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Use CPF account as a savings account. (Prefers money close by and is CPF the answer?)

Friday, September 1, 2017

This blog is the continuation of an earlier blog:
Our parents and their CPF plans.





Reader:
Thanks for your well structured reply! It answered most of my questions :)

The reason I am concerned is because my mum keeps cash in the house instead of making it work for her.. And often she gets "tempted" by agents/bankers who sell her savings plans (10 - 15years) with "guaranteed" returns!!!

I managed to stop 1 transaction last week during the free look period but she has another savings plan that is fully paid in the next month and will pay out every year for 10 years (I will just see it as damage is done)...
Hence I thought to further explore the use of her CPF account if she wants to earn more interest over the years.

She likes the feeling of 100% liquidity (which explains keeping of money at home) and she finds it a hassle to even withdraw it at the ATM.. will need to think of an arrangement such that it will benefit her pocket in the long run.







AK:
Yup, it is as I suspected. Your mom likes the feeling of having money close at hand. Haha. So do I, to be honest, if you remember my blog on keeping some convenience cash at home.

Yes, from my habits, you can tell that AK has joint the ranks of the old folks too. Cham. How like that? Die lah.

Convenience is a good thing but there is a price to pay for convenience. Convenience has a price? Yes. I blogged about this too.

Your mom is lucky to have you look out for her, especially when it comes to guarding her against unscrupulous sales people but worse than those would be the PONZI schemes.





Try talking to her about using her CPF account as a high interest savings account. She can do voluntary contributions up to the annual contribution limit ($37,740). 

Please check that her CPF-MA has hit BHS first ($52,000) or else most of her contribution, at her age of 60, will go to her CPF-MA and will be locked up.

Of course, I feel that it is a good thing to hit the BHS because the CPF-MA pays 4% per annum and the interest of more than $2,000 a year will pay for many things but it is her money and it should be her choice.



Related posts:
1. Convenience money.
2. The price of convenience.
3. Unpleasant experience at a bank.
4. PONZI schemes.
5. CPF as a high interest savings account.

5 comments:

Cindy said...

Hi AK, while we are at this topic, is it possible to transfer funds into my mum's cpf account this year and place her under the CPF life scheme? She is 64 this year and has close to nothing in her cpf accounts. Probably just $5k max across all accounts. If we transfer money to her cpf account up to the basic retirement sum of $80k, does this automatically enroll her into BRS or do a portion gets allocated to Medisave etc?

AK71 said...

Hi Cindy,

Inform CPFB that she wants to join CPF Life. She doesn't automatically qualify because of her age. You will have to do a RSTU (Retirement Sum Top Up) for her. Every cent will go into her CPF-RA this way.

See who qualifies for CPF Life:
CPF Life payout estimator.

Cindy said...

Thanks!

AK71 said...

You are welcome. Your mom is lucky to have you. :)

AK71 said...

Reader says...
i don't plan to withdraw from my OA/SA when hitting 55. Instead, my plan is to use our cash savings (which is on FD @ 1%) from 50-79. thereafter, we will draw down CPF from age 80. do you know if this is allowed? ie. withdrawing only at 80?

AK says...
CPF-Life (money in RA) will automatically pay out from age 70 but for money in OA and SA, you can leave it untouched for as long as you like. ๐Ÿ˜‰

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