CPF SA Shielding (do this just before you turn 55)
 

When you turn 55, CPF board will create a Retirement Account (RA) for you.

The money from your Special Account (SA) will first be transferred to your RA, followed by money from your Ordinary Account (OA), up to the Full Retirement Sum (FRS).

Note that FRS is $186k in 2021. It was $181k in 2020.

Because SA pays a higher interest (4%) than OA (2.5%), it makes sense to "shield" your SA money from being transferred.

To do this:

- Just before you turn 55, invest as much of your SA money as possible via the CPF Investment Scheme (CPFIS).

For example, you may buy SGS Treasury Bills (T-Bills) that mature in 6 months. Make sure that they mature AFTER you turn 55.

Note that you have to set aside 40k to remain in your SA, meaning that you can only invest the rest. For example, if you have 300k in your SA, you can invest 260k.

- When you turn 55, the 40k from SA and money from your OA will be transferred to the newly created RA.

- After the T-Bills mature, the money together with its returns will be credited back to your SA. Your SA money will then continue to earn the 4%++ interest.

RA interest rate also 4%

Suppose you have:
OA 151k
SA 151k

Without shielding, after you turn 55, you will have:
OA 121k <-- 2.5%
SA 0k
RA 181k

With shielding (after T-Bills mature):
OA 10k
SA 111k <-- 4%
RA 40k+141k

The difference is that you will have 111k earning 1.5% more.

This youtube video explains the CPF Shielding strategy very well:

https://youtu.be/i2n4l5UyfPw

Check out this asiaone article on the same topic.

Before you turn 55 years old:

Step one: Calculate how much you need to transfer out of your CPF SA, in order to keep just $40,000 in the account

Step two: Transfer that amount of money out of your CPF SA by investing the money in a low risk investment product (more on this in the section below)

Note, you’ll need to be able to invest under the CPFIS before you can do this.

After you turn 55 years old:

Step three: Wait and check for your CPF RA to be formed

Step four: Cash out by selling your investments

Step five: Transfer the money back into your CPF SA

Step six (optional): Consider topping up your CPF RA up to the Enhanced Retirement Sum (ERS) to enjoy higher monthly payouts during your retirement

Good article with details on the CPF shielding "hack":

https://dollarsandsense.sg/cpf-shiel...inary-account/

Can't you just transfer from OA to SA after you turn 55?

After 55, no.

See:
https://www.cpf.gov.sg/member/faq/gr...s-to-my-specia

"No, you will not be able to make CPF transfers to your Special Account (SA) after you turn 55. The Retirement Account (RA) was created for your retirement needs when you turned 55. Hence, top-ups to boost payouts will have to be made to the RA instead of SA."

Has anyone purchase T-Bills using SA for CPF shielding.

I called up my CPFIS bank (UOB) and they said it is not managed thru them.

I searched CPF website but T-bills is not listed -> s://.cpf.gov.sg/member/growing-your-savings/earning-higher-returns/investing-your-cpf-savings

Thanks

One point not mentioned in this thread is that after reaching retirement age, you can withdraw from OA and SA any time (subject to some rules), but you can’t withdraw from RA account. Hence, to the person who asked why not transfer from OA to RA to earn a higher interest, the answer is that if you have more than FRS amount in SA before age 55, it’s best to “shield” some money so that there’s more money in SA (earning higher interest) than in OA even though you can withdraw from both OA and SA.