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

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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%

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Originally Posted by Unregistered

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.

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This youtube video explains the CPF Shielding strategy very well:

https://youtu.be/i2n4l5UyfPw