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Reader:
Would you leave your money in CPF-OA (beyond 55)?
I can understand CPF-SA @ 4%.
Wouldnt it be better to move into CPF Life for better returns?
Noted that leaving it in CPF-OA will provide more flexibility. Thanks.
AK:
We have the option of moving more funds into the CPF-RA up to the prevailing ERS (1.5x the prevailing FRS) at age 55. Is it better?
If what you want is a higher payout from CPF Life, yes.
However, do note that you will be required to move funds from your CPF-SA first and not from your CPF-OA.
Only when the CPF-SA has insufficient funds, then, the CPF-OA is tapped.
So, let us say we have quite a bit of money remaining in our CPF-SA after our CPF-RA is created and FRS requirement met at age 55, it is not all that more beneficial for us to move more funds into the CPF-RA because we are not getting a higher interest.
It is the same 4%, assuming things were to remain unchanged.
However, for someone whose CPF-SA is depleted after the creation of his CPF-RA, if he wants to have the ERS in his RA, he would be moving funds from his CPF-OA and the funds would then be receiving 4% instead of 2.5% interest.
That is 60% more in interest income!
Like you said, flexibility is sacrificed but, in my opinion, the loss is well compensated.
Sweet but not available for everyone.
I have the happy problem of having much more in my CPF-SA than the prevailing FRS.
So, will I move more money into my CPF-RA at age 55 to meet ERS?
I will decide when I turn 55.
To anyone who just dropped in, another blog on the CPF was published earlier today.
See:
CPF Life Escalating Plan.
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