Once payouts start the dollars are streaming out of that high interest RA, and you're certainly not going to find anything directly comparable to 4+% interest elsewhere.

 

[maple96]

After topping up to ERS, can I later at 65 yo choose cpf life basic plan with only FRS and start withdrawing the remaining money inside my RA monthly under the retirement sum scheme?

U cannot choose the "amt RA at 65" that u want to join CPF Life. All balances in RA at 65 will go CPF Life if u opt for Standard/Escalating and start payout, for Basic ony 10-20% will be transferrred

Q:

if choose basic.Is the the rest of the money remaining in RA will be payout under RSS till age 90?

see my reply to madtari, if u have ERS, then 10-20% of ERS total balance in RA at 65 will be transferred to pool, the rest in RA at 65 are still part of the CPF life plan.

 

[dork32]

And 4% interest is still 4% interest --

actually 4% is not 4%. this is because 20% of your initial amount does not earn interest. so 4% is actually 3.2%. You are going to deplete your principal as you draw down. the amount that does not earn interest remains the same. it means that your interest will gradually decrease to 0