2 CPF Hacks when you turn 55?

Hack 1: CPF Special Account Shielding

I am sure most of you have heard of "CPF SA shielding" before. There are many articles written on it and I think Seedly info-graphics below summaries it quite well.

In brief, CPF shielding is actually a hack on the CPF system when you turn 55. At age 55, the following will happen.

1. CPF will setup a Retirement Account (RA) on top of your existing OA, SA and MA.
2. CPF will first transfer your SA to RA to meet the prevailing FRS.
3. If the amount in your SA is insufficient to meet the FRS, your OA will get transferred to your RA to meet the prevailing FRS.
4. When you hit FRS in your RA, you can withdraw the rest of the monies in your OA and SA, treating them essentially like a high interests savings account

Since monies in SA earn a higher interest than in OA, you will want to keep more money in your SA than OA. However, CPF always prioritize the transfer of funds from your SA to your RA. Hence "CPF SA Shielding" is a hack where you shields your SA funds from being transferred to your RA at 55 by investing your SA (you can only invest your SA money above $40,000), just before you turn 55, in a low risk short term investment such a 6 months T-bills or a bond funds. Hence your OA will get transferred first to meet FRS leaving you with more money in SA earning 4% interest! You can read more about this on Seedly.

Hack 2: CPF Ordinary Account Shielding

This is a lesser known hack for your CPF as you turn 55. While the first hack requires you to invest your SA, this one requires you to invest your OA (you can only invest your OA Money above $20,000) as well in an investment that can get you 4% or more. The idea of investing your SA and OA before 55 is to reduce as much as possible the amount of money that gets transferred to your RA when you reached 55.

This mean that you will have much lower than FRS in your RA and it will allow you to perform Retirement Sum top up for tax relief to your RA up to the prevailing FRS. The RA account with the above hack actually provides another way for you to top up your CPF account for tax relief and earning 4% interest risk free!

Do note that hack 2 does mean locking up more of your money in CPF and CPFIS and you need to be sure you have sufficient liquid fund before performing RSTU to your RA.

P.S. I have created a CPFcalculator where you can check what "CPF SA Shielding" does to your CPF account after you turn 55 and it's impact on your total CPF savings.

Happy CPF growing!