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This is a guest blog that originated as an email from a reader, Vic, who would like to share his concerns with regards to the transfer of funds from OA to SA:
I was quite alarmed by the 34 year old who transferred all his funds in his OA to his SA.
a) transfer is not reversible. (Is he aware or are readers aware?)
b) by doing so, he has cut off a pool of funds for the purchase of housing in the future. I am not sure if that is a good idea since there are opportunities for housing investment. I assume that this man must be single at this point in time.
c) there is a limit to the amount of money that can be given out under CPF Life. So, any amount put in beyond minimum sum, at the Retirement Account (RA) level, you still get 4%. If you do not withdraw money at 55 years of age, the money is stuck there. This happened to my father who is 66 years old.*
He has $144,000 in the RA but can only be given $620 per month. He cannot withdraw the excess. At 4% per year, the interest from the $144,000 is $5,760 but, every year, he can only get $620 X 12 = $7,440. Net reduction is only $1,680 per year! In spite of this, he is not allowed to withdraw since he skipped the chance at 55. Medisave is full and untouched.
He has $144,000 in the RA but can only be given $620 per month. He cannot withdraw the excess. At 4% per year, the interest from the $144,000 is $5,760 but, every year, he can only get $620 X 12 = $7,440. Net reduction is only $1,680 per year! In spite of this, he is not allowed to withdraw since he skipped the chance at 55. Medisave is full and untouched.
Based on this, my father has to live at least 50 to 70 years more to fully benefit from his CPF retirement funds.
Some background:
1. My father has faithfully contributed the maximum CPF amount every year, partly as a means of tax reduction ever since he was a young man. He is a CPF believer!
2. He has withdrawn $800,000 for purchase of condo in 2006. Condo is fully paid up by his CPF funds.
Related post:
* AK is a bit kaypoh and checked CPF's website on this.
Check it out at: Withdraw CPF savings at age 55.
And also: CPF Life.
So, what we want to do is to withdraw from our CPF account all that we are allowed to withdraw at age 55 and what is left is the required CPF minimum sum which currently stands at $148,000. This will be transferred into our Retirement Account (RA).
Using the CPF Life pay-out estimator provided, assuming that the annual value of our place of residence is less than or equal to $9,500 and that our annual assessable income is less than or equal to $27,000, we could get the following benefits from the Life Standard or Life Basic plans.
Looks good to me as a minimum safety net.
What do you think?
Check it out at: Withdraw CPF savings at age 55.
And also: CPF Life.
So, what we want to do is to withdraw from our CPF account all that we are allowed to withdraw at age 55 and what is left is the required CPF minimum sum which currently stands at $148,000. This will be transferred into our Retirement Account (RA).
Using the CPF Life pay-out estimator provided, assuming that the annual value of our place of residence is less than or equal to $9,500 and that our annual assessable income is less than or equal to $27,000, we could get the following benefits from the Life Standard or Life Basic plans.
Looks good to me as a minimum safety net.
What do you think?
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