For those turning 55 this year, there is this loophole to move your CPF OA money to CPF Retirement Ac, leaving you with incremental return of 1.5% pa (from 2.5% pa to 4%pa).
Savings in your CPF SA can be withdrawn anytime, whilst earning the 4% pa interest, thus creating your very own high-interest savings account.
The much talked about loophole – CPF Shielding
What is CPF Shielding?
This is a process which “shields” your CPF SA savings from being transferred to your Retirement Account (RA) when you turn 55 years old to form your retirement sum.
When we turn 55, a new RA is created for us. Up to our Full Retirement Sum (FRS)will be transferred from our SA and OA into the RA. For example, the FRS in 2023 is $198,800.
RA is filled up first from our CPF SA balances, which earn 4.0%pa. Meanwhile, our CPF OA balances, earning 2.5% pa, is only transferred in after that. Because of this, some may prefer our OA funds to flow into our RA first and to shield our SA balances which already earns 4.0%. This way, we optimise the amount of interest we earn on our CPF balances.
After shielding process, savings in your SA can be withdrawn anytime, whilst earning the 4% pa interest, thus creating your very own high-interest savings account.
How to do it?
Before you turn 55 years old:
Step 1: Calculate how much you need to transfer out of your CPF SA, in order to keep just S$40,000 in the ac
Step 2: Transfer that amount of money out of your CPF SA by investing the money in low risk investment products. You may buy Unit Trust Funds in POEMS (see below)
After you turn 55 years old:
Step 3: Wait and check for your CPF RA to be formed
Step 4: Cash out by selling your investments
Step 5: Transfer the money back into your CPF SA
Login to POEMs Ac
• Under MySettings, MyAccount, Bank Ac Information, check if your trading ac is linked to your CPFSA account number.
If CPFSA is not setup yet in your trading ac, there is a need to complete the SAQ questionnaire at CPF website (you could login from the link below using your Singpass) - https://www.cpf.gov.sg/eSvc/Web/Schemes/CPFISSelfAwarenessQuestionnaire/Declaration
Upon passing, email a copy as proof to your broker for update. For ac with me, email to ellaintmn@phillip.com.sg.
• Under Trade(LP1), under Unit Trust tab, filter funds that could be bought using CPF SA. Select the funds to invest.
Tips…sort them by 3 yr and 1 yr annual returns. May choose those with no negative returns for as little price volatility reason. Another tip, do it closer to your birthday so that your holding be for a short period only.
After turning age 55, you may redeem, under Acct Mgt>>Unit Trust, and move the funds back to CPF SA ac.
What is the cost?
No sales charge or transaction cost for DIY in POEMs.
Don't have a trading ac with me yet?
You may use this link at https://www.poems.com.sg/open-an-account/?TR=Y3 to open a trading ac using your Singpass. My TR code is Y3.
On trading ac type to choose, you may open a Cash Management ac if you have a CDP ac where Sg listed shares are kept in CDP, and/or Cash Plus ac ( Sg shares kept in custody with Phillip Securities).
There are no charges for opening the ac.
Reference:
https://dollarsandsense.sg/cpf-shielding-hacks-special.../
https://www.moneyowl.com.sg/articles/sa-shielding-pros-cons/
https://www.straitstimes.com/.../no-more-shielding-of-cpf...
Brought to you by Ellain (97509313)
(Disclaimer: Errors and Omissions excepted)
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