Options for the CPF-OA with a new flat on the way.

(Please make sure you have enough cash, CPF savings and housing loan to pay the balance, duty and fees.)





This was taken from a letter B wrote to me recently:

My wife and I recently got married and will be receiving the keys to our new home (BTO) soon. 

We have indicated to take up HDB loan and I know that on the point when we receive our place, both our CPF will be wiped out completely for the house.

We have worked for about 2-3 years and CPF balance is about 30-50k currently.

I have received advice from different people on this. I am actually quite confused with so many choices.

My reply:

Hi B,

Do you know why there are so many suggestions? 

Because people with different circumstances, beliefs and risk appetites will do different things. ;)

So, it is important to know yourself. 

What is comfortable for you? 




Have a discussion with your wife and weigh the costs and benefits of all the suggestions and decide on one which you are most comfortable with.

Of course, I have never faced such a question before but if I had to decide, then, having a roof over our heads is of primary importance for my family. 

Any decision I would then make would have this consideration in mind. 




1. Transferring money from OA to SA would not be an option in such an instance with only $30K to $50K in the OA. 

I would rule this out since funds in the SA cannot be used to pay down housing loans. 

The SA is to help secure finances for our retirement.

2. If I were to place what is allowed in the CPF-OA in investments approved under CPFIS, I would have to make sure that these investments are virtually risk free like the CPF-OA and would generate a return similar to or higher than what the CPF-OA generates. 

In the end, it is really difficult, if at all possible, to tick all the boxes. 





Some risk taking is probably necessary as risk free options are limited to T-bills and Singapore Government Securities (bonds) which have much lower returns compared to the CPF-OA for those maturing within the next 2 years. 

We are looking at a coupon of 0.4% or so per annum now. Acceptable?

3. Let HDB wipe out all the money in my CPF-OA? 

That is certainly a simple option but I would lose that 3.5% interest on the first $20K. 




HDB's home loan only attracts 2.6% in interest cost. 

I would lose 0.9% per annum in interest income on that first $20K. 

Hmmmm... How much is that? 

$180 a year (and of course, it would be compounded over the years). 

Is that significant enough for me to take some short term risk?

Just sharing my thoughts. :)




Related post:
1. A new flat on the way and $200K in spare cash.
2. CPF or Singapore Government Securities.
3. CPF, SRS and HDB housing loans.