Need some advice on CPF RA for a 72yrs old man

[camholicx]

Current in CPF:

OA: 38K
MA:52k
RA:2k


Question: Should he transfer all OA 38k to RA? Any pros and cons?

Thank you.

 

[JuniorLion]

Transferring funds from your Ordinary Account (OA) to your Retirement Account (RA) in Singapore is a decision that requires consideration of your financial goals, age, and retirement planning. Here are the key pros and cons of transferring your OA funds to your RA:

### **Pros of Transferring OA to RA:**

1. **Higher Interest Rates on RA:**
- The RA offers a higher interest rate (4% p.a. currently) compared to the OA (2.5% p.a. for the first $20,000 and 4% p.a. for the next $20,000, and 2.5% for balances above that).
- By transferring your OA funds to the RA, you can earn a higher return on your savings.

2. **Boosting Retirement Savings:**
- Transferring funds to your RA can help you build up your retirement savings, which will be used to provide monthly payouts when you reach retirement age.
- As you're already 72, ensuring your RA is well-funded will allow you to maximize the monthly payouts under CPF LIFE.

3. **CPF LIFE Monthly Payouts:**
- A higher RA balance can increase the amount of monthly payouts you receive when you start drawing from CPF LIFE (you can start the payouts from 65 years old, or later if you choose).
- If you transfer funds into the RA, it can enhance your long-term financial security by increasing the size of your CPF LIFE annuity.

### **Cons of Transferring OA to RA:**

1. **Liquidity Concerns:**
- Once transferred, the funds in the RA cannot be withdrawn for general use. This limits your liquidity since the RA funds are locked in for retirement purposes.
- You would not be able to access the transferred funds for other needs like housing or emergencies (unless you're eligible for specific CPF schemes, but those options are limited).

2. **No More Housing Use:**
- The OA can be used for housing-related expenses, like purchasing a home or servicing a mortgage. By transferring to the RA, you lose the option to use those funds for housing if you plan to do so in the future.

3. **Possibly Lower Interest in the OA:**
- While the RA offers higher interest, your OA balance may still be useful in other contexts if you plan to use it for housing, or if you want to maintain more flexibility.

### Considerations:
- **Your Retirement Needs:** If you already have adequate housing and do not need to use the OA for future housing, it may be a good strategy to move funds to the RA for better returns.
- **Age Factor:** At 72, you are already receiving or close to receiving CPF LIFE payouts, so maximizing your RA balance could be a good move if you want higher monthly payouts.
- **Other Assets:** Ensure you have sufficient non-CPF savings for any short-term needs or emergencies, as transferring to the RA limits your flexibility.

### Final Thoughts:
If you are looking to maximize your CPF LIFE payouts and have no further need for the OA funds for housing or liquidity purposes, transferring the funds to your RA is generally a good move. However, if you anticipate needing more liquidity in the future, it might be worth keeping some balance in the OA.

You may also want to consult a financial planner to tailor the decision based on your full financial picture.

 

[JuniorLion]

Thank you ChatGPT.

 

[DevilPlate]

Current in CPF:

OA: 38K
MA:52k
RA:2k


Question: Should he transfer all OA 38k to RA? Any pros and cons?

Thank you.

What’s his financial situation outside CPF?
If he don’t need to withdraw 38k for his living expenses…..then why not? Transfer all to RA and can even consider to top up RA using some of his spare cash

 

[camholicx]

He is a cleaner. Low paid.
If transfer all OA to RA, when the person demise, RA will be pass down to his kids?

 

[DevilPlate]

He is a cleaner. Low paid.
If transfer all OA to RA, when the person demise, RA will be pass down to his kids?

I assume he is on the older RSS scheme…..so any undrawn leftover amount including interest earned will be pass to beneficiaries,

https://www.dbs.com.sg/personal/articles/nav/retirement/cpf-life-or-rss-for-retirement
A good read.

 

[henrylbh]

Transferring funds from your Ordinary Account (OA) to your Retirement Account (RA) in Singapore is a decision that requires consideration of your financial goals, age, and retirement planning. Here are the key pros and cons of transferring your OA funds to your RA:

### **Pros of Transferring OA to RA:**

1. **Higher Interest Rates on RA:**
- The RA offers a higher interest rate (4% p.a. currently) compared to the OA (2.5% p.a. for the first $20,000 and 4% p.a. for the next $20,000, and 2.5% for balances above that).
- By transferring your OA funds to the RA, you can earn a higher return on your savings.

2. **Boosting Retirement Savings:**
- Transferring funds to your RA can help you build up your retirement savings, which will be used to provide monthly payouts when you reach retirement age.
- As you're already 72, ensuring your RA is well-funded will allow you to maximize the monthly payouts under CPF LIFE.

3. **CPF LIFE Monthly Payouts:**
- A higher RA balance can increase the amount of monthly payouts you receive when you start drawing from CPF LIFE (you can start the payouts from 65 years old, or later if you choose).
- If you transfer funds into the RA, it can enhance your long-term financial security by increasing the size of your CPF LIFE annuity.

### **Cons of Transferring OA to RA:**

1. **Liquidity Concerns:**
- Once transferred, the funds in the RA cannot be withdrawn for general use. This limits your liquidity since the RA funds are locked in for retirement purposes.
- You would not be able to access the transferred funds for other needs like housing or emergencies (unless you're eligible for specific CPF schemes, but those options are limited).

2. **No More Housing Use:**
- The OA can be used for housing-related expenses, like purchasing a home or servicing a mortgage. By transferring to the RA, you lose the option to use those funds for housing if you plan to do so in the future.

3. **Possibly Lower Interest in the OA:**
- While the RA offers higher interest, your OA balance may still be useful in other contexts if you plan to use it for housing, or if you want to maintain more flexibility.

### Considerations:
- **Your Retirement Needs:** If you already have adequate housing and do not need to use the OA for future housing, it may be a good strategy to move funds to the RA for better returns.
- **Age Factor:** At 72, you are already receiving or close to receiving CPF LIFE payouts, so maximizing your RA balance could be a good move if you want higher monthly payouts.
- **Other Assets:** Ensure you have sufficient non-CPF savings for any short-term needs or emergencies, as transferring to the RA limits your flexibility.

### Final Thoughts:
If you are looking to maximize your CPF LIFE payouts and have no further need for the OA funds for housing or liquidity purposes, transferring the funds to your RA is generally a good move. However, if you anticipate needing more liquidity in the future, it might be worth keeping some balance in the OA.

You may also want to consult a financial planner to tailor the decision based on your full financial picture.

That person at age has that little in CPF. And you said so much and without relevant knowledge.

At 72 he must be receiving mandatory payout and his RA will run out of money very soon as there a minimum monthly payout for his cohort.

The first thing he should do is to transfer that amount of OA to RA without delay as he will not be able to withdraw all his OA as some of OA will automatically go to RA, if he attempts to withdraw his OA. I think that's an idiotic rule of CPF that has been left unchanged.

If he has no other financial resources and alone without financial support from relatives, too bad as there is no magic. He has to keep working as long as he is alive and healthy. Hopefully, he has at least an elderly flat and receiving SSS. If he works he will also receive WIS.

Depends on his god and karma.

 

[JuniorLion]

Thank you ChatGPT

 

[LWZ]

Thank you ChatGPT

you already thanked ChatGPT earlier

 

[BBCWatcher]

Current in CPF:
OA: 38K
MA:52k
RA:2k
Question: Should he transfer all OA 38k to RA?

Short answer: yes, that's probably a good idea.

ChatGPT flunked, as it so frequently does. Henry has a much better answer.

Don't ever post AI-generated results unless you put right at the top: "ChatGPT's AI-generated answer says...." Credit the specific AI engine and indicate that it's an AI-generated answer. Otherwise you're just wasting everyone's time and often providing dangerously misleading or false information.

What’s his financial situation outside CPF?
If he don’t need to withdraw 38k for his living expenses…..then why not? Transfer all to RA and can even consider to top up RA using some of his spare cash

[Edited.] He can't withdraw OA (not most of it anyway) if he hasn’t met the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge). If so, he's currently stuck with OA earning only 2.5% interest and no ability to withdraw most or all of it.

At 72 he must be receiving mandatory payout and his RA will run out of money very soon as there a minimum monthly payout for his cohort.

It's S$350 per month minimum if he’s on the classic Retirement Sum Scheme. If so, his RA will probably be exhausted this year then his payouts will continue from OA (recent rule change) until both RA and OA are exhausted. If he’s on CPF LIFE payouts will continue for life, although his OA (if left in OA) will still be earning only 2.5% interest and won’t be factored into monthly payouts.

Of course if he doesn't currently need this (short lived) income he can redeposit any/all payouts back into his CPF RA if he wishes. And that could be a very smart thing to do since he may qualify for the Matched Retirement Savings Scheme (MRSS). If he can plow all S$2,000 straight back into CPF RA then he could potentially double it. (Something to check.)

He has the option to switch to CPF LIFE payouts if he wishes if he’s not already on CPF LIFE. The monthly payout would be lower, but it would last for life.

If he has no other financial resources and alone without financial support from relatives, too bad as there is no magic. He has to keep working as long as he is alive and healthy. Hopefully, he has at least an elderly flat and receiving SSS. If he works he will also receive WIS.

Family members (such as children and grandchildren) are usually able to transfer their OA dollars into his RA. That's frequently a good idea, although it's best to do that after grabbing tax reliefs and the MRSS if/as available.

As OA dollars land in his OA (from compulsory contributions) it would probably be a good idea to transfer them, every month, into his RA. That’d boost his interest earning and (eventually anyway) his monthly payouts.

 

[camholicx]

1. If children transfer OA to his RA - does it qualify for tax relief of MRSS? I suppose no rite, unless it is cash top up.
2. If children transfer 10k to his RA, does it means that his monthly payout will increase or it will remain as amount for a longer period?

 

[BBCWatcher]

As an important aside, in situations like this one (and echoing Henry's sentiments) the CPF Board probably could do better. For example, it'd be nice if the CPF Board offered auto transfers of OA to SA/RA. You could set (or change) these 4 auto-transfer options (radio buttons):

0. No automatic transfers from OA.
1. Retain $ ___ in OA per month, transfer the rest (the "mortgage option")
2. Transfer $ ___ per month, keep the rest in OA (the "elder allowance option")
3. Transfer ___ % each month (the "share success with my spouse option")

And then you'd have a transfer destination menu:

A. Your own SA/RA: ___ %
B. Family Member #1's SA/RA ___ %
C. Family Member #2's SA/RA ___ %
(Percentages must add to 100%.)

Also, the CPF Board should know whether OA is still being used for housing because it can see the housing deductions (and their absence). If OA isn't being used for housing, or if the OA balance is "excessive" relative to housing deductions (more than 3 years/36 months of housing payments for example), then the CPF Board should nudge these older members to consider OA to RA transfers. Maybe, hopefully the CPF Board is already doing this part.

 

[BBCWatcher]

1. If children transfer OA to his RA - does it qualify for tax relief of MRSS? I suppose no rite, unless it is cash top up.

[Edited.] No. Cash top ups do, if otherwise qualified. Make cash top ups for tax relief and MRSS first (if desired, if available), then follow with transfers from OA.

To be slightly morbid for a moment, when he passes away any residual (if any) would be paid to his CPF nominees. If that residual happens to be from OA dollars transferred the week before he passes on, so be it. Those OA dollars are thus "liberated" from the donors’ OAs and thus become unrestricted cash in that event. In the meantime, he's more financially secure and earns at least 4% interest p.a. on those dollars (instead of 2.5% interest in the donors’ OAs).

2. If children transfer 10k to his RA, does it means that his monthly payout will increase or it will remain as amount for a longer period?

[Edited.] The minimum classic Retirement Sum Scheme payout is $350 per month. If he’s receiving precisely this amount on this payout plan then adding funds to his RA could initially extend payouts for a longer period without changing the payout amount. But if enough, or more than enough funds are added the payout amount will increase. It just depends on his situation.

If he‘s on CPF LIFE, or switches to CPF LIFE, then he will receive monthly payouts for the rest of his life, however long it lasts. Whenever funds are added to his Retirement Account the CPF LIFE monthly payout amount will increase (and stay increased for the rest of his life).

Anticipating the next question, if he’s not on CPF LIFE and considering it, the CPF LIFE Basic Plan is most probably not for him in these circumstances. If he's in genuinely poor health then the Standard Plan is probably best. If he's in decent or better health (seems likely since he's still working) then the Escalating Plan could work best particularly since he is still working, has family members evidently willing to help, and will evidently be redepositing funds back into his RA (and pushing his monthly OA into RA too) to light a small rocket under his future income. That’s a bit of guesswork, though, and situations vary.

 

[qhong61]

Current in CPF:

OA: 38K
MA:52k
RA:2k


Question: Should he transfer all OA 38k to RA? Any pros and cons?

Thank you.

Con is cannot take out lump.
Pro is better interest.

 

[BBCWatcher]

Con is cannot take out lump.

[Edited.] That's not necessarily a con. It depends on whether he’s met the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge). The CPF Board enforces lump sum withdrawal constraints if he hasn’t hit that mark. If he’s in that situation then there should be at least some amount he can transfer from his OA to his RA without affecting his lump sum withdrawal options by even one penny. That “lump sum withdrawal-neutral” transfer amount could even be the whole OA balance.

 

[BBCWatcher]

I hesitate to mention this idea, but I'll mention it "for the record." His MA is currently $52K. He can't use his MA dollars to pay for daily necessities unless he's severely disabled. But he can use his MA dollars for his and his qualified family members' MediSave eligible expenses such as MediShield Life and base Integrated Shield plan premiums. If he wants to give his MA dollars to family members in this way in exchange for double the number of dollars coming back into his RA (from family members' OAs, for example), then that would be a reasonable trade for him I think.

I don't like the idea of "horse trading" like that. Just deposit money in his RA and let him keep his MA dollars for his own needs. But it's an option he has.

 

[qhong61]

That's not a con. He can't withdraw OA in these circumstances, not much anyway. His RA has never even come close to the BRS (with property pledge/charge)(*), so he's withdrawal constrained.

(*) This is a bit of an assumption, but it seems almost certain.

Why cannot withdraw?
Maybe he is not under cpf life.

 

[BBCWatcher]

Why cannot withdraw?
Maybe he is not under cpf life.

[Edited.] If he hasn't ever met the Basic Retirement Sum (with property pledge/charge) or the Full Retirement Sum then he’s lump sum withdrawal constrained. When you haven't set aside enough money in your RA then the CPF Board blocks you from most lump sum withdrawals until you correct that problem if you can. And, if you can't, you'll still get classic Retirement Sum Scheme payouts or CPF LIFE payouts, as the case may be.

In this event he might be able to withdraw a little in a lump sum — the $5,000/10%/20% ruleset depending on his cohort and any prior lump sum withdrawals he took. If so there’s probably still some significant amount he could transfer from OA to RA without affecting his lump sum withdrawal options.

 

[qhong61]

He hasn't ever met the Basic Retirement Sum (with property pledge/charge) or the Full Retirement Sum. When you haven't set aside enough money in your RA then the CPF Board blocks you from most lump sum withdrawals until you correct that problem if you can. And, if you can't, you'll still get classic Retirement Sum Scheme payouts or CPF LIFE payouts, as the case may be.

He might be able to withdraw a little in a lump sum — the $5,000/10%/20% ruleset depending on his cohort and any prior lump sum withdrawals he took.

It's "hilarious" discussing lump sum withdrawal options he doesn't actually have in this context. His classic Retirement Scheme payouts look like they're ending this year, he's 72 years old, and (fortunately) he's still working. This is a bit like worrying about whether your blanket is blue or gray ... the blanket on your bed in the hospital Intensive Care Unit. Yeah, OK, point taken I guess. But there are bigger problems right now.

Maybe he is under Minimum Sum scheme?

 

[ctan84]

He is a cleaner. Low paid.
If transfer all OA to RA, when the person demise, RA will be pass down to his kids?

Yes if his kids are nominated to receive his CPF and not his kopitiam friends.