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Guide to CPF SA Shielding in 2023


CPF Shielding

Alright! Let's dive into the CPF SA Shielding technique and how you can use it to maximize your CPF returns. 🚀


What is CPF SA Shielding?


CPF SA Shielding is a nifty trick for those approaching the age of 55. It's a strategy to maximize the interest earned on your CPF savings. The idea is to ensure that more of your CPF money earns a higher interest rate of 4% p.a. instead of the lower 2.5% p.a.


Why Should You Consider It?


Both your CPF Retirement Account (RA) and CPF Special Account (SA) earn a solid 4% interest per annum, risk-free. But, the money in your CPF Ordinary Account (OA) earns just 2.5% p.a. So, if you're financially savvy, you'd want to maximize the interest earned by having more of your CPF RA formed by CPF OA funds (which earn lower interest) rather than CPF SA.


How Does It Work? Real Examples


Understanding CPF Retirement Account (RA): When you turn 55, your CPF RA is automatically created by pooling savings from your CPF SA first, then from your CPF OA, up to the Full Retirement Sum (FRS) which is currently S$198,400.


The Shielding Technique: Before you turn 55, calculate how much you need to transfer out of your CPF SA to leave just S$40,000 in it. Then, invest that amount in a low-risk investment product. After you turn 55, your CPF RA will be formed. You can then sell your investments and transfer the money back into your CPF SA. Optionally, you can top up your CPF RA to the Enhanced Retirement Sum (ERS) for higher monthly pay-outs during retirement.


For instance, if you have S$200,000 in your CPF-OA and CPF-SA respectively, by executing the CPF SA shielding, an extra S$146,000 will earn 4% instead of 2.5% p.a. This means an additional interest of S$2,382 in just one year! Over time, this can accumulate to a significant amount.


CPF Shielding example

Where to Invest?


You can invest your CPF SA money in products that are low-risk and high-liquidity investments in order to preserve your capital. Also choose something with the lowest cost too.


In Conclusion


The CPF SA Shielding technique is a smart way to ensure you're getting the most out of your CPF savings. Whether you choose to shield your CPF SA or not, remember that the goal is a comfortable retirement. And if you're not nearing retirement age yet, you still have time to grow your savings through systematic savings or investments.


Remember, every cent counts when planning for your golden retirement!


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