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A river called CPF and the stubborn horses.

Friday, November 1, 2019

In my last blog, I said that as long as personal financial conditions permit, I would like to continue making voluntary contributions to my CPF account at least till I am 55 years of age. 

How much passive income is enough for you?

I believe that it should not come as a surprise to anyone that this plan is ridiculed by people unhappy with the CPF.

Some people unhappy with the CPF even got angry at me for sharing my thoughts on how to make the CPF work as a cornerstone in our retirement funding strategy.

Unhappy with CPF and angry with AK.

Looking through some of my unfinished blogs which are pretty numerous, I decided to spruce up one on the CPF.

There are so many reasons why many blogs remain unfinished.

Of course, AK being lazy is one reason.

However, this blog was left unfinished probably out of respect for a friend.

I say "probably" because I am not sure if it was out of respect or out of pity.

He is actually more of a friend's friend than a friend.

What's the difference?

Anyway, it was something that happened more than a year ago.

The original blog went like this:

I am once again reminded of human mortality as I attended a funeral wake recently.

As I grow older, I suppose I might be attending more of such necessary and unhappy events.

I will avoid them if at all possible.

I sat at a table with some friends and in the chatter, someone said something about the CPF locking up our hard earned money and that it is as good as gone.

It was in response to another person who said it is better to live life to the fullest and there is no point in dying with lots of money left behind.

Anyway, I wasn't feeling talkative and I wanted to go home as soon as I was done with the dinner buffet.

AK is so anti-social.

So, I kept quiet and kept eating.

When they started talking about children and parents, I gulped down my drink and said farewell.

Why do I prefer my own company?

I wonder.

I know that there are quite a few out there who do not trust the government.

It is good not to be too trusting.

That is for sure.

Too trusting and we are in danger of becoming gullible.

However, if we become overly suspicious, we are in danger of becoming irrational.

We should ask the right questions before making a decision, absolutely.

When we become irrational, however, we ask all the wrong questions or start imagining things.

Anyway, this is a topic that I have covered multiple times.

1. The CPF is not a national PONZI scheme.

There is a maximum amount we can contribute to our CPF account each year.

Want to contribute more?

Sorry, not allowed.

Does a PONZI scheme work this way?

CPF is really a PONZI scheme!

2. The CPF is designed to help all members achieve a basic level of retirement funding adequacy.

"The CPF is a system that is meant to help the masses to help themselves.

"If we think the system cannot help us, it is probably because we have not tried to help ourselves."

Purpose of the CPF is to make the rich richer?

3. If we are very rich, we probably will have to look for other tools on top of the CPF.

"For most ordinary Singaporeans, if they want to hold some bonds to prepare for retirement, maxing out their CPF membership benefits is all they need."

CPF is all we need unless we are very rich.

Read: $800K in his CPF!
The CPF is a good thing and we Singaporeans are a fortunate bunch.

Unfortunately, many who really need to make better use of the CPF do not realise what a good thing the CPF is.

We can bring horses to water but we cannot make them drink it or so the saying goes.

Fortunately, the mandatory component of the CPF makes the horses drink some water.

LOL. ;p

The horses might not be grateful and they complain a lot but they sure are lucky. :p

Related post:
CPF interest is passive income and CPF savings is real money.

You might also be interested in these blogs:

1. How much passive income is enough for you now?
2. CPF SA time and income lost due to peer pressure.


Unknown said...

Hi AK,

I agree with you on how most Singaporeans view CPF. As a Malaysian, I used to dislike EPF (pension fund in M’sia), until I started researching and finding out more about it. For some reasons, all of us seem to dislike our own government at first. ��

BTW, do you still remember the “SA shield” hack? It worked. Mdm Lorna Tan shared in her Straits Times article where she managed to preserve bulk of her SA savings through the “hack”:
(1st way: Maximising Special Account Savings.)

Must be a member to read the article though. In short, what she did was just before she turned 55, she invested all her SA savings (above the first $40k) into Nikko AM Shenton Short Term Bond Fund, which was done on the platform where there’s zero sales charge. Then, when RA was created, she let her OA savings form FRS first and sold her holdings in the fund.

Guess what? All proceeds flowed back to her SA and remained there. She could continue to enjoy the 4% interest in SA.

AK71 said...

Hi Unknown,

Yes, I remember. :)

Incidentally, someone I know who turned 55 did the same thing and told me about it.

I wonder if things might change by the time I turn 55.

Well, I will find out 7 years from now. ;)

In case some readers are wondering about this, here is the blog in ASSI on the matter:
Hardware Zone Money Mind on hacking the CPF-SA.

FIREworks said...

Hi AK,

Your blog posts have always been very inspiring!
I hope I'm able to reach FRS in my SA in 2 yrs time when I reached 36, I've been paying my mortgage using cash and previously have also transferred part of my OA to SA.

Seeking your "talk to yourself" expertise, do you think we should top up our MA with cash to max it out, or top up SRS for tax saving purposes? hehe

AK71 said...

Hi FIREworks,

Hitting the FRS at 36 is a good move and also a great achievement.

So, good on you. :D

It is then most likely that you would not have to worry about the FRS increasing in future or what some misguided people call "moving the goalposts".

FRS in CPF-SA at age 30?

As for contributing to your MA or your SRS first, I would choose the MA because the MA pays 4% interest, risk free.

Not so for the SRS.

Contributing to either MA or SRS will give you the tax relief that you want, of course.

You might also be interested in this blog:
Should a young person contribute to his CPF or SRS?

Invest Sg said...

the SA "Hack" worked well and smooth for me too earlier this year :)

I do have a question - read the following CPF withdrawal rules from another blog but i am unable to verify if from the CPFB website. Is AK or anyone here know if this is true? Would be good to know to "strategize" CPF withdrawal in the future when needed. Thanks

"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."

AK71 said...

Hi Invest Sg,

Good to hear that the strategy worked for you too.

Crossing fingers that things don't change 7 years later when I turn 55.

As for the withdrawal of excess funds from our CPF when we turn 55, what you shared is correct.

If we only withdraw the interest earned in our SA and OA every year, it would be another source of perpetual passive income.

The other source of perpetual passive income would be from CPF LIFE but, of course, that only starts paying from age 65 at the earliest.

Luanda said...

Rather than making this difficult, it would be better if the government provides the option where the RA funding should be sourced from (e.g. OA or SA).

AK71 said...

Hi Luanda,

That would surely make things more convenient for me. :)

AK71 said...

To: (You know who you are),

Thank you for the secret message.

Hope you see this reply as there is no other way for me to respond to you.

Didn't know what was "Telegram".

Had to Google it. ;p

I don't even have "WhatsApp". >.<

I am too lazy to join any chat groups. :p

Invest Sg said...

Hi AK,

You said "If we only withdraw the interest earned in our SA and OA every year, it would be another source of perpetual passive income" - haha happy with this strategy:)

Do you know where we can find the CPF withdrawal rules/deduction sequence? Just to be sure.. i kiasu one ;)

Thank you hor.

AK71 said...

Hi Invest SG,

I remember CPFB explaining this some time ago but I cannot remember exactly when or where now.

Growing old and forgetful, unfortunately.

Very cham like this. :(

Siew Mun said...

You aret only person who helped me rose from the ashes of financial ruin after my father passed away 5 years ago. This blog post is a gem.

AK71 said...

Hi Siew Mun,

Hey, good to hear from you again.

I know it is not as convenient as commenting in FB.

So, thank you for taking the time to comment here. :)

I am glad my blog has been helpful but the crucial ingredient was your strong determination.

That made all the difference. :)

Just talking to myself here and what readers do is up to them. ;p

gagmewithaspoon said...

Hi Ak, this is very useful. It's very hard to decide whether I should (i) top up OA, (ii) transfer OA to SA since I do not get any tax benefits. I have started to use limited CPF to pay my house so my OA is growing but still in doubts.

I have children and I dunno if I should try to max out their CDAC account. Like CPF, it seems useful but confusing since there are locks in periods. IF only you can talk to yourself on this! but it does't concern you.

One more question - has BreadTalk fallen to a price you like yet? I remember in the last AK and friends, you said when it drops by almost half you will look at it again! at that time I was shocked, how can it drop by half.. and it has nearly fallen there!!

AK71 said...


I am glad you like the blog. :)

Which CPF account to top up first depends on what you want to achieve.

Think carefully because the OA to SA transfer is irreversible.

As for children and their CDAC accounts, again, it depends on what you want to achieve.

Once you know what you want to achieve, you will know what to do. ;)

As for BreadTalk, my original buy price was about $1 a share which was before the stock split.

I thought that was a reasonably high price, if you know what I mean.

Then, the price went up so much which made it an unreasonably high price.

That was why I said what I said during "Evening with AK and friends".

So, if the share price is 50c now, I might buy a bit more.

There is no fundamental analysis to this.

Just AK's anchoring effect. ;p

You might be interested in this blog from 2016 when I first became a BreadTalk shareholder:
BreadTalk etc.

TangoXray said...

Sad that you don't reply to FB msg anymore. We used to chat on CPF if you still remembered and you shared with me about CPF limit and CPF will refund us without interest if we top up too much.

Fast forward 3 years, I have been transferring my OA to SA since Sep 2019 and had VC to SA for the past 3 years (21k in total), Jan 2020 will be my last VC 7k top up to SA as I will be hitting year 2020 FRS (181k) by Sep 2020 (at age 37!!!!) with active work contribution plus annual bonus.

I have decided to let SA compound at maximum amount earlier and give up "earning" the 7k annual tax relief, well we can't have the best of both world and just have to choose our priority.

No longer I have to worry about moving of "goalpost" from year 2021 and onward. A sense of relief.

With active salary contribution, assuming till 55 years old from 38 year and 17 years of compounded SA interest, I am expecting conservatively at least 500k++ in total CPF assuming SA interest do not fall to 0% (choy choy choy!!).

My next goal is to help my wife to reach the FRS in the next 3-4 years and squeeze every cents out of CPF Interest.

Heartfelt thank you to your sharing whether in blog post or personal messages.

AK71 said...

Hi TangoXray,

Unfortunately, FB doesn't like AK anymore for whatever reason. :_(

Financially free and Facebook free.

and point #3 in:
2Q 2019 passive income.

Fortunately, we can still chat in my blog's comments section like we do now. :)

Thank you for taking the time to write.

I am very happy to learn of your progress.

Cornerstone in retirement funding will be completed soon!

Congratulations! :D

Your wife is lucky to have a husband like you.

Gambatte! :D

Art Collector in SG said...

Hi AK, can I ask your opinion?
I'm quite sure I'll meet FRS at 55, so I plan to use CPF SA as a 4% no risk saving plan for my children. I top up cash every year and withdraw them when I'm 55. Do you think it's workable plan? Thanks.

AK71 said...

Hi Art Collector in SG,

Sounds viable to me. :)

As long as your SA has yet to hit the prevailing FRS, you can do top ups to it and also enjoy tax relief. :)

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