Keep $20K in CPF OA when taking HDB loan. (Growing CPF SA after OA was wiped out by home purchase.)

Just as I was about to publish this blog, I saw the news hot from the oven.

"Flat buyers will have more flexibility in using their Central Provident Fund (CPF) money, the Housing Board said as it launched 5,101 flats for sale from Tuesday (Aug 28).

"Buyers can now keep up to $20,000 in their CPF Ordinary Accounts (OA) when they take a Housing Board loan. Before, they had to use all the funds in their OA first.

"The funds can be used for their monthly mortgage instalments in times of need and will improve retirement adequacy if left unutilised."

Source:
The Straits Times





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Reader says...
Thank you for sharing so freely.

As like many others, I feel inspired and in awe.

I hope to get some advice if possible.

I recently emptied by OA to purchase a flat (on hindsight not such a great move).

Since then OA has been accumulating till it's about 10k now.






I plan to sell in 5-6 years time (depending on market).

Should I already start to transfer all my OA to SA?

Will there be any repercussions upon selling my BTO in 5 years time?

I am sorry if some of these questions look abit directionless.

Never been good with numbers, learning the hard way now.






AK says...
5 to 6 years from now, if you are not at least 55 years old or if you would be 55 but do not have the FRS in your CPF, you would have to pay back the accrued interest on the CPF money you used to purchase this flat.

I don't give advice but I will talk to myself.






If I had a mortgage now, it would not be a good idea to transfer all the money in my OA to my SA because if things do go terribly wrong, the OA money would go some way to pay the monthly mortgage.

I would keep enough in my OA for 12 to 24 months of mortgage payment (or any number of months that I think I might need to find work offering similar pay I had before).






Then, if I am certain I do not need the remaining OA money for any other purpose, I can consider transfering any balance to the SA.

Please remember that OA to SA transfer will not enjoy any income tax relief.

So, if income tax relief is important to you, you might want to do cash top ups to your SA instead.

Fresh funds from you will be required.






The first $7K of cash top up to the SA each year enjoys income tax relief.

Although OA to SA transfer does not enjoy income tax relief, it is financially less demanding as it is simply moving money that is already in your CPF account and not a demand for fresh funds.

Saving more in the SA is a long term plan to help fund our retirement but we should not do it without first considering our circumstances and what might go wrong.








You might want to read this:
Topping up our CPF savings can wait for some.