Reader says...
We were talking about the CPF during lunch and I said it is good passive income.
It is like investing in bonds and getting interest income.
Who said that?
Who? Who? Ha ha.
My colleague said he would not refer to CPF interest as passive income especially interest in MA.
He said anyone who says CPF interest is passive income must be twisting logic.
He insisted normal people will not think of CPF interest as passive income.
AK, you blur or not?
I very blur.
AK says...
You very blur?
I more blur than very blur.
However, that colleague of yours is the most blur of us all.
So, your colleague is normal and we are abnormal?
Ouch.
Alamak, I fell off my chair.
Interest income is income that is passive.
Interest income is passive income and it doesn't matter if it is paid on our savings in our bank accounts or in our CPF accounts.
Just like money in our bank accounts, money in our CPF accounts is real.
If it is not real, we would not be able to use the money in our MA to pay for H&S insurance.
If it is not real, we would not be able to use the money in our OA to pay for our homes.
Would insurers and property developers accept Monopoly money in payment?
You tell me.
I blur.
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18 comments:
Hi AK
When I look at the title of this post, it struck as a deep ponder for thought to me. I can understand that most people treat CPF as not part of their money. I believe that they have right reason to state that point. The goalpost is shifting all these while. I believe that the shifting will be ongoing. It will not be a surprise for one to be able to withdraw from the age of 100 in time to come. I guess that the best approach is to adopt the appropriate decision in accordance to the prevailing circumstance which is the best for one.
Ben
Hi Ben,
As long as changes made to the CPF system are reasonable, the reasonable person will be able to accept them.
So far, I think changes made have been reasonable and also necessary. :)
Siew Mun Kwan says...
Should emphasize CPF is your money 😊
I think that some people think that the government is not reasonable to move the goal post on CPF from 55 to 67 year old because they want to take out the money to buy a cheaper home in the neighbouring countries where the cost of living is much lower than Singapore. They may wish to join their children in the country they choose to settled down. I have a number of friends in these dilemma.
Dear Mr AK,
I'm 26 this year and I won $100k last year gambling.
I used $80k to top up my SA last year.
Currently, my SA and Ma combined is slightly over $90k.
Photo of my CPF: https://i.imgur.com/yqPGxfC.png
However, I realised that if I only focus on topping up my CPF, I can only retire at earliest 55, whereas if I invest it in stocks, I can retire earlier.
Have I made a mistake by topping up my CPF?
Thank you Mr AK.
Tan
Hi Tan,
CPF is risk free and volatility free.
Investing in stocks is not.
There is no guarantee that investing in stocks will allow you to retire earlier.
Having said this, I like my CPF savings and I also like investing in stocks.
What should you do?
It depends on your risk appetite and what you want to achieve.
Hi yevets,
At age 55, we will be allowed to withdraw all money in our OA and SA in excess of the FRS.
I don't know why there are people who keep talking about age 67.
Having said this, even if we are reasonable, I find that there is simply no reasoning with some people.
I think most people will view interest as default sure get for everyone even if you do nothing. What some people will think is that if it involves a conscious decision to buy/invest in an asset that give regular returns, then this would qualify as "passive income". In the Singaporean context, that means mostly buying a property asset and extracting rental income. It could mean a business too. Its all about semantics.
There is a also a lot of antipathy towards CPF because it cant be withdrawn fully at the age of 55. There are also a lot of conditions that guides the use of CPF monies. There is also a lack of transparency of how the govt invests or deals with CPF monies. I think many people are frustrated, most are indifferent and perhaps only a minority like yourself and my father who are more positive about it.
This reminds me of the current debate on HDB ownership. What do u think?
See:
Want to withdraw $500,000 from CPF at age 55?
Thank you Mr AK for your reply.
But do you think it's wise for a young person like me to have 90k in CPF instead of stocks?
Thank you.
Tan
See:
A lazy and fool proof way?
Hi Victor,
If it is about semantics, there should be no argument as to what "passive income" is.
People who deny that CPF interest income is passive income are either confused or they are out to confuse people. ;p
Hi Tan,
I don't know your circumstances and psychology.
So, I don't know what is a wise decision for you. ;)
See:
Have your (CPF) pie and eat it (eventually).
Dave Goh says...
Those anti CPF will flight all the way with you that CPF $$ is NoT your money..
To me, I am planning it as a part of my passive income for retirement!!!
Thank u AK...
Ben said...
I believe that one way to treat CPF as an additional buffer and treat it as non-existent. This may be applicable for those who has the cash or investment portfolio to sustain his/her daily lifestyle expense. Such thought may not be accepted by some or the majority of the people. I will say that this is to each of our own. Different people have different views and it is up to them to make the decisions in accordance to their belief and preference. In fact, there is no right or wrong answer and the decisions vary from people to people and depend on their prevailing circumstance.
AK said...
Too many people think that the CPF is not real money and this is a problem (for them).
Sau Yee Fong says...
I would take a practical approach towards CPF. OA and SA can be treated as personal bank account after 55 because we can take monies out and use. As for CPF Life payout, especially for young people in their 20s, don't bank on it as you plan for retirement because you won't know what the Payout Eligibility Age would be until you turn 55. Simply treat CPF life payout as a way to fight inflation in your old age.
PK Jan says...
**came across the following in Hardwarezone forum** (I did not check the cpf FAQ)
There is a sequence of withdrawal for CPF funds. It can be found by searching the CPF FAQ
"Please note that the Board processes all withdrawals for members who are 55 and above, using the following deduction sequence:
i)*interests earned*in the Special Account, then Ordinary Account, from the beginning of the year up to the month*before*the withdrawal, followed by
ii) contribution/refunds credited to the Special Account, then Ordinary Account, in the same month of the withdrawal, and lastly,
iii) monies in the Special Account, then Ordinary Account."
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