Hero1624706161 Posted January 13, 2021 Posted January 13, 2021 (edited) I read many articles rgd RA (Retirement Account) and CPF LIFE but one area that is still grey to me is as follows: Suppose I top up my RA @ 55 with the full Enhanced Retirement Sum, over 10 years, this amount will compound to a very substantial amount. [Based on the Standard or Escalating Plan] My current understanding is I believe CPF's intent is to 'force' almost all funds in your RA into CPF LIFE and start paying your monthly annuity for life. My question is, between 65 to 70, just before joining CPF LIFE, can we decide to move ONLY A PORTION of the RA funds into CPF LIFE? and keep the remaing balance in our RA to earn the attractive interest rate, and to draw out from our RA whenever we please? Similar to any balance we might have in our SA / OA account at this age? [I am not referring to the BASIC PLAN, where 90 - 80% of funds in your RA remains in your RA after joining CPF LIFE] If we can confirm this, we can be more wary / careful how much money we want to flow into our RA account at 55, and not get 'cornered' later at 65 to 70 which will then be too late to turn back..... something for all locals to think about! :) Edited January 13, 2021 by Hero
Boxerfan88 Posted January 13, 2021 Posted January 13, 2021 (edited) I did a review about half a year ago. Take a look and compare the estimated monthly payout of BRS vs. FRS vs. ERS. The monthly payout doesn’t scale exactly 2x or 3x the capital placed. Out of the capital returns, I suspect there is some wealth transfer going on from the “rich” (ERS) to the “poor” (BRS). Do your own due diligence and decide wisely https://www.cpf.gov.sg/members/FAQ/schemes/Retirement/Retirement-Sum-Scheme/FAQDetails?category=Retirement&group=Retirement Sum Scheme&folderid=18088&ajfaqid=2190574 Edited January 13, 2021 by Boxerfan88
Hero1624706161 Posted January 14, 2021 Author Posted January 14, 2021 (edited) The monthly payout between ERS, FRS and BRS is different simply because the extra interest rate given for the 1st 60K of your balance. The way the RA works is at 55, a lump sum (BRS/FRS/ERS) is 'imprisoned' for 10 - 15 years earning compound interest. At 65 - 70, the large compounded amount (principal + interest) is used to pay for the 'one time' CPF LIFE annuity premium, which will then kick off your monthly $ for life. The Key thing to understand is once your $$$ crosses into CPF LIFE, all subsequent interest earned from your premium paid will no longer belong to you but to the collective POOL of members instead. If you live longer, the money from this POOL will continue to pay your monthly $ for life. If you live shorter (typically 80 - 82), then you loose out...... Still, my earlier question remains unanswered, ie... can you choose not to let CPF force ALL your $$$ in RA into CPF Life? Eg, if I only wanna use 50% of $$$ in my RA to purchase the CPF LIFE premium and keep the remaining 50% inside RA to earn 4-6% interest..... can or not? .............because the 4-6% interest in RA will belong to me and not to the collective POOL........get it? If cannot, I may not want to put so much $$$ in my RA when I reach 55! Edited January 14, 2021 by Hero
Audio Posted January 16, 2021 Posted January 16, 2021 On 1/14/2021 at 10:46 AM, Hero1624706161 said: If cannot, I may not want to put so much $$$ in my RA when I reach 55! You really got no choice here. Once 55, they will lock the minimum sum from your CPF Account and called it RA....or by now, they will call it CPF Life. You want "spendable" money? Then if you have balance after deducting Minimum sum , it will go to your OA which you can withdraw. (Audio)
Hero1624706161 Posted January 16, 2021 Author Posted January 16, 2021 I have analysed a few scenarios using excel (spent 2 whole days!), here is my conclusion for my current situation: 1) I will try to shield as much funds in my SA as possible. Why? Because after 55, your funds in SA is like a super bank account that pays 4-5% interest. Super. Period. 2) I will move as much OA funds into RA as possible. Imagine if both husband and wife both have full ERS in their RA, at 65, they will be getting a combined income of 50K pa, for LIFE.....and this is just from CPF!! Disclaimer........I am a fan of Mr CPF (1M65)
tsammyc Posted January 25, 2021 Posted January 25, 2021 Just choose the CPF Life "Basic" scheme at 65-70. About 10-20% of your RA balance will be immediately transferred to the CPF Life Fund when you make the choice (depending on the size of your RA balance. The higher it is, the lower the % transferred). The remaining 80-90% of your RA will remain in the Retirement Account and continue to earn 4-6% interest. Your monthly payment from CPF will be drawn from that balance, just like the previous Retirement Sum Scheme (RSS). The RA will run out of money in your early 80s and you will draw from the interest earned from your original 10-20% contribution to CPF Life. That will run out in a few years and you will start to draw down on the principal of your 10-20% contribution. At around 90, everything will run out and you will be supported by the CPF Life Fund. Essentially using "other people's money". Note that if you die before your RA runs out in your early 80s, beneficiaries will get the balance of your RA and the 10-20% you contributed to the CPF Life Fund. However, they will not get any of the interest earned by the CPF Life Fund. That goes to paying others who live over 90.
tsammyc Posted January 25, 2021 Posted January 25, 2021 On 1/16/2021 at 11:51 PM, Hero1624706161 said: I have analysed a few scenarios using excel (spent 2 whole days!), here is my conclusion for my current situation: 1) I will try to shield as much funds in my SA as possible. Why? Because after 55, your funds in SA is like a super bank account that pays 4-5% interest. Super. Period. 2) I will move as much OA funds into RA as possible. Imagine if both husband and wife both have full ERS in their RA, at 65, they will be getting a combined income of 50K pa, for LIFE.....and this is just from CPF!! Disclaimer........I am a fan of Mr CPF (1M65) CPF transfers your SA into your RA first before touching your OA. You don't have control over that. The only way to shield your SA funds is to buy products with the SA funds as they won't force you to sell them. However, there is a cost to buying these products, which you need to analyze. Note that you can top up from BRS to ERS using cash and therefore preserving your CPF. Note that after 55, you can continue to contribute to your RA ($7.5k last year, $9K next year) until you start to draw down. If you do that for 15 years until 70, the RA will be around $550k-600k, depending on interest rates. This will give a couple about $80k pa
Hero1624706161 Posted January 27, 2021 Author Posted January 27, 2021 (edited) On 1/13/2021 at 3:50 PM, Hero1624706161 said: My question is, between 65 to 70, just before joining CPF LIFE, can we decide to move ONLY A PORTION of the RA funds into CPF LIFE? and keep the remaing balance in our RA to earn the attractive interest rate, and to draw out from our RA whenever we please? Similar to any balance we might have in our SA / OA account at this age? [I am not referring to the BASIC PLAN, where 90 - 80% of funds in your RA remains in your RA after joining CPF LIFE] On 1/25/2021 at 11:07 PM, tsammyc said: Just choose the CPF Life "Basic" scheme at 65-70. About 10-20% of your RA balance will be immediately transferred to the CPF Life Fund when you make the choice (depending on the size of your RA balance. The higher it is, the lower the % transferred). The remaining 80-90% of your RA will remain in the Retirement Account and continue to earn 4-6% interest. Your monthly payment from CPF will be drawn from that balance, just like the previous Retirement Sum Scheme (RSS). The RA will run out of money in your early 80s and you will draw from the interest earned from your original 10-20% contribution to CPF Life. That will run out in a few years and you will start to draw down on the principal of your 10-20% contribution. At around 90, everything will run out and you will be supported by the CPF Life Fund. Essentially using "other people's money". Note that if you die before your RA runs out in your early 80s, beneficiaries will get the balance of your RA and the 10-20% you contributed to the CPF Life Fund. However, they will not get any of the interest earned by the CPF Life Fund. That goes to paying others who live over 90. Thx bro for the clear description for CPF-LIFE's BASIC Plan. I believe your clarification here is the most detailed I have read so far. Even clearer than CPF LIFE website Very helpful and I learned a few pointers However, my original question remains unanswered. The fundamental issue I have is that when you are on the BASIC plan, your drawdown from your RA is fixed and regulated by CPF. (dont even talk about the other plans where once 100% of your RA balance goes into CPF-LIFE, the amount is bye bye forever, ie no more lump sum in your control, in exchange for a guranteed payout until you die) Back to the BASIC PLAN, my query / concern remains unanswered. Below are a few scenarios: > say, a few years down the road after I start receiving monthly payouts, my kids given me more allowance and I want to reduce my payout by 50%, or > say, I want to stop payouts for a few months (maybe lucky strike toto or 4D ) Do we have any flexibility to do the above?? Why do this you might ask > : > to slow drawdown from my RA balance so that I could leave even more behind as inheritance > to prevent over indulgence / over spending (especially for some of us who are naturally thrifty by nature). Imagine money you might not need at a particular period just keep coming into your bank account that earns almost ZERO interest! Would'nt you rather stop the inflow from your high interest RA into your zero interest bank account?? So that the amount can continue to compound and grow in your RA for your later years where you might really need the money? Remember, by 70, ready or not, CPF-LIFE will start the payouts. You no longer have any control? Presently, logical reasoning tells me that > YES, you no longer have any control on the destiny of your money once it enters your RA. So think long and hard how much you want to go in. Welcome meaningful clarification / contribution from anyone :) Edited January 27, 2021 by Hero
Hero1624706161 Posted January 27, 2021 Author Posted January 27, 2021 (edited) On 1/25/2021 at 11:15 PM, tsammyc said: CPF transfers your SA into your RA first before touching your OA. You don't have control over that. The only way to shield your SA funds is to buy products with the SA funds as they won't force you to sell them. However, there is a cost to buying these products, which you need to analyze. Note that you can top up from BRS to ERS using cash and therefore preserving your CPF. Note that after 55, you can continue to contribute to your RA ($7.5k last year, $9K next year) until you start to draw down. If you do that for 15 years until 70, the RA will be around $550k-600k, depending on interest rates. This will give a couple about $80k pa I still have quite some years before I reach 55 and have not done any analysis yet. Anyone who have done SA shielding do share your experience. As mentioned in my post above, if you have a good amount remaining in your SA after 55, the flexibility of this SA balance will be exactly what I want for my ideal retirement account...... earning high interest when I dont need the money but have flexibility to draw anytime and any amount when I need it...... I strongly believe it is a good idea to safeguard my SA balance at 55.....yes, one way to do that is to top up RA (from BRS to FRS) using cash but not many ppl will have this option, also, not forgetting there could be a big sum sitting in your OA, if you have not invested it Edited January 27, 2021 by Hero
Boxerfan88 Posted January 27, 2021 Posted January 27, 2021 It's an open secret, there was an article in ST years ago on how to execute SA shielding. Park it in approved SA investments before midnight of your 55th birthday. Cheapest way is to park using one of the online platforms (eg.FSM). You will be forced to leave $40K in SA as a minimum. At midnight of your birthday, the RA account is created, the $40K from SA is swept into RA. The balance to make up the FRS is taken from OA.
Hero1624706161 Posted January 27, 2021 Author Posted January 27, 2021 (edited) 4 hours ago, Boxerfan88 said: It's an open secret, there was an article in ST years ago on how to execute SA shielding. Park it in approved SA investments before midnight of your 55th birthday. Cheapest way is to park using one of the online platforms (eg.FSM). You will be forced to leave $40K in SA as a minimum. At midnight of your birthday, the RA account is created, the $40K from SA is swept into RA. The balance to make up the FRS is taken from OA. If any bro have good experience in any specific investment for SA shielding, do share :) The underline statement above in my opinion can be very misleading. Pls allow time (maybe 1 week) for investment drawdown to take effect. Its not like buying shares where at a click of a butten and walla the funds are drawn out from your SA! Speaking from my experience investing my OA balance, it took around 5 - 6 business days for my broker to draw out my OA funds. If you simply wait until the day before you turn 55 (to shield your SA) then you will definately be in for a surprise / shock ! Edited January 27, 2021 by Hero
Audio Posted January 27, 2021 Posted January 27, 2021 (edited) I don't believe you still have SA account after 55. This is my understanding. Everything in your SA will be transferred into your RA. Anything bought with SA will remains as investment fund, which you gamble, win or lose.....it no longer earn you the 4%. If you made money with your SA bought investment, after 55, you liquid it, it goes into your OA, assuming your RA meets your CPF LIFE plan amount. Everything in RA is locked. If you are born after 1958, you will be on CPF LIFE. Payout starts at 70. If you strike lottery or your son give you allowance, your CPF Life payout remains the same. You cannot change here or change there. Why would the government would want to provide a 4% account for people to park their money? If it is so easy, then there would be no need for everyone to have OA, just move everything to SA. (Audio) Edited January 27, 2021 by Audio
Guest CASH Posted January 27, 2021 Posted January 27, 2021 (edited) 26 minutes ago, Audio said: Why would the government would want to provide a 4% account for people to park their money? If it is so easy, then there would be no need for everyone to have OA, just move everything to SA. this is why our stupid asswipe government is so smart... if cpf ever gave a choice to its citizens to withdraw every single cent that is in there, (actual fact, that is your own hard earned money), i would be first in line to withdraw all!!! i dont need to be thought how to use my own money. asswipe pap. Edited January 27, 2021 by CASH
Boxerfan88 Posted January 27, 2021 Posted January 27, 2021 (edited) 6 hours ago, Hero1624706161 said: The underline statement above in my opinion can be very misleading. Pls allow time (maybe 1 week) for investment drawdown to take effect. Its not like buying shares where at a click of a butten and walla the funds are drawn out from your SA! I clearly stated the transaction must complete before midnight of 55th birthday (park it in approved investments before midnight of 55th birthday). It is not misleading at all, you took what I wrote out of context. Sell share also where got click sell and then walla - funds magically appear in the account? Sheesh... I sincerely hope whoever is planning to do this sort of investment activity already have the necessary investment experience, and clearly knows about the transaction times. Noobies with less than a week to 55th birthday, is better off letting the default CPF process happen. Edited January 27, 2021 by Boxerfan88
Boxerfan88 Posted January 27, 2021 Posted January 27, 2021 (edited) 3 hours ago, Audio said: I don't believe you still have SA account after 55. This is my understanding. (Audio) Bro, still have SA lah... I can see OA/SA/MA/RA... Oops...I just revealed how young I am...ha ha Edited January 27, 2021 by Boxerfan88
Hero1624706161 Posted January 27, 2021 Author Posted January 27, 2021 (edited) 27 minutes ago, Boxerfan88 said: Bro, still have SA lah... I can see OA/SA/MA/RA... Oops...I just revealed how young I am...ha ha That is my understanding too. Whatever balance in your OA and SA after 55, will continue to remain in the OA and SA and continue to earn the 2.5% and 4% interest respectively. The only difference is the amount is no longer locked up! You can draw is out any amount, anytime you want or not at all until you retire from this world. Therefore, the SA earning 4% is such a beautiful account to keep after 55. Just remember, can only draw out, cannot put in anymore. This is the whole objective why i started this thread.... to have a SA (and maybe RA?) account that earns 4% and is flexible for you to draw out anytime after you retire. At present, looks like only SA is available for this purpose. The RA has a fixed destiny which you cannot change and is not flexible. Edited January 27, 2021 by Hero
Hero1624706161 Posted January 27, 2021 Author Posted January 27, 2021 (edited) 38 minutes ago, Boxerfan88 said: I clearly stated the transaction must complete before midnight of 55th birthday (park it in approved investments before midnight of 55th birthday). It is not misleading at all, you took what I wrote out of context. Sell share also where got click sell and then walla - funds magically appear in the account? Sheesh... I sincerely hope whoever is planning to do this sort of investment activity already have the necessary investment experience, and clearly knows about the transaction times. Noobies with less than a week to 55th birthday, is better off letting the default CPF process happen. Lets keep calm .... I am pointing out this for the benefit of those who are unaware. I try to consider folks with all sorts of experience reading this thread and some may not have the necessary investment experience..... Edited January 27, 2021 by Hero
Guest CASH Posted January 27, 2021 Posted January 27, 2021 i only have this to say......"I DO NOT TRUST PAP" cheer's!!!! hehehehehe!!!
Boxerfan88 Posted January 27, 2021 Posted January 27, 2021 (edited) 10 hours ago, Hero1624706161 said: Lets keep calm .... I am pointing out this for the benefit of those who are unaware. I try to consider folks with all sorts of experience reading this thread and some may not have the necessary investment experience..... Then don't say what I wrote could be "misleading" lor...that's taking things out of context and then being judgemental... If your intention was so pure and wanted to educate the inexperienced, you could have just added on and wrote "cater sufficient time so that the CPF SA transaction fully complete before birthday" lor... instead of accusing me of misleading... Edited January 27, 2021 by Boxerfan88 1
Hero1624706161 Posted January 28, 2021 Author Posted January 28, 2021 9 hours ago, CASH1624705743 said: i only have this to say......"I DO NOT TRUST PAP" cheer's!!!! hehehehehe!!! Hey bro Cash..... regardless of everyone's differences in opinion on the present government.... the important thing here is how to 'milk' the existing system to bring maximum benefits to yourself ah :) Taking a quote from Mr CPF from IM65, he said something like, 'we dun have to love the govn, but surely we can love their cash/money right?' heheheh
Hero1624706161 Posted January 28, 2021 Author Posted January 28, 2021 2 hours ago, Boxerfan88 said: Then don't say what I wrote could be "misleading" lor...that's taking things out of context and then being judgemental... If your intention was so pure and wanted to educate the inexperienced, you could have just added on and wrote "cater sufficient time so that the CPF SA transaction fully complete before birthday" lor... instead of accusing me of misleading... OK, lets try to move forward....... May I ask if you did any SA shielding, or have helpful experience or pointers to share at 55 before RA is created? Would be very appreciative of helpful contributions..... cheers :)
tsammyc Posted January 31, 2021 Posted January 31, 2021 On 1/27/2021 at 9:23 AM, Hero1624706161 said: Back to the BASIC PLAN, my query / concern remains unanswered. Below are a few scenarios: > say, a few years down the road after I start receiving monthly payouts, my kids given me more allowance and I want to reduce my payout by 50%, or > say, I want to stop payouts for a few months (maybe lucky strike toto or 4D ) Do we have any flexibility to do the above?? Why do this you might ask > : I know friends who have managed to get CPF to reduce the monthly payment. CPF do this on a case-by-case basis, but you cannot stop the payment. Reduction is accomplished by extending the payment period from your RA for longer. However the maximum is 95 yrs old so the reduction is limited. Reason for this is that Govt views CPF RA as retirement income, not a higher than normal paying investment that other taxpayers have to subsidize. So you cannot stop the payment. It is also possible to increase the monthly payment if you can show CPF substantial assets such that you do not really need the CPF monthly payments for ongoing expenses. Again in this case, they shorten the payment period from your RA, but the minimum is around 80 so any increase is also limited.
tsammyc Posted January 31, 2021 Posted January 31, 2021 On 1/27/2021 at 5:11 PM, Audio said: I don't believe you still have SA account after 55. This is my understanding. Everything in your SA will be transferred into your RA. Anything bought with SA will remains as investment fund, which you gamble, win or lose.....it no longer earn you the 4%. If you made money with your SA bought investment, after 55, you liquid it, it goes into your OA, assuming your RA meets your CPF LIFE plan amount. Everything in RA is locked. If you are born after 1958, you will be on CPF LIFE. Payout starts at 70. If you strike lottery or your son give you allowance, your CPF Life payout remains the same. You cannot change here or change there. Why would the government would want to provide a 4% account for people to park their money? If it is so easy, then there would be no need for everyone to have OA, just move everything to SA. (Audio) Most people continue to work after 55, some until 70. Their regular contributions go into OA, SA & MA. So SA must exist. You can also top up your RA after 55 by $7.5-$9K per year until it starts paying out. That gives you higher payout. Because the RA earns 4%, if you keep on topping up the RA until 70, it can rise to be about $550K when you hit 70, giving you $3K+ per month If you chose the CPF Life Basic Plan, only 10-20% is transferred from RA to CPF Life. You get paid from RA just like before. CPF can change payments slightly on a case-by-case basis, as I mentioned in the previous message. It's quite hard to understand everything when you are under 55. However, everything will start to become clear after 55. 1
Hero1624706161 Posted February 2, 2021 Author Posted February 2, 2021 (edited) On 2/1/2021 at 12:19 AM, tsammyc said: I know friends who have managed to get CPF to reduce the monthly payment. CPF do this on a case-by-case basis, but you cannot stop the payment. Reduction is accomplished by extending the payment period from your RA for longer. However the maximum is 95 yrs old so the reduction is limited. Reason for this is that Govt views CPF RA as retirement income, not a higher than normal paying investment that other taxpayers have to subsidize. So you cannot stop the payment. It is also possible to increase the monthly payment if you can show CPF substantial assets such that you do not really need the CPF monthly payments for ongoing expenses. Again in this case, they shorten the payment period from your RA, but the minimum is around 80 so any increase is also limited. Its interesting to know that some limited changes to your monthly payouts are allowed once you start CPF-LIFE. To me, nothing beats having total freedom SA offers you after 55 (provided you have satisfied the minimum requirements for your RA) Its a real pity to me why some folks just dun bother to shield their SA account at 55 especially when they have more than enough in their OA to satisfy the min requirements for the RA. For example, one of my colleague in his late 50s told me yesterday he just dun bother as he is very risk adverse. Doing a simple excel calcs, $100K sitting OA 2.5% vs SA 4%, the difference in compuounded interest after 10 and 20 years is $20K and $55K respectively. Unbelievable that one would just turn down Ah Kong's money like that! Edited February 2, 2021 by Hero
Hero1624706161 Posted February 2, 2021 Author Posted February 2, 2021 (edited) On 2/1/2021 at 12:28 AM, tsammyc said: Most people continue to work after 55, some until 70. Their regular contributions go into OA, SA & MA. So SA must exist. You can also top up your RA after 55 by $7.5-$9K per year until it starts paying out. That gives you higher payout. Because the RA earns 4%, if you keep on topping up the RA until 70, it can rise to be about $550K when you hit 70, giving you $3K+ per month If you chose the CPF Life Basic Plan, only 10-20% is transferred from RA to CPF Life. You get paid from RA just like before. CPF can change payments slightly on a case-by-case basis, as I mentioned in the previous message. It's quite hard to understand everything when you are under 55. However, everything will start to become clear after 55. To me, the 10-20% in CPF Basic Plan which is transferred to CPF LIFE is like an "insurance premium" you pay to gurantee yourself a payout for life..... of course if you leave earlier, this amount will be used to supports other members in the CPF-LIFE pool who live longer than the 'breakeven' point. After 55, if I do not have a better place to park my left over savings, I would consider topping RA by 7.5-9K as mentioned. Thank you bro tsammyc for your insightful contribution! Edited February 2, 2021 by Hero
Recommended Posts