Pay back CPF or HDB first?

[maple96]

These are the links you will need to read so you can decide for yourself which is correct.

If you go to the RSTU page and look under forms, you will see that there are separate forms for topup using cash and using CPF, but they all fall under the RSTU scheme.
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme

In the RSTU FAQ, it again talks about transferring from your OA to your SA under the scheme
https://www.cpf.gov.sg/members/FAQ/...ping-Up Scheme&folderid=19860&ajfaqid=2188830

And in the CPF Life FAQ, it states that top-ups made under RSTU is excluded from being withdrawn with a property pledge
https://www.cpf.gov.sg/members/FAQ/...group=CPF LIFE&folderid=11656&ajfaqid=2186359

I think BBCWatcher correctly read my mind.

Maybe I should explain why I said “locked”, my plan is as follows:
1.) SA shielding
2.) FRS at 55
3.) BRS at 65

Assume FRS $181k, then BRS $90.5k.

At 65, if I decide to pledge my property, I will get back cash from my RA as follows:
i) $90.5k if I had only transfer from OA to SA, no cash top-up.
ii) $90.5k minus [all cash top-up]

I assume after CPF refund, the “refunded cash” goes back to OA first, then OA transfer to SA. This “refunded cash” does not fall under “cash top-up”. So it should not reduce the amount that I can withdraw from RA at 65. Thus this “refunded cash” is not “locked”.

Hope I am correct, if not please let me know.

tangent seems to be lost and confused himself, so he asked u to read all the rules to make u more confused

I always write in to CPFB to get double confirmation, cos reading the whole website will not give u a direct or complete answer. Whatever u raised is not new, had been discussed here before. Maybe Uncle Henry can help u further when he is free

 

[BBCWatcher]

I think BBCWatcher correctly read my mind.

No, I simply read what you wrote then provided a recommendation. You explained your situation at least fairly well.

Maybe I should explain why I said “locked”, my plan is as follows:
1.) SA shielding
2.) FRS at 55
3.) BRS at 65

Assume FRS $181k, then BRS $90.5k.

Bear in mind that BRS/FRS/ERS are shifting goalposts, shifting upward annually with inflation and a little more -- at a little below +3%/year, probably. So the exact figures will be different.

So why do you plan to draw down your Retirement Account to that low level at age 64.9? What goal(s) are(is) you trying to accomplish? Is a BRS+10% level of lifetime retirement income, for example, going to be too much retirement income for you -- too much caviar and champagne, so to speak?

At 65, if I decide to pledge my property, I will get back cash from my RA as follows:
i) $90.5k if I had only transfer from OA to SA, no cash top-up.
ii) $90.5k minus [all cash top-up]

Yes, that's correct.

I assume after CPF refund, the “refunded cash” goes back to OA first, then OA transfer to SA.

It goes to OA, then you can choose to transfer OA dollars to SA, up to the Full Retirement Sum and as long as you're under age 55. You can already do this, of course, if you have OA dollars.

This “refunded cash” does not fall under “cash top-up”. So it should not reduce the amount that I can withdraw from RA at 65. Thus this “refunded cash” is not “locked”.

Hope I am correct, if not please let me know.

You're correct, but the detail you're missing is that you can collect up to $7,000 of tax relief if you route the first increment of cash directly to your Special Account instead of via the OA to SA path. Yes, OK, that means the maximum amount of cash you can withdraw in a lump sum at age 65 (or just before you start CPF LIFE payouts) is a little less -- very near the BRS, but a little above it. But you enjoy tax relief; that's the reward, and it's almost immediate.

 

[maple96]

I think BBCWatcher correctly read my mind.

Maybe I should explain why I said “locked”, my plan is as follows:
1.) SA shielding
2.) FRS at 55
3.) BRS at 65

Assume FRS $181k, then BRS $90.5k.

At 65, if I decide to pledge my property, I will get back cash from my RA as follows:
i) $90.5k if I had only transfer from OA to SA, no cash top-up.
ii) $90.5k minus [all cash top-up]

I assume after CPF refund, the “refunded cash” goes back to OA first, then OA transfer to SA. This “refunded cash” does not fall under “cash top-up”. So it should not reduce the amount that I can withdraw from RA at 65. Thus this “refunded cash” is not “locked”.

Hope I am correct, if not please let me know.

How many more years do u have before u hit 55? We all know that CPF rules keeping changing, and u will never know what it would be when u hit 55, how many more years later?

What is your income tax bracket? How much can u save? Will u utilise SRS to pay less tax? Many other considerations. This is just a “now consideration”.

When I do retirement planning (the future), I need to consider worst case senarios. Whether I will ultimately use the plan ( be it plan A, B, C etc) depends on the situations when “my boat reached the destination.”

So u are doing the right thing, making sure u can withdraw 50% of FRS based on current rules by choosing to refund your OA monies, then transfer to SA. Whether u will ultimately follow your plan to choose BRS also depends on the rules and your situation when u reach there.

BBC always recommend and tell all here he will delay till 70 to start payout with ERS and join CPF Life choosing Escalating Plan. Whether he will follow his own recommendation/plan when he reached 70, no one knows, only he knows and he has a strong option to leave Singapore for good at 69.5 as he is a PR

Just simple common sense

 

[JustDoLor]

Several mths ago I read some posts/threads that OA transfer to SA done before 55 is not “earmarked”, However top-up with cash to SA is. At that time I did call CPF hotline to confirm. So I am sure about it. Thanks anyway.

These are the links you will need to read so you can decide for yourself which is correct.

If you go to the RSTU page and look under forms, you will see that there are separate forms for topup using cash and using CPF, but they all fall under the RSTU scheme.
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme

In the RSTU FAQ, it again talks about transferring from your OA to your SA under the scheme
https://www.cpf.gov.sg/members/FAQ/...ping-Up Scheme&folderid=19860&ajfaqid=2188830

And in the CPF Life FAQ, it states that top-ups made under RSTU is excluded from being withdrawn with a property pledge
https://www.cpf.gov.sg/members/FAQ/...group=CPF LIFE&folderid=11656&ajfaqid=2186359

 

[BBCWatcher]

Several mths ago I read some posts/threads that OA transfer to SA done before 55 is not “earmarked”, However top-up with cash to SA is. At that time I did call CPF hotline to confirm. So I am sure about it.

That's my understanding as well.

So here's how I approach this question, fundamentally. I look at the Basic Retirement Sum, Full Retirement Sum, and the current CPF LIFE monthly payout amounts under any plan you/I prefer. Let's look at the Standard Plan (just a random choice here), 2019 BRS and FRS (for those age 55 today), and age 65 payout amounts: BRS is about S$760/month, and FRS is about S$1,400/month.

OK, here's the question I ask myself: is there any reasonable or better chance that I will be attempting to live on anything like S$1,400/month of total income (2019 Singapore dollars) at any point in my elder years? And I, personally, have a very simple answer to that question: no, hell no. I'm not planning for that low standard of living, I don't expect it, and frankly I don't even want to imagine it. I have absolutely no expectation that S$1,400/month, or S$1,200/month, or S$900/month will ever be "too much" retirement income. It makes no financial sense whatsoever for me to pass up some nice, near immediate tax relief(*) in order to preserve a choice of reducing my future lifetime retirement income through this specific program from S$850/month to S$760/month, for example.

This particular decision is not complicated at all for me. However, if you feel that anything greater than S$760/month of lifetime retirement income (2019 calculation/dollars) would be a problem for you, that it'd be too lavish or something, then OK, maybe you'd be willing to pay more money today (in the form of not collecting tax relief, assuming you qualify for tax relief) to preserve that particular choice.

(*) And I'm a U.S. person. I keep only some of this Singapore income tax savings. I share a portion of the savings with the U.S. Internal Revenue Service. You presumably get to keep all the Singapore income tax savings you're entitled to collect.

 

[JustDoLor]

Thanks everyone for the response, appreciated.

I thought I have it right, but I just realised with CPF refund, there is another factor which I must consider if I wanted to withdraw exactly $90.5k from my RA at 65.

“You can withdraw your RA savings above the BRS fully if the expected CPF housing refund is able to restore your RA to your Full Retirement Sum when you sell/transfer the property in future.**“

So after CPF refund with cash, I have to make sure $90.5k or more is still remaining as “loan”. In the extreme case if I fully refund (which is unlikely), I would have nothing to pledge, then I will not be able to downgrade to BRS at all.

....
At 65, if I decide to pledge my property, I will get back cash from my RA as follows:
i) $90.5k if I had only transfer from OA to SA, no cash top-up.
ii) $90.5k minus [all cash top-up]

I assume after CPF refund, the “refunded cash” goes back to OA first, then OA transfer to SA. This “refunded cash” does not fall under “cash top-up”. So it should not reduce the amount that I can withdraw from RA at 65. Thus this “refunded cash” is not “locked”.
.

 

[BBCWatcher]

So after CPF refund with cash, I have to make sure $90.5k or more is still remaining as “loan”. In the extreme case if I fully refund (which is unlikely), I would have nothing to pledge, then I will not be able to downgrade to BRS at all.

No, that's not correct. You can still make a property pledge if you have a qualifying property to pledge, whether or not you've used OA dollars for housing or refunded them, in any amount. The language you're referring to relates to how property charges work (partially or fully in lieu of property pledges).

However, you have reminded me of another possible opportunity cost. If you route cash through your OA to get it into your SA, instead of just depositing cash directly into your SA (to collect tax relief if you qualify for it), then you reduce the amount of cash that you can repay into your OA later. Your OA is a 2.5% interest earning account, and some people like to stuff spare cash into their OA as they approach age 55 and beyond, to use it as a rather attractive "piggybank." But every dollar you repay is one less dollar, plus accrued interest, that you can repay later into your "piggybank." That reduction might or might not matter, but it is a possible opportunity cost.

 

[JustDoLor]

Ok. Thanks for pointing out, I was confused with property charge vs property pledge.

No, that's not correct. You can still make a property pledge if you have a qualifying property to pledge, whether or not you've used OA dollars for housing or refunded them, in any amount. The language you're referring to relates to how property charges work (partially or fully in lieu of property pledges).

.

 

[maple96]

To me it is very simple. Just compare how much u can gain from the reduction in income tax payable vs how much u can gain from the 4% interest on SA compounded for many years plus all other benefits like money not "locked" up for SA hack and other "locks". Dun forget the tangible or intangible benefits of more SA monies for the long long run, at a faster rate of return!

Why do u think CPFB is so good, always encouraging u to topup CPF to benefit from tax relief? So more monies will be "locked" for a long long time into CPF Life. Give u BRS also take back some or no use, give u opportunity to withdraw lump sum also no use or little use, if u keep topping up

Then dun forget, always have other sources of retirement funds, so even your mthly payout from CPF Life is "low", it does not mater. There are ways to still grow your monies if u know how, like your SA hack will give u guaranteed 4% annual interest which adds to your payout if u need it. Only those who dun know how will keep harping on the low mthly CPF Life Payout

Not forgetting not many are as lucky as JustDoLor, got cash to refund to CPF, got housing to refund to, got room to transfer from OA to SA, got all the lucky opportunities to earn 4% compounded interest for more years (ie at a faster rate), not forgeting SA hack!

 

[BBCWatcher]

To me it is very simple. Just compare how much u can gain from the reduction in income tax payable vs how much u can gain from the 4% interest on SA compounded for many years plus all other benefits like money not "locked" up for SA hack and other "locks". Dun forget the tangible or intangible benefits of more SA monies for the long long run, at a faster rate of return!

I don't think you understand how this works, or at least you're still having difficulty explaining it. So I'll net it out.

Scenario A

Here's what you get when you deposit $7,000 of cash directly into your Special Account:

A1. Near immediate tax relief, if you otherwise qualify. Your income tax payment(s) is(are) reduced in the year following the top up.

A2. Preservation of your ability to repay all OA dollars (plus accrued interest) that you used for housing at any time you wish, for more OA "piggybank" opportunity.

A3. Attractive interest for longer, higher lifetime retirement income payouts, and a higher residual for your CPF nominee(s) for all ages when a residual remains.

Here's what you must give up:

A4. The option (choice) to withdraw the entire Basic Retirement Sum from your Retirement Account in a lump sum in the time period from age 55 until CPF LIFE payout, with a property pledge. That is, the top up increases the minimum that that must be left in your Retirement Account (with attractive interest, higher lifetime retirement income, and a higher residual if a residual applies). The top up does not increase this minimum by more than the top up's relative contribution or by more than the Basic Retirement Sum (total to the Full Retirement Sum), whichever is lower.

Scenario B

Here's what you get you when you repay $7,000 of cash into your OA then transfer the $7,000 from your OA to your SA:

B1. The option (choice) of attractive interest for longer, higher lifetime retirement income payouts, and a higher residual for your CPF nominee(s) for all ages when a residual remains.

B2. Or, the option (choice) to withdraw all of the Basic Retirement Sum (BRS), with property pledge, in the period from age 55 until just before starting CPF LIFE payouts (which can be as late as age 70). (B1 and B2 are mutually exclusive for each dollar, and only B2 is a unique benefit to Scenario B.)

Here's what you must give up:

B3. Tax relief. There is none with this method.

B4. The number of dollars of OA available to repay is reduced, so your future opportunity to (re)cycle dollars into your OA as a 2.5% interest earning "piggybank" is reduced by that amount, plus accrued interest.

Scenario A is the much better deal in my view under reasonable (and even fairly unreasonable) assumptions, but it's up to each person to decide.

 

[maple96]

I don't think you understand how this works, or at least you're still having difficulty explaining it. So I'll net it out.

U obviously still fail to comprehend. It is for the member to determine how much is the tax savings vs benefit of OA refund/transfer to SA, which option is better for him. He choose OA refund!

I dun need to detail like u do just to impress or confuse

I think he is done! Me too!

 

[dork32]

i have mentioned many times, brs, frs, ers all have their pros and cons.

it is never a one size fit all solution.

justdo likes brs. he may have his reasons for it. there is nothing wrong with choosing this.

because he is going for brs, his strategy is correct.

 

[henrylbh]

i have mentioned many times, brs, frs, ers all have their pros and cons.

it is never a one size fit all solution.

You fail to understand him. There is only one road to Rome. And it's got to be there and no where else. Even the cost does not matter.

 

[henrylbh]

I think BBCWatcher correctly read my mind.

Your sure know what he talking about? With cash top to SA with benefit of tax relief, instead of through transfer from OA to SA, your intention to take out amount in excess of BRS will be lesser.

 

[henrylbh]

tangent seems to be lost and confused himself, so he asked u to read all the rules to make u more confused

I always write in to CPFB to get double confirmation, cos reading the whole website will not give u a direct or complete answer. Whatever u raised is not new, had been discussed here before. Maybe Uncle Henry can help u further when he is free

Why me and not you? Dementia is closing on me and tend to forget what I said in the past

 

[JustDoLor]

That remark I made only referred to that part where he wrote about BRS.... Initially I didn’t even mentioned about my intention for BRS... that’s how the remark came about.

As for his other recommendation that deviate from my intention, can just take as valid inputs for consideration lor...

Your sure know what he talking about? With cash top to SA with benefit of tax relief, instead of through transfer from OA to SA, your intention to take out amount in excess of BRS will be lesser.

 

[maple96]

No, that's the rule. Here's what CPF itself says about it:


The Retirement Sum Scheme is only for older cohorts.


No, I'm not assuming that. You are now evidently agreeing with me that the implications of this particular CPF rule are not generally worth worrying about.


The much more likely problem is that you have ongoing challenges with basic English reading comprehension and civil discourse. And you still haven't provided any specific recommendation.

rubbish, u cannot explain simple rules, u can only make things complicated

U cannot even extract the correct CPF rules or faq, even fail to explain the different rules clearly.

Here is the correct CPF rules we are discussing here:

Q I received top-ups before age 55. What happens to the top-ups when I turn 55?
A If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55. Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55.

My further comments:

Monies in RA are handled differently!

my suggestion already clearly posted, u simply refuse to accept or comprehend, is exactly what he wants so he can withdraw full BRS, read his latest post

 

[dork32]

That remark I made only referred to that part where he wrote about BRS.... Initially I didn’t even mentioned about my intention for BRS... that’s how the remark came about.

As for his other recommendation that deviate from my intention, can just take as valid inputs for consideration lor...

henry mentioned that bbc has only one recommendation. ers, escalating, rstu every year, draw down at 70.

he will shoot down all decisions.

if you like liquidity, or need money becoz your foreign lover who is jailed by authorities and need cash to get out, brs may be a good choice.

 

[henrylbh]

henry mentioned that bbc has only one recommendation. ers, escalating, rstu every year, draw down at 70.

he will shoot down all decisions.

if you like liquidity, or need money becoz your foreign lover who is jailed by authorities and need cash to get out, brs may be a good choice.

I no say. The epitome is practically everyone wins. So must do whatever possible it takes to win or be on top, regardless the situations.

 

[maple96]

henry mentioned that bbc has only one recommendation. ers, escalating, rstu every year, draw down at 70.

he will shoot down all decisions.

if you like liquidity, or need money becoz your foreign lover who is jailed by authorities and need cash to get out, brs may be a good choice.

I no say. The epitome is practically everyone wins. So must do whatever possible it takes to win or be on top, regardless the situations.

BBC always recommend and tell all here he will delay till 70 to start payout with ERS and join CPF Life choosing Escalating Plan. Whether he will follow his own recommendation/plan when he reached 70, no one knows, only he knows and he has a strong option to leave Singapore for good at 69.5 as he is a PR

To set the story right we 3 have similar views anyway

There is a difference between recommendation and suggestion.

I only provide suggestions here, some times recommend based on my own experience, but in my job, I always make recommendations to management