Using CPF as fixed deposit after age 55

[CityFarmer]

I am only in my late 30s but I hv the below in my accounts
Cpf OA: $500k
Cpf ma:$50k
Cpf sa:$70k

500K in your CPF OA??! oh my goodness! how did you get that?!
u brought 100K of OSIM at 9cts in 2009 using CPF?

Actually, I'm more curious about funman's MA - the current MA ceiling is only $48,500. I suppose $50k is a rounded number?

The transfer of MA excess to SA, isn't done monthly, but half-yearly IIRC.

[egghead]

It is done instantly once you hit the ceiling. I should know since I've hit that ceiling. Basically, all my mandatory contribution goes to OA and SA only. Then every July, when the MA MS is revised, the ceiling will go higher accordingly, and I start to see my contribution to MA until it hits the ceiling again in a few months.

[gzbkel]

I think some buddies quite against leaving money in CPF, but I also interested in knowing if there are other opinions.
I created a poll to find out. Feel free to vote

[funman168]

Siong, seems that wan to retire also nd to know alot
Ya rd off
Oa:498
Ma:48
Sa:68

I am only in my late 30s but I hv the below in my accounts
Cpf OA: $500k
Cpf ma:$50k
Cpf sa:$70k

500K in your CPF OA??! oh my goodness! how did you get that?!
u brought 100K of OSIM at 9cts in 2009 using CPF?

Actually, I'm more curious about funman's MA - the current MA ceiling is only $48,500. I suppose $50k is a rounded number?

The transfer of MA excess to SA, isn't done monthly, but half-yearly IIRC.

[Big Toe]

In this ultra low interest rate environment, this seems a viable option.
BUT the spread between what you get under a normalized interest rate environment versus CPF will narrow significantly.
The way I see it, even if indeed we are able to take advantage of it now, the window of opportunity maybe limited.

[gzbkel]

With the announcement that you are no longer forced to top-up MediSafe, I think the idea of using CPF as a fixed deposit (after age 55, assuming you can meet the min sum) is more viable than ever.

Now the remaining two disadvantages are:
2) Depositing into CPF capped at $30,600 per year. May be a bottleneck if this amount does not grow with inflation, or you are HNWI.
3) Risk of government policy change that results in additional withdrawal restrictions.

Currently, I keep a cash reserve of about 30% for market correction or crash, and most of this is in fixed deposit.
I am mulling the idea of using CPF as a substitute for fixed deposit after 55, since the interest is higher.
This seems feasible, since you can withdraw from CPF as often as you like at age 55 if you are no longer working.
Do any of you plan to do so? (or already doing so?) Or do you prefer to withdraw as much as possible after age 55?

These are the differences I have gathered so far:
(CPF rules based on my understanding after I called their hotline. Please correct me if I am wrong)

Interest rate:
Fixed D: Current rate about 1 - 1.3%
CPF: 2.5% for OA, 4% for SA. (+1% for first 20k/40k)

Depositing:
Fixed D: No limit
CPF: Called "Voluntary contribution". Currently capped at $30,600 per year (If you are retired and have no mandatory contribution).
OA/SA/MA allocation ratios apply. (You cannot specify account). If hit MA ceiling, will overflow to SA. If hit SA ceiling, will overflow to OA.

Withdrawing:
Fixed D: Will lose all or part of interest income if withdraw before maturity.
CPF: Can withdraw any time on hitting age 55 if retired. Else, once a year. Since interest is credited monthly, interest loss is minimal.
*Cannot choose the account to withdraw from. Instead, withdrawal is based on the following order:
1) Interest income
2) Employer contribution (none if retired)
3) Medisafe, if exceed MA minimum sum.
4) SA
5) OA
**Each time you withdraw, you will be forced to top up your MA if balance is less than MA minimum sum. See following blog for details.
http://atans1.wordpress.com/2013/07/30/t...acilities/

Problems with this idea:
1) Forced to top up MA. May be an issue if MA minimum sum grows too fast.
2) Depositing into CPF capped at $30,600 per year. May be a bottleneck if this amount does not grow with inflation, or you are HNWI.
3) Risk of government policy change that results in additional withdrawal restrictions.

Can you think if any other problems if using CPF as "personal fixed deposit"?

(Edited to correct wrong link)

[opmi]

(2) By right, there is a cap.

[egghead]

From 2015, the CPF Annual Limit is increased to $31,450.

[kehyi4]

Now that we are no longer required to top up the MA per withdrawal after 55, has using CPF as a fixed deposit become more feasible?

[hiddenchilli]

At 55 the Retirement Sum amount is moved to your Retirement Account. The RS amount can be $80,500 if you pledge your property, or $161,000 if you don't.

Will the rest of your balance will remain in SA/OA?
If it does, it means we can use it as a fixed deposit.

Another qn: from 55 onwards, we can make yearly withdrawals. How much can we withdraw? AFAIK:
-Can withdraw any contribution to SA/OA.
-Interest earned in RA will remain in RA to accumulate for CPF life.
-How about interest earned in SA/OA? Can we withdraw them yearly as well?


Another question: lets say a person is eligible to withdraw at 55, $120,000, after setting aside the Basic Retirement Sum. Does it mean that he can choose to let the $120,000 remain in his SA/OA? Then from 55-65 can make yearly withdrawals of $12,000, while still earning interest. In other words, if a person has sufficient amounts ($120,000 in this case) he technically can retire at 55 already (rely on yearly withdrawal $12,000 from 55-65, then rely on cpf life from 65 onwards)?