How Much to keep in OA

[BBCWatcher]

if i xfer from OA to SA.. it limits how much cash i can topup to my SA.. part of it is for tax relief, part of it because i want more funds in cpf

Your tax relief is limited to $7K per year of top up into your SA. Your SA is limited to the Full Retirement Sum, which is $166,000 in 2017 and adjusted upward periodically. It takes a couple decades at $7K/year to reach the FRS if that's the only source of funds into your SA.

However, I think you're missing part of the picture. Let's suppose you're a baby born in Singapore with a generous aunt or grandfather (for example). That generous person tops up the baby's SA in one $166,000 payment. The benefactor receives no tax relief for that top up -- not even the $7K. (The tax relief is only potentially available when you top up your own account or the accounts of certain specific family relatives, such as your spouse, who has limited income.) So no tax relief, but...that $166,000 has a LONG growth trajectory with compound interest. Also, compulsory CPF contributions into SA still go into SA, and also earn attractive interest. In short, while the tax relief is important, compound interest and compulsory contributions are also important. So if you want huge CPF, then being something at least closer to that lucky baby is a smart idea.

Also, even when your SA reaches the FRS, you can still top up your other accounts (OA and MA). If you top up MA then you can get tax relief, but your MA top ups are subject to the CPF Annual Limit (currently $37,740). Meaning, the compulsory contributions (you and your employer) plus your top up cannot exceed $37,740 per year. Once your MA reaches the Basic Healthcare Sum (BHS), currently $52,000, then both compulsory and top up contributions stop. Compulsory MA contributions then roll over into your SA. You can also top up all three accounts (OA+MA+SA), with no tax relief and still subject to the $37,740 Annual Limit. If MA and SA are already "full," then such top ups will flow into OA.

Anyway, OA to SA transfers can still make a lot of sense due to compound interest and compulsory contributions, even while you're trying to take advantage of tax relief. There's a lot of merit to making the highest yielding parts of your CPF (SA and MA) big sooner. Like those few lucky babies.

Another interesting "quirk" is that top ups to SA must be paid out as life annuities whereas that's not necessarily true of OA to SA converted funds. For example, if you end up with $100K of top ups into your SA but also with a property pledge, you won't have the option to choose the lower Basic Retirement Sum-based CPF LIFE annuity even if you want to. You'll have to choose the minimum annuity that's large enough to include all your top ups (plus the interest on those top ups, if I understand it correctly). Maybe that isn't a problem, but it's something to be aware of if your SA will have a relatively large fraction of top ups and if you were trying to minimize CPF LIFE annuity payouts and instead let your CPF funds earn ordinary attractive interest.

Anyway, I convert OA to SA, and I also top up SA. I don't need OA funds as OA (won't be using them for housing), so every month I convert those funds. The SA is zooming up. I also have a bit of room within the Annual Limit to top up MA, so I do that, too. MA is zooming up, too. I expect the MA will hit its BHS first, and then compulsory MA contributions will start rolling over into SA, turbocharging its growth. It's all good stuff.

 

[mosmos]

Just to pick an example, suppose you have $10,000 in your OA, you're "not rich" (at least now), you live overseas, and you have no plans to return to Singapore, never mind buying any leasehold or freehold in Singapore. Should you convert all your OA to SA? Yes, that would be the smart move.

i just put the minimum to earn 4% interest

 

[BBCWatcher]

i just put the minimum to earn 4% interest

I'm not sure what you mean. Your entire SA and MA balances earn at least 4% interest. Every dollar CPF allows you to convert into SA, or to top up into SA and/or MA, earns at least 4% interest.

 

[apatheticme]

There has been multiple posts in this forum that says that SA above FRS can be taken out as a lump sum at 55. The CPF website is confusing about this though.

 

[henrylbh]

There has been multiple posts in this forum that says that SA above FRS can be taken out as a lump sum at 55. The CPF website is confusing about this though.

Ownself confuse ownself?

At 55 all balances in OA and SA can be withdrawn after setting aside FRS or BRS with sufficient property charge/pledge.

 

[apatheticme]

Ownself confuse ownself?

At 55 all balances in OA and SA can be withdrawn after setting aside FRS or BRS with sufficient property charge/pledge.

Why so hostile? I am just pointing out to BBCWatcher who said "Another interesting "quirk" is that top ups to SA must be paid out as life annuities whereas that's not necessarily true of OA to SA converted funds."

 

[henrylbh]

Why so hostile? I am just pointing out to BBCWatcher who said "Another interesting "quirk" is that top ups to SA must be paid out as life annuities whereas that's not necessarily true of OA to SA converted funds."

Sorry don't mean to be hostile.

There is nothing 'quirk'. It's just a superfluous statement that top ups to SA cannot be withdrawn.

SA must flow to RA at 55 to meet FRS and any left in SA can be withdrawn. It doesn't matter whether the fund is from contributions or from top-ups because top-ups in SA can never exceed FRS. Even if top-ups somehow exceed FRS, it can be withdrawn. But top-ups cannot be withdrawn when one is pledging property to meet BRS at age 55.

 

[BBCWatcher]

It's just a superfluous statement that top ups to SA cannot be withdrawn.

It's not superfluous, as I pointed out already. Scenario: Zero CPF balances (nonworking and/or disabled spouse, for example), age 54 11/12ths, top up to SA of $1. Can that $1 be withdrawn at age 55 or later? According to what CPF writes, no. What's the reality? I'm not sure. I guess the $1 could be withdrawn, but I can't find anything CPF wrote that says so.

Let's stick to what CPF says absent clear evidence to the contrary. If we're guessing, let's say that.

 

[RoLanTo]

Your tax relief is limited to $7K per year of top up into your SA. Your SA is limited to the Full Retirement Sum, which is $166,000 in 2017 and adjusted upward periodically. It takes a couple decades at $7K/year to reach the FRS if that's the only source of funds into your SA.

However, I think you're missing part of the picture. Let's suppose you're a baby born in Singapore with a generous aunt or grandfather (for example). That generous person tops up the baby's SA in one $166,000 payment. The benefactor receives no tax relief for that top up -- not even the $7K. (The tax relief is only potentially available when you top up your own account or the accounts of certain specific family relatives, such as your spouse, who has limited income.) So no tax relief, but...that $166,000 has a LONG growth trajectory with compound interest. Also, compulsory CPF contributions into SA still go into SA, and also earn attractive interest. In short, while the tax relief is important, compound interest and compulsory contributions are also important. So if you want huge CPF, then being something at least closer to that lucky baby is a smart idea.

Also, even when your SA reaches the FRS, you can still top up your other accounts (OA and MA). If you top up MA then you can get tax relief, but your MA top ups are subject to the CPF Annual Limit (currently $37,740). Meaning, the compulsory contributions (you and your employer) plus your top up cannot exceed $37,740 per year. Once your MA reaches the Basic Healthcare Sum (BHS), currently $52,000, then both compulsory and top up contributions stop. Compulsory MA contributions then roll over into your SA. You can also top up all three accounts (OA+MA+SA), with no tax relief and still subject to the $37,740 Annual Limit. If MA and SA are already "full," then such top ups will flow into OA.

Anyway, OA to SA transfers can still make a lot of sense due to compound interest and compulsory contributions, even while you're trying to take advantage of tax relief. There's a lot of merit to making the highest yielding parts of your CPF (SA and MA) big sooner. Like those few lucky babies.

Another interesting "quirk" is that top ups to SA must be paid out as life annuities whereas that's not necessarily true of OA to SA converted funds. For example, if you end up with $100K of top ups into your SA but also with a property pledge, you won't have the option to choose the lower Basic Retirement Sum-based CPF LIFE annuity even if you want to. You'll have to choose the minimum annuity that's large enough to include all your top ups (plus the interest on those top ups, if I understand it correctly). Maybe that isn't a problem, but it's something to be aware of if your SA will have a relatively large fraction of top ups and if you were trying to minimize CPF LIFE annuity payouts and instead let your CPF funds earn ordinary attractive interest.

Anyway, I convert OA to SA, and I also top up SA. I don't need OA funds as OA (won't be using them for housing), so every month I convert those funds. The SA is zooming up. I also have a bit of room within the Annual Limit to top up MA, so I do that, too. MA is zooming up, too. I expect the MA will hit its BHS first, and then compulsory MA contributions will start rolling over into SA, turbocharging its growth. It's all good stuff.

wat u said, i understand.. but i will still keep my OA as back up..in case i need tat for 2nd property or to pay off my 1st property. im just not using it at the moment.

 

[henrylbh]

It's not superfluous, as I pointed out already. Scenario: Zero CPF balances (nonworking and/or disabled spouse, for example), age 54 11/12ths, top up to SA of $1. Can that $1 be withdrawn at age 55 or later? According to what CPF writes, no. What's the reality? I'm not sure. I guess the $1 could be withdrawn, but I can't find anything CPF wrote that says so.

Let's stick to what CPF says absent clear evidence to the contrary. If we're guessing, let's say that.

•If you are unable to set aside the FRS or BRS, you can still withdraw up to $5,000 of your Ordinary and Special Account savings when you reach 55.

 

[henrylbh]

It's not superfluous, as I pointed out already. Scenario: Zero CPF balances (nonworking and/or disabled spouse, for example), age 54 11/12ths, top up to SA of $1. Can that $1 be withdrawn at age 55 or later? According to what CPF writes, no. What's the reality? I'm not sure. I guess the $1 could be withdrawn, but I can't find anything CPF wrote that says so.

Let's stick to what CPF says absent clear evidence to the contrary. If we're guessing, let's say that.

It's still superfluous. He was referring to your para where you used the word 'quirk'. That's quirk that you are now you are referring to another part of your comments to say it's not

 

[BBCWatcher]

It's still superfluous.

So why does CPF go to such great lengths to explain that certain contribution categories, including RSTUs, can only be drawn down in the form of CPF LIFE (or predecessor program, if applicable) monthly annuity payments? There must be a reason why they track that amount separately as "Reserved" (check your online account, if you have any such funds) and why they explain that restriction so carefully. It can't be "superfluous."

If I'm being "superfluous" then CPF also is, and I find it hard to believe that they would be.

 

[BBCWatcher]

Here's something interesting I hadn't spotted before:

Q: Will my Ordinary Account (OA) savings transferred to my Special Account (SA) enjoy the SA interest rate in the month of transfer?

A: Yes, your OA savings will start earning the SA interest rate in the month of transfer.

That's helpful! Online OA to SA conversions seem to happen in a matter of seconds, so (as I write this) there's still time to get SA interest instead of OA interest for the whole month of January, 2017, for those who want to and can convert funds.

 

[henrylbh]

Here's something interesting I hadn't spotted before:

CPF wrote:

Q: Will my Ordinary Account (OA) savings transferred to my Special Account (SA) enjoy the SA interest rate in the month of transfer?

A: Yes, your OA savings will start earning the SA interest rate in the month of transfer.

Yes that's what it's saying. In transferring OA to SA, OA loses interest of 2.5% in that month, but SA gains interest of 4%. said. That's an inducement to top up for retirement.

 

[henrylbh]

If I'm being "superfluous" then CPF also is, and I find it hard to believe that they would be.

Yes sometime and somewhere CPF explanations are also superfluous that create confusion especially for those who don't read other parts of the explanations or faq.