Category: t_CPF

see https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=32094&action=edit

[25]build up150k]wife’s greenPortion

Posted on by tiger40490

 

  • $10k self top-up by cash .. excluded from green_portion of cpfRA. “Only meant for CpfLife monthly payout”. No way to withdraw at 55 or any time after.
  • $10k within-family cash top-up, includes my annual 8k .. excluded
  • $10k within-family cpf transfer .. excluded
  • .. In my dashboard there is an amount displayed.
  • $10k self transfer from her own OA (including VCon).. will go into green_portion 🙂
  • $38k VCon -> 3-way split .. about 27k will go into green_portion 🙂
  • .. salary contribution .. similar. Let’s wait for that to kick in.

The green_portion of wifeRA is f4w by “pledging”. As of Feb 2025, 24k is red_portion. Green_portion is about 60k.

It’s crucial to build up a big SA balance before she turns 55, so that when cpfRA is created, it will have a sizeable green_portion.

The timeline and process:

  1. at 55, FRS amount (say 250k) is auto-transferred from OA/SA into my new RA. (There may be an excess balance in OA/SA.)
  2. IFF we pledge my portion of the flat as “collateral” then we can take out the green_portion of cpfRA. We should test this channel after 55, a little bit.
  3. The OA/SA excess balance can be withdrawn 100% any time. We should exhaust this channel beffore touching the green_portion.
  4. After 55 (by 65), I will top up cpfRA to the ERS watermark.
  5. Before wife turns 55, self-transfer OA balance to SA.

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Posted on by tiger40490

This comparison proves to me that cpfOA is an inferior parking space.

Therefore, I should consider housing refund from FSM to OA to SA.

SA OA FSM bank
(comp)return@$1k marginal amount 4% 2.5% 2-3%
.. dependable return? yes no yes
how soon can take out without loss age 55 6M 1D
use for edu #after 55? BRS yes
use for housing before 55? no yes yes
use for U.S. housing/edu? no no yes
use for stocks mostly US no unlikely yes

lock up100k]cpf if no liquidity need

Posted on by tiger40490

See also

— The worries .. Given 300k [1] idle cash in your bank account, this sitting suck is exposed to (ranked by my worry)

  1. scams … growing threat as we age and lose some of our judgement
  2. splurge .. by anyone in the family
  3. [a] adult children 啃老 .. relying on me
  4. [a] adult children’s housing needs .. their problem, not my duty. I want to help out within my means. Having most of my fund locked into cpfLife obviates these tricky, heavy, stressful decisions.
  5. [a] start-up .. by my adult children or someone else. A good cause. However, beyond my 60s I won’t have big (above 100k) appetite for start-ups.
  6. [a] donations .. Large donation is safer in my will, not an impulsive decision. In contrast, regular contribution can be adjusted at any time.

[a] Some may call me an elderly hoarder but I want to protect my wife and my own retirement.

[1] You may have more idle cash, but let’s focus on a slice of it.

——————————-

If you are between 55 and 65, and foresee no “liquidity needs” after 65, then better lock it away in cpfRA. Time your action to some time close to 65.

If you don’t need this amount of idle cash after 55, then better lock it away in cpfRA. Note you still can withdraw the snap55_FRS_minus_BRS amount (the green portion). See %%big-ticket outlays: 55-65 – dTanbinvest

Q: how much locked up is too_much_locked_up?
A: an amount (like 1000k locked up) that affects my big-ticket purchases.
A: no amount is “too_much_locked_up”, if I have no big-tickets in my old age

— Q: Considering long-term inflation (60~90), but assuming no liquidty needs, should I lock up this huge[1] amount in cpfLife?

  • optimist .. I will have work income into my 70s. Part of it, if in Singapore, will go into cpfOA and f4w
  • optimist .. Assuming no liquity needs, my everyday living expensese will Not experience inflation as high as in housing, medical, education,,,
  • if I lock away this huge[1] amount of idle cash, then my monthly payout would be increased by some $x amount. I could invest this $x into inflation-hedging asset such as stocks or FixD
  • Outside cpfLife, I will have other productive assets such as rental prop, dividend stocks

[25]CPF: 2channels: withdraw{55

Posted on by tiger40490

This bpost provides simple binary framework. It is applicable to my and wife’s cpf withdrawals after 55.

Green_portion channel is irreversible, so use it as a last resort.

— channel: from OA

Right after RA creation, “excess” amount flows into OA. Any OA balance is 100% withdrawable any time, including subsequent salary contributions. OA becomes something like a bank account. No restriction like ‘SA top-up amount is not withdrawable’.

— channel: from the green portion of cpfRA. See [21]cpfRA for liquid parking@4% – dTanbinvest

HsbcLWA #

Posted on by tiger40490

Small quantum is the key reason for my quick-n-easy decision

— Here are the key product features I have collected about HsbcLWA [HsbcLife_Wealth_Abundance], to be confirmed.

  1. I pay 5 annual premiums of 12k/Y, over 49 months (M1 M13 M25 M37 M49), and then wait for another 71 months.
  2. .. Free and unlimted prem holiday after 5th installment.
  3. surrender value is not so good within the initial (49+71) 120 months i.e. MIP i.e. the prison_term. The “early surrender penalty” improves with time, and drops to 0 after 120M
  4. my 60k would buy units of a chosen fund (switchable FOC among 60).
  5. NAV of the units determine my surrender value at any given time after 10Y
  6. death benefit .. based on the higher of NAV and total premium.
  7. monthly payout starts in M2, based on current NAV, and continues till age 99 of “life assured”
  8. both monthly payout rate and NAV will fluctuate
  9. Life assured .. would be my daughter… automatically assign to me.
  10. .. after some time, I may buy another policy for my other kid, at the same premium.
  11. (sustainable) payout .. is managed by PIMCO; death benefit is guaranteed by insurer. Surrender value is specified in the insurance contract and specified in terms of NAV.
  12. transparent expRatio 2.1 ppa during 120M… a real charge to my account, though I may not notice it. Improves to 0.6 ppa after 120M.
  13. 8% “startup bonus”

— two components
aa) a fixed-income mutual fund
bb) a simple life insurance with 10Y prison_term, without gurantee of 100% surrender value

The (aa) provides “lifetime” payout + a capital preservation better than cpfLife.
The (bb) provides death/TPD benefit and nothing much

— Overall product rating (most important on top) .. Comparing against CC) cpfLife and AA) my existing annuities and other products

  1. quantum: excellent. Comparable to (actually better than) one of my annuities [FLI250]
  2. prison_term: bad.. I can’t back out easily if I find the product unsuitable.
  3. .. between CC and AA. CC prison_term is “life imprisonment”
  4. sustainable payout rate: 6% is recent performance only. CC is the best, despite the declining bequest
  5. surrender value safety: no guarantee, unlike my existing annuities
  6. .. between CC and AA
  7. payout wait: perfec, better than CC and AA
  8. death benefit: acceptable. Better than CC

— prison_term .. is defined/enforced by the ESC (early surrender charges). Within MIP, a withdrawal by default incurs ESC as a penalty. Penalty amount declines over the 10 Y window, to become $0 after 120M.

There is 1 big flexibility + 1 minor flexibility.

1) Monthly payout is a big flexibility. Assuming 5 ppa payout, within the MIP I would cash out 50% of my initial investment 🙂

2) A minor flexibility .. two fee-waived partial withdrawls during MIP. Here is one realistic timeline.

  1. Suppose customerX pays 12k via five installments in M1 M13 M25 M37 M49.
  2. In M50, NAV is 55k (close to the 60k total premium), and she withdraws, free of charge, 6% of that i.e. $3300.
  3. .. NAV immediately drops by $3300, and monthly payout would follow the reduced NAV.
  4. A few years later, when NAV is 50k, she does her second and final 6% free withdrawal, of $3000.

Q: How did I come to accept the life imprisonment of cpfLife?
A: Indeed I might top up to ERS at age 55 and have 450k locked up forever. This is possibly irrational.
A: Note a quarter of my ERS amount is withdrawable if I pledge my property.
A: With CpfLife, I don’t worry about payout_rate drop, though it is absolutely possible within my life time.

##[25]cpfLife adv over private annuity

Posted on by tiger40490

See also

— advantage: fineprints are well-documented
CPF Life product feature is probably more stable, and better understood. Fewer hidden surprises.

Same (no such thing in private annuities) policy for everyone. Easy to find answers online.

As a auth UI, Singapass shares this advantage.

CPF Life is designed for the less educated. The CPF board is not out to take advantage of its own citizens.

policy fineprints stay the same for decades. (Some private annuities evolve with market, or go out of market.) As a result, I invested dozens of hours to document CPF fineprints in 30+ bposts.

— advantage: hotline + service centers .. CPF customer service is excellent — onsite, prompt help, similar to a local police or WalMart. The information provides is simpler to understand.

As a auth UI, Singapass shares this advantage.

— advantage: expRatio
CPF is not run for profit. If the commercial insurer charges 3% fee a year or has average 5% surplus return from investment, or pays the salesman a commission,  then with CPF Life, these sums would go back into the pool, enhancing the payouts.

Compare a bookstore run by a church vs a commercial bookstore.

— advantage: non-profit .. The insurer is CPF board which I trust more.

If the economy takes a down turn for CPF members, and the CPF Life becomes insufficient as a retirement plan, then I trust CPF would consider adjustments (bending over backward) to help the members. Retirement is the #1 objective of CPF board of a nanny state. In contrast, Allianz is a commercial operator and not a nanny state.

— advantage: (standard plan) stable payout .. monthly payout amount stays constant in the Standard plan, provided cpf int rate and mortality rate stay constant.  I heard this promise in a Feb 2025 hotline conversation, and I trust this “promise”.

In constrast my private annuities have weaker “promises” on payout rate.

The rest are questionable “advantages”, but often cited as advantages

— higher payout_rate .. becuase

  • descending death benefit .. “selling blood to prop up payout_rate”. CpfLife is a “descending annuity”.
  • .. I prefer the words “descending/descent” for its neutral connotation
  • 10Y accumulation at 4 ppa. Many private annuities have 10Y or 20Y but I bought three annuties with 3Y accumu phase.
  • low expRatio

— liquidity (double-edged) .. private annuities have surrender value, an exposure to scams and adult children’s (unwanted) plea for help

As discusssed in lock up100k]cpf, if you don’t need some 100k idle cash for the rest of your life, then why not lock it away in cpfRA permanently to prevent those issues?

cpfVCon>SA #IRAS #Rule37740

Posted on by tiger40490

— Wife cpfSA..
First housing-refund to cpfOa. After full (housing) refund to cpfOA, we can consider voluntary cash top-up to cpf split 3-way, then cpfOA -> cpfSA

Sooner or later, by her age 55 I want to give her enough red_packet for FRS, so shall we do it now? See answer in https://tanbinvest.dreamhosters.com/17194/age-50-asset-allocation-aggressive/

— rules governing the VCon 3-way split
Rule: no limit on SA. Any contribution (by employer or voluntary) will go into SA. In contrast, top up to SA-only .. won’t be allowed after you hit FRS.

Rule: the 3-way split is computed first. If MA has reached 66k, then the MA share will overflow to OA. This is very likely to happen, so SA would end up receiving about 21% of the total contribution, and OA receiving the remainder.

Rule 1: if 5k of your contribution exceeds the annual limit $37740, that 5k will be refunded to you without interest [Rule 1b] and without penalty.

Any OA amount you contributed can be used for housing.

tax exemption (and liquidity restriction) doesn’t cover VCon

— Risk: cpfSA IRF(interest rate floor) is subject to change. No guarantee like cpfOA IRF of 2.5%.

cpfSA rate has been above 4% since 1995.

— Q1: How about housing-refund to my cpfOA by 50-100k.

(necessity)big-ticket items pre55: CPF top-up has a conclusion.

— Q2: shall we transfer some amount from OA to SA?
Is this transfer safe for wife’s account? I think 1k is ok but she may not understand the implications.

— All CPF accounts are illiquid to varying degrees. Some amounts in OA and SA can be invested. Some amounts in OA/SA can be withdrawn at 55. Some amounts in RA can be withdrawn at 65. CPF-life is the most illiquid.

A cash Top-up transfers liquid cash from bank account into illiquid CPF accounts. Top-up is usually irreversible — You can’t withdraw anything into liquid cash, with certain exceptions.

Lock-in/lock-up means no withdrawal, and is the main drawback of top-up. As to the benefits of top-up, there are two

  • top up 33k to SA and this 33k would earn interest (around 4%) in SA, but this interest is not usable as cash
  • top up 88k to CPF-life and this 88k would produce monthly payout in cash 🙂 and the return rate is rather high.

— At age 65, RA will be used to pay annuity premium, and monthly payout will start.
Any excess across CPF accounts would probably be liquid.

— After age 55, there’s a limited level of liquidity, perhaps incompatible with my plan
— At some time before 55, when I pay down a mortgage, this is the best level of liquidity in CPF-OA
— Here I discuss four forms of top-up.
B1) IFF at 65 you don’t have ERS (Enhanced retired sum) in RA, and decide to top up 100k into RA (not to exceed the ERS), this 100k will be locked in and generating compound 4%. This 100k starts producing monthly payout at 65.

The earlier you top up, the more interest you earn, at the cost of liquidity. For example (I described at Sep 2022 CPF appointment), If you set aside 100k 6M in advance, then you can top up 100k 6M before 65th birthday. Waiting period is 6M. During the waiting period, your 100k earns 4% in RA.

B2) You can also top up, say, 50k to RA at, say, age 58 (after 55), and this 50k would be locked in for a lengthy 7 years until it transfers into cpf-life and starts “producing”.

CC) If you (VCon) top up before age 55, then it (partially) hits SA. You can withdraw it at 55 or any time

CPF confirmed that $2k transferred from OA to SA will earn $30 (1.5%) more every year.

DD) if you top up to OA (up to the housing-refund limit), it pays down the housing portion. This is an interesting option. — discussed in depth at (necessity)big-ticket outlays now till 55

— decision to make at age 65, not 55!
At 65, CPF members choose how much money to committed to CPF-life. The amount will be locked in.

No real minimum participation amount — Even if you have only 20k in RA, it can still transfer to the annuity account.

— Rule 37740 .. Not a separate rule, but a consequence of the 6k rule on OW and 30k rule on AW.

For a max-earner, the contribution “engine” would self-stop (like a self-driving car) at $37740. By design, the engine would never break the 37740 rule and lead to refund from cpf. (If a payroll software system doesn’t use this engine, it could break 6k rule or 30k rule, resulting in refunds from cpf.)

Let’s illustrate with real eg. In my 2021 (and likely 2022),

  • AW [additional wage] contribution by employer+employee was capped at 37% x 30k = $11,100
  • .. If your bonus exceeds 30k, the surplus bonus is ignored by the engine
  • OW [ordinary wage] contribution was capped at 37% x 6k x 12M = 37% x 72k = $26640
  • ^^ add up to 37% x 102k = $37740, also equal to 17M of 6k/M x 37%. As a breakdown
  • employer’s contribution was actually capped at 17% x $10,200/Y = $17,340
  • employee’s contribution was actually capped at 20% x $10,200/Y = $20,400

Deciding factor for the “max-earner” is …. 30k bonus!  If AW hits 30k and OW hits 6k,  then you are (regarded by CPF system) a max-earner and should not make a VCon [voluntary contribution]. Here’s why.

VCon is designed for non-max-earners. Max-earners’ accounts  already receive sufficient OW/AW contributions, so CPF board probably don’t want to pay such high interests on additional amounts contributed by these max-earners. Any VCon would be 100% refunded at end of year, without interest. You would be lending that amount to CPF board at zero interest.

[22]targeted top-up to wifeSA

Posted on by tiger40490
  • j4: yield
  • J4: lock down free cash against missteps or hackers
  • limitation — very poor liquidity.

See also

Rule 1: every $1k I top up to wifeSA is locked up forever. I wrote this in 2022. See wife’s geen portion

Rule 2 (Self-transfer): in my own case, any time after 55, I can apply to withdraw any excess amount from RA as long as remaining RA balance exceeds the BRS watermark. So in 2021, any self-transfer from OA to SA is “unrestricted”… can take out after 55.

— tax benefit .. comes with a severe restriction — any targeted top-up amount can’t be withdrawn at any time, not even after 55 or 65.
* MA account can’t be withdrawn except medical

Rule: Suppose I want to top up 8k in 2024 to enjoy tax benefit:
wife’s 2023 (pervious year) income must be < 8k including dividend, interest etc

Rule: only applies to targeted cash top-up to SA or targeted top-up to MA, including to family member’s accounts.
.. Rule: OA -> SA is unrelated to “income” and ignored by IRAS.
Rule: only the first $8k is recognized by IRAS for each tax year.

VCon amount of 37k (unlike targeted top-up) is NOT tax-exempt even though part of this 37k goes into SA/MA. (As confirmed at cpf appointment), the amount can be used for housing or withdrawn after 55.

In essence — Tax ^ Liquidity are 2 sides of a coin:

  • with tax benefit, you sacrifice liquidity .. Look at targeted top-up
  • without tax benefit, you have some liquidity .. Look at VCon.