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A way towards retirement adequacy before the year ends.

Wednesday, December 17, 2014

A reader sent this message to me in FB and agreed to have me share it in my blog:

Hi AK,

Many thanks for your blog post "How to grow my wealth as I approach 40 years of age" and the other cpf related posts.

After poking around our cpf site, finally decided to move my entire 2013 OA contributions into SA. While it is nowhere near the MS, i feel it's a step in the right direction despite the fact that i am closer 40 than 20!

Thank you for always sharing your thoughts, journey AND nagging at us


CPF website has an "Ordinary Account-Special Account Savings Transfer Calculator". It estimates how much MORE interest we earn by moving $x amt from OA to SA account. Unfortunately, it only calculates up to age 55 and not the 65 you mentioned. However, it is still a great gauge. Perhaps this may be useful for your readers to convince themselves of how wonderful this 4/5% interest is!

Here's the link:

if you feel it will help others, please (share)

the exchange between you, Endrene and a few others were very helpful to me.

If you like what you read here, there are still a couple of weeks left before the year ends.

Related posts:
1. How to grow my wealth as I approach 40 years of age?
2. How to upsize $100K to $225K in 20 years?


victorlsl1 said...

the 4% SA is not guaranteed as the govt may change its rate. but moving to SA is a permanent and irreversible move. Not sure if this decision is best

AK71 said...

Hi Victor,

It is true that the floor rate for the SA is 2.5% but I feel that if the government had wanted to make changes, they would have done so in recent times, given the low interest rate environment.

Instead, they chose to maintain the 4% interest rate and and also to pay an additional 1% on the first $20K in the SA. I feel that they are using this tool to achieve social and political goals. So, they cannot afford to blunt it. Just my view. ;p

Of course, I will say that it has worked for me and I hope that it will work for others who are willing to give it a chance. :)

Sillyinvestor said...

Hi AK,

I am for measured transfer of OA to SA. However, a big sum transfer should need more consideration.

IF I am not wrong, SA CANNOT be used in

1) property purchase
2) you child tertiary education

If the person is single and is sure he has no need of CPF OA, then sure ...

Just my 2 cents worth

AK71 said...

Hi Mike,

We can always depend on you for a rational voice. :)

Yes, if we need the money in our OA for housing or our children's education, then, it is best not to do any transfer of funds from the OA to SA.

For me, I transferred all the funds in my OA to my SA in the first 4 years or so of my working life because I didn't have any commitments that required the money in my OA, really.

It has worked out really nicely for me, of course, with the 4% SA interest compounding for almost 20 years now.

It wasn't until SARS when I had to use the money in my OA to help fund the purchase of a condo. Now, I wouldn't even use the money in my OA to pay for my home because the interest of 2.5% is hard to beat in the current environment. So, I am using mostly cash to pay for my current home.

Like in all things in life, we must understand our own circumstances and know what allows us to sleep well at night and act accordingly. :)

shun said...

Hi, AK,

would like to seek your advice: If we transfer 7k cash to our SA under the minimum sum topping up scheme, can this amt. be used for share investment under CPFIS? Thks

pf said...

Recently my friend asked me if he should top up his cpf or SRS for tax benefit. He did neither before.

Suggestion for your blog post, Ak?

AK71 said...

Hi shun,

Money in the SA is really meant to help prepare us financially for retirement. It is meant to be a risk free approach. So, there aren't many options available in terms of investments. A few approved unit trusts are all there is, if I remember correctly.

The authorities are pretty conservative when it comes to investment options for money in our SA.

AK71 said...

Hi pf,


SRS: A brief analysis.

On CPF-SA and more:

Don't see money, won't spend money.

If he is not the type to invest, then, the SA's 4% to 5% interest per annum will be attractive to him. If he is worried that he might need to break the piggy bank before retirement age, then, the SRS gives him that option (with a penalty for early withdrawal, of course).

Whichever option he chooses, he should be using money he is quite sure he doesn't need till retirement. It should be money he can forget he has. :)

qook said...

Hmm I just ran some numbers and they were illuminating. If I'd done the same as AK, I would have hit my minimum sum too! AK, could I ask another question on SA. Once I hit my minimum sum, do SA contributions from salary still go into the SA? Means my SA will keep compounding + new contributions to a really big sum by retirement?

AK71 said...

Hi qook,

I have decided to publish my reply to you as a blog post. Look out for it. Thanks for providing the catalyst for this. ;)

victorlsl1 said...

good to hear from Ak and Mike!

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