Refund of housing withdrawal into CPF

[chialc88]

1M65



As what tanjm qualified in his initiation post, 
it's for a certain category of valuebuddies and not for all.

Anyway, I found this Cash Refund options when planning for de-coupling.

BTW, 3 more Monday before 2018.
Enjoy:


Dublin, anyone?

[Contrarian]

There's a CPF "hack" you can do that I recently discovered. Perhaps it is already well known, but it certainly didn't occur to me until recently.

It is based on the fact that you can refund your housing withdrawal back into CPF even if you haven't sold your property.

This is particularly attractive if
(A) you have paid off your property but are still living in it.
(B) you have spare cash that you would like to invest risk free for at least the next few years (or however far you are from 55)
(C ) You are relatively near the retirement age of 55.

You then earn the statutory minimum interest rate of 2.5% in OA or 4% if you can transfer some to SA. At present, 2.5% is better than the yield of a 30 year govt bond.

After contributing to CPF LIFE at age 55, you can withdraw the rest, or keep it in CPF at 2.5% interest rate. You can withdraw any amount on demand with about 3 days notice. i.e. basically use it as a high interest bank account.

Say we contribute $200,000 refund housing withdrawal.  Can we withdraw it at 55 years old, after picking the annuity options?

[CY09]

As of current policy, yes you can withdraw the difference

[PkNanas]

As of current policy, yes you can withdraw the difference

Interesting to know this option.

Allow me to ask other scenario.
If one is over 55 years old and has set aside enough CPF Life amount, can he still do the 'refund', enjoy 2.5% interest rate and allowed to withdraw anytime (after given required notice period)?

[Contrarian]

As of current policy, yes you can withdraw the difference

Thank you boss :-)

Let me go ask CPF.  If policy change, can I still withdraw...  that is the key answer to know :-)

[Porkbelly]

If you are 55yrs and above.. and have no more housing loans, and
have met the minimum sums.. or now its called a variety of things.. Basic, Enhanced.
The best is to log in to CPF and see your own statements.

Veterans in valuebuddies are way ahead of the curve, and will
discuss topics at a level that may not be easily grasped by non veterans.
It can be very cryptic... 
( but thats probably because I am not as knowledgeable ..) 


"refund" is a term that needs to be understood clearly....

This is what it looks like:

[tanjm]

As of current policy, yes you can withdraw the difference

Thank you boss :-)

Let me go ask CPF.  If policy change, can I still withdraw...  that is the key answer to know :-)

Nobody can guarantee CPF policies will not change. But think about this. This is a economically rational government. Most of its changes that I can think of were to further retirement adequacy or healthcare coverage for the lower income Singaporeans. So what could change?

a. (moderate probability). Reduce amount that can be withdrawn from CPF for housing. This will affect you only if you intend to purchase housing in the future. This is to improve balances in CPF.

b. (moderate probability). Increase CPF Life FRS  by a bit more. The current FRS of $177,000 will roughly give about an average of $930/mth income inflation adjusted at 2%. An increase to $200k will give a average inflation adjusted income of $1050 a month. (note: my own bespoke calculations). It depends on what the govt might consider a *basic* income.

c. (low to very low probability). Move the withdrawal age from 55 to say.... 57. Since at age 55, you already set aside a retirement fund, the govt has no reason to move this withdrawal age. At most, they adjust the retirement fund amount which has an equivalent effect (see b).

d. (moderate probability). Increase amount set aside in Medisave to account for rising healthcare costs and likely increased insurance premiums. The current Medisave MS is $49,500. Let's say they increase it to $65k (I'm just being arbitrary).

e. (moderate probability). An economic crisis hits. Govt cuts employer contribution rates to help goose economy, as it has done before.

f. (moderate probability). At some future date (say 5 years in the future), risk free interest rates have risen so that the 2.5% and the 4% OA/SA rates have to be revised. The gap between CPF and risk free rates narrows (the statutory rate for OA is some average of bank deposit rates. The rate for SA is 10Y SGS bond + 1%).

If you have just put in $200,000 for housing withdrawal refund, (a) only affects you if you intend to reuse it for housing. (b) and (d) will affect you slightly compared with the amount you put in, and its for your own good. (e) is possible, but won't have anything to do with the refund. if (f) happens, you are free to withdraw and invest yourself.

[specuvestor]

Actually "economically rational government" is most important in this CPF savings topic which is for the long haul. Like I said people are barking up the wrong tree when they ask if Singapore govt wont be able to pay them back. Any country will not default on their own currency denominated liability as long they control the printing press. It's a straw man

We can calculate the interest rate etc to the exact cent but if we get back Zimbabwe S$ 30 years later it is irrelevant. The most important for long-term savers is the preservation of value. Just compare Singaporean and Malaysian 50 years down when we had 1:1 exchange rate. We can easily argue that the average pay for graduates on notional amount is similar, but the wealth is quite different. Compounding it over next 30-50 years and it is very different

Penny wise pound foolish psychology is more rampant than a rational market should be.

[Jared Seah]

Specuvestor,

"Penny wise pound foolish psychology is more rampant than a rational market should be."

Now that's what I call a subtle "poke"!