Should I transfer my excess in my CPF OA to my SA? - Seedly
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Anonymous

Asked on 26 Jan 2020

Should I transfer my excess in my CPF OA to my SA?

Let’s say I set up a higher amount for purchase of a resale flat at $700k (better to set higher amount for 4-rm) 5% cash = $35k and 15% cpf OA = $105k. Does it mean if any excess In cpf oa more than $105k, I should transfer excess in OA to SA now?

Ps. Not looking or buying now, so OA will still accumulate more

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Shengshi Chiam, CFA
Shengshi Chiam, CFA, Personal Finance Lead at Endowus
Level 6. Master
Answered on 27 Jan 2020

Its great that you are taking responsibility of your personal finances, and are questioning the usual recommendation of OA to SA transfer. Yes, the 1.5% additional interest is appealing, especially if your SA has not reached $40,000 for you to enjoy the additional 1% interest.

Let me highlight to you the key issues about the OA to SA transfer.

  1. Irreversible, as per what Hariz mentioned. There may be moments in your life where you wish to have it to repay your mortgage, especially when you lose your job.

  2. You are effectively losing money through destruction of a tax relief avenue, as the RSTU for tax relief is capped at the current Full Retirement Sum. When you do a cash top up to your own SA account (up to $7,000) , the amount is reduced from your taxable income. Let's just assume you are of a 7% tax bracket. and you have transferred $80k from your OA to SA. You have effectively destroyed $5,600 worth of tax relief when you do that transfer, and that is not inclusive of the compound interest that would have even further reduce your tax space.

OA to SA is a very very personal decision, and is also very dependent if your current level of tax reliefs is high enough to lower you to a very insignificant tax bracket.

The transfer is extremely attractive for working moms with a stable income and not looking to upgrade their house for the long term. In contrast it is extremely unattractive for single guys/ladies aiming for a high tax bracket and wants more flexibility and higher growth with their OA monies.

All my OA monies will be invested by end Q1 2020, I definitely want to do better than 2.5% AND still have the flexibility to use the monies for other purposes. ​​​

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Chee Seng Marcus Chew
Chee Seng Marcus Chew

27 Jan 2020

It is always a friendly swashbuckling duel 🤺 when the topic of CPF OA to SA transfer 🆚 annual cash top up to your own SA account 🆚 CPFIS investing. Each have their pros & cons and the considerations are usually the unique circumstances and context of each individual’s. As for me, I have utilised all 3 at different timeline weighing the cost & benefits. Thank You Seedly! For all the meaningful discussions & constructive debates.

I'd much rather you invest your OA instead of transferring to SA. The transfer is irreversible. At least if you're investing, you can sell your holdings and get back money in OA should you desperately need it.

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Question Poster

27 Jan 2020

Why still need it when already had enough for down payment? The rest of mortgage will be paid by bank loan. So cpf OA not much usage. No?
Hariz Arthur Maloy
Hariz Arthur Maloy

27 Jan 2020

Yeah don't keep it in OA, but invest it instead of transferring to SA.
J
jiafong
Level 3. Wonderkid
Answered on 09 Feb 2020

I used most of my CPF OA monies for mortgage, so it is constantly at a low value.

You may want to transfer to SA if you have small amounts because investing it is inefficient

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Ang Boon Ping
Ang Boon Ping
Level 2. Rookie
Answered on 27 Jan 2020

Hi,

it really depends whether you want to grow cpf aggressively to help you in yr retirement.

Since you have already put aside the money needed for your house and you have NO other purpose to use yr remaining OA money, growing yr SA with OA money is a logical choice.

No doubt you can top up yr SA using RSTU. Do note that, top up money can't be withdrawn after 55 even if you have reach FRS.

It will be reserved and form part of yr FRS. You can view the money reserved at the last part of section A in yr CPF account.​​​

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Shengshi Chiam, CFA
Shengshi Chiam, CFA

27 Jan 2020

For most people, their cpf SA will be formed largely by their employment or interest earned. These will be withdrawable. RSTU topups will inevitably form part of your CPF RA and eventually CPF life.