Using CPF as fixed deposit after age 55

[CY09]

Hi funman, it may be difficult to contribute voluntarily all of your 100k into CPF. There is a limit of 30,600 annually. Secondly, a voluntary contribution will not be all into SA but across the 3 accounts, thus depriving you of earning the full 4%. Lastly, for your case, it is difficult to utilise the min sum topping scheme as the MS limit is only 155k thus far. At your SA balance of 70k, you can only top up 85k directly into your SA account. However this too is still capped to the annual contribution limit of " $30,600 – Mandatory Contributions"

http://mycpf.cpf.gov.sg/CPF/News/News-Re...ov2002.htm

On a sidenote, as you are in your late 30s, I am curious how 500k is in your CPF OA and yet have only 50k in MA and 70k in SA, did you utilize any scheme which enables the topping up of CPF OA only? This is because your proportion of OA to SA+MA is unique, normally individuals will have approx 1.5 to 2.5 times the amount in OA to their total SA+MA and not 4 times.
Perhaps you could post or pm me how did you do it as I am interested in trying to contribute to only OA since I intend to use OA for my loan installment/drawdown of HDB flat. Thanks in advance.

[brattzz]

I have this problem.
I am only in my late 30s but I hv the below in my accounts

Cpf OA: $500k
Cpf ma:$50k
Cpf sa:$70k

I hv already bought my condo, o/s loan abt $600k

Shld I also consider to add another $100k into cpf so
That can max cpf benefit n nt pay interest?

500K in your CPF OA??! oh my goodness! how did you get that?!
u brought 100K of OSIM at 9cts in 2009 using CPF?

[funman168]

Thanks cy09 for the info.
Actually the majority of my $$$ in oa was made from the raffles edu & yoma in my earlier yrs...the $$$ been stuck in my cpf for quite awhile earning the interest..

Hi funman, it may be difficult to contribute voluntarily all of your 100k into CPF. There is a limit of 30,600 annually. Secondly, a voluntary contribution will not be all into SA but across the 3 accounts, thus depriving you of earning the full 4%. Lastly, for your case, it is difficult to utilise the min sum topping scheme as the MS limit is only 155k thus far. At your SA balance of 70k, you can only top up 85k directly into your SA account. However this too is still capped to the annual contribution limit of " $30,600 – Mandatory Contributions"

http://mycpf.cpf.gov.sg/CPF/News/News-Re...ov2002.htm

On a sidenote, as you are in your late 30s, I am curious how 500k is in your CPF OA and yet have only 50k in MA and 70k in SA, did you utilize any scheme which enables the topping up of CPF OA only? This is because your proportion of OA to SA+MA is unique, normally individuals will have approx 1.5 to 2.5 times the amount in OA to their total SA+MA and not 4 times.
Perhaps you could post or pm me how did you do it as I am interested in trying to contribute to only OA since I intend to use OA for my loan installment/drawdown of HDB flat. Thanks in advance.

[gzbkel]

Today I called up CPF again to verify the withdrawal frequency allowed.
Basically, you can withdraw as many times as you want, as long as you meet the following conditions:
1) You are 55 or older.
2) You already set aside the minimum sum in RA.
3) You are not working.

Based on this, I think the CPF liquidity is very good, if you meet the above conditions. There is a 5-day processing time for each withdrawal, but this should not be a problem unless you are trying buy something during a flash crash.
So it still makes sense to me to use CPF to store the cash part of my portfolio to take advantage of the better interest rate, unless CPF decides to change the rules.

Ok, on a serious note, you have set aside 30% of your total fund as cash.
I presume this 30% hard cash is for emergency purpose, or opportunity fund should the 2009 worldwide stock market crisis should appeared again.
So this portion of cash should be as liquid as possible, even though it is earning miserable interest rate at our local banks.

In my opinion, if this portion of cash is parked into CPF, which carries many restrictions and uncertainties, it can never be considered as hard cash anymore. And therefore it contradict your original purpose of keeping 30% of your portforlio as cash !

Even Warren Buffett is setting aside a big portion of his funds as hard cash. I'm sure we have something to learn from him.

Hello Layman

I am currently also vested in some REITs and pref stock.
I am taking about moving the cash part of my portfolio from Fixed D to CPF after 55. (I do not intend to top-up before 55)
Since you can withdraw from CPF at least once a year after 55, interest rate risk is not a problem I think.

My main concern is change of CPF policy, and how fast the MA minimum sum will grow (since you are force to top up MA before each withdrawal.

No offence, but I find it difficult to understand why you want to use CPF as an FD instrument , as much as why people want to invest in zero coupon convertible bond in a junk company .

The similarity :

Your case :
1. You earn peanut difference in the interest rate, but risk locking up the whole entire sum when there is major change in policy.

2. Maybe tomorrow when you wake up from you dream, you find that interest rate already start ticking up, and may be in a year or two the interest rate offer by the bank could well beat the miserable 2.5% by CPF board .

The zero coupon convertible bond case :
There is nothing to gain except risk risk and risk. Default risk, company wind up risk etc.

In conclusion :
You are taking on overwhelming risk just to gain the miserable interest difference. Is it worthwhile ?


And since you are toying with the idea :
1. I presume you are reaching 55 soon.
2. I presume you are cash rich CPF rich uncle who could easily beat the minimum sum set by the CPF board.

For me, I park a portion of my cash in bank preference share, Genting perpeptual 5.125%, and REITs .
( yes REIT. Since I'm taking risk, I might as well going for the highest interest possible in the market ! )

On the other hand, if this a just a technical TCSS scenario just for discussion purposes, then it's a different story !

[CityFarmer]

Today I called up CPF again to verify the withdrawal frequency allowed.
Basically, you can withdraw as many times as you want, as long as you meet the following conditions:
1) You are 55 or older.
2) You already set aside the minimum sum in RA.
3) You are not working.

Based on this, I think the CPF liquidity is very good, if you meet the above conditions. There is a 5-day processing time for each withdrawal, but this should not be a problem unless you are trying buy something during a flash crash.
So it still makes sense to me to use CPF to store the cash part of my portfolio to take advantage of the better interest rate, unless CPF decides to change the rules.

Another misconception on CPF withdrawal?

It seems that the condition causing the misconception, is the minimum sum.

[gzbkel]

Hi CityFarmer, can you elaborate more on the misconception?

Today I called up CPF again to verify the withdrawal frequency allowed.
Basically, you can withdraw as many times as you want, as long as you meet the following conditions:
1) You are 55 or older.
2) You already set aside the minimum sum in RA.
3) You are not working.

Based on this, I think the CPF liquidity is very good, if you meet the above conditions. There is a 5-day processing time for each withdrawal, but this should not be a problem unless you are trying buy something during a flash crash.
So it still makes sense to me to use CPF to store the cash part of my portfolio to take advantage of the better interest rate, unless CPF decides to change the rules.

Another misconception on CPF withdrawal?

It seems that the condition causing the misconception, is the minimum sum.

[CityFarmer]

I mean generally people presume difficulty to withdraw CPF money, even after 55. Base on your feedback, it doesn't seem so.

I reckon the condition that causing the misconception, is the minimum sum. Unless minimum sum met, otherwise no withdrawal. Once the minimum sum formula becomes more flexible, more people will be able to do their CPF withdrawal, after 55

Hi CityFarmer, can you elaborate more on the misconception?

Today I called up CPF again to verify the withdrawal frequency allowed.
Basically, you can withdraw as many times as you want, as long as you meet the following conditions:
1) You are 55 or older.
2) You already set aside the minimum sum in RA.
3) You are not working.

Based on this, I think the CPF liquidity is very good, if you meet the above conditions. There is a 5-day processing time for each withdrawal, but this should not be a problem unless you are trying buy something during a flash crash.
So it still makes sense to me to use CPF to store the cash part of my portfolio to take advantage of the better interest rate, unless CPF decides to change the rules.

Another misconception on CPF withdrawal?

It seems that the condition causing the misconception, is the minimum sum.

[specuvestor]

The other misconception is that the 2.5% is fixed. It is actually floating with statutory minimum at 2.5%

http://mycpf.cpf.gov.sg/CPF/News/News-Re...ay2014.htm

SMA account had been changed to peg to 10 year SGS rather than CPF OA ie 1.5%+OA.
http://mycpf.cpf.gov.sg/CPF/News/News-Re...un2014.htm

IMHO CPF interest rate is one of the few freebies from our kiasu govt that keeps on giving... They already quietly taking away the HDB loan in the guise of letting banks give alternatives in low interest rate environment

[sgd]

Sgs bond only abt 2.5%
The bonds listed on sgx all hv certain risk associated with it.
That y I am contemplating putting in cpf.
My idea is just to set aside all my hse $$, and try to earn the interest rate difference
I am thinking of buying another ppty in 2020 with my cpf...

you see this 4% it's until 2018

http://infopub.sgx.com/Apps?A=Cow_Corpor...AfNTBYfMo5

you see this 3.5% it's until 2027

http://infopub.sgx.com/Apps?A=Cow_Corpor...AfN8xYfMo4

so sgs bonds there are higher than 2.5%

You buy other bonds yes there's risk and I read briefly somewhere there's income tax on other bonds but sgs is tax free and I believe cpf also buying these at slightly higher special interest.

I can only assume you transferred a lot of money from your private bank account into cpf if you did that only time will tell if that was a right decision to do as they keep on roti prata and flipping the rules.

[Temperament]

I am puzzled by why you keep on saying, "you can withdraw as many times as you want"??? - Even all conditions are met.

Have CPF relax their rules and regulations of after 1st withdrawal (AGE 55 onwards), you are allowed to withdraw as many times as you want and at anytime too? Correct me if I read you wrong.

Basically, you can withdraw as many times as you want, as long as you meet the following conditions:
1) You are 55 or older.
2) You already set aside the minimum sum in RA.
3) You are not working.