Friday, June 17, 2016

Considerations on How To Manage Your CPF Money

Hi Everyone!

Today is the day that I receive my CPF money for last month's income in my account. Although it is not much but it helps me to build my funds for purchasing condo (my target for next year - Investing in Property.. My Choice and My Plan). CPF also recently upgrade their website to enhance their user interface and also with more information on individuals CPF money (Previously mention in this blog post - Are You Ready? By CPF Board).

So, today's topic is about CPF, because there are many options out there on how to manage your CPF money in order to earn higher interest rate or use it to purchase properties. Well, different people will have different idea on how they going to spend their CPF money, so there is no definite answer on whether which decision is the best. So I will mention some of the suggestion that I have in mind on how can one manage their CPF money.

1. Shift all your money from Ordinary Account to Special Account

So the first point, shifting money from ordinary account to special account, the reason for doing that is because Special account will generate higher interest rate as compared to ordinary account as shown below

CPF Interest Rates (01 April 2016 to 30 June 2016)
(reviewed quarterly)
Ordinary AccountUp to 3.50% p.a.
Special & Medisave AccountsUp to 5.00% p.a.
CPF Interest Rate (01 January 2016 to 31 December 2016)
(reviewed yearly)
Retirement AccountUp to 5.00% p.a.

Pros: Able to earn higher interest rate and the user will be able to meet the minimum sum. 

Cons: Irreversible, which means once you transfer your OA to SA account, you cannot reverse back. This is an important note to those people who intent to purchase properties (HDB/Condo and etc.), do not blindly transfer your money inside your OA to SA without any planning. This will only cause backfire when you need to purchase properties and found yourself unable to purchase due to lack of funds

2. Top up your money to CPF account

People can top up their CPF account using cash so as a way to earn better interest via CPF and also tax relieve as well. This is a win-win situation whereby people can earn good interest from CPF and also getting tax relieve from doing so. There is a limit on the amount to top up to achieve the tax relief, the amount for topping up per calendar year is $7,000.

Many people in forum and blogs mention that they do this approach whereby they can see the money grow and they can enjoy the returns when they retire. This is indeed a valid reason whereby it is hard to find a such a good channel with very minimal risk (except for the ever increasing minimum sum) with good interest rate of up to 3.5% per year for ordinary account and up to 5% per year for special, medisave and retirement account. 

Pros: Earn higher interest in CPF account and less risky as compare to stocks and bonds in the market in order to achieve the similar interest rate.

Cons: Irreversible, which means once you put the money into CPF, you cannot withdraw until you reach 55 years old which some portion of the money will go into retirement account and the rest of the money you can either put it in retirement account or do a lump sum withdrawal. this would means that if you really need cash to start a business or something else, you will have cash flow problem.

3. Purchase Properties with CPF money

The last option that you can do is to spend all your CPF ordinary account money to purchase property in Singapore. With purchasing of property in Singapore, you can rent it out or sell it at a higher price to earn profits from it. However the current rental and property is not very good,so do your own homework/research before your do any big ticket purchase.

Pros: Able to rent out or sell at a higher price, which means you can get cash on your hand rather than keeping it in CPF. With cash you can go for tours, holiday, and purchase whatever you like (within means, don't fall into debt!).

Cons: As purchasing property, it seems to be a bit riskier than CPF, so if you want to go for less risky investment, should stay with CPF, instead of buying properties.

4. Topping Up Parent's Retirement Account

I have come across one blog talking about how younger members can get 6% per year from CPF from AK71's blog. Source: How younger members can get 6% per year from CPF

Topping up parent's retirement account can be quite a good move as it has goo interest rate and also can help in Tax relief. Because for the first $30,000, the interest rate is 6% and the subsequent amount is 5%. I think this is a really good move but of course, do talk to your parents about it before doing it, after all this is their account.

Some people use this method for their own gain but some are for building their parents retirement fund. So each has their own good, so do really plan well for this and strike a balance out of it.

Pros: Earn higher interest and tax relief, which can potentially save quite a huge sum of money.

Cons: Clash of interest between siblings, when it comes to money, it is quite sensitive, because people have their own agenda. So if two siblings have the same idea of using retirement fund to generate higher interest for their own use, then there will be a war between siblings.

5. Do nothing, remain status quo

Well, if you are rich enough and don't really care about CPF money, then just leave it as it is. Some people really treat CPF as extra money when they retire. So they won't even track how much they have in their CPF account until CPF sends them letter. I do know some of my friends are like that, either they are too cash rich or the other extreme end is that their income are low or they don't intent to use CPF money as of now so they won't go check or do anything about it.

Pros: No need to worry about managing CPF money

Cons: Lose out opportunity to earn more interest

So what do you do with you CPF money? Care to share with me some of the tips that I might have missed out? Write in the comment below.



  1. How about opening a CPFIS account if you are stock investing savvy?
    Cons - "Boh Pow Chiat"

    1. Yea lor, if lose money then jia lat sia. I rather dont use cpf fund to invest unless you are certain that you can beat cpf interest rate


  2. It's true!Learning how to manage and grow your money is the only way for getting rich.


    market neutral