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Use CPF savings for homes and investments?

Sunday, May 30, 2021

This blog is in reply to a reader's comment: HERE.

Hi Tonny,

Apologies for the tardy reply. 

Didn't check my blog for a couple of days. 

Been spending my time sailing in another world. ;p

We are likely to stay in a low interest rate environment for some time to come. 

So, using our CPF OA money which generates 2.5% risk free return every year to fund the purchase of homes is rather silly.

Of course, for some people, there really isn't any other choice but for those of us who have a choice, if we have idle cash, using that to fund the purchase of homes makes better sense.

If we do not have idle cash but have assets which can be liquidated to generate cash, I would liquidate assets which are not generating an income first if I am thinking of raising cash that way.

Income generating assets should not be liquidated first especially very good income generating assets like investments made in the local banks at rock bottom prices during the crisis.

Of course, the CPF is risk free and volatility free while our investments are not so.

Still, our local banks are well capitalised and well run. 

They are probably the next best thing to the CPF. 

If we have paid rock bottom prices for their stocks, they are probably generating very attractive return on investment for us.

What is more important to us? 

Having something that is risk free and volatility free that generates a decent return like the CPF? 

Or having the next best thing for higher returns like investing in our local banks? 

I don't know what gives you peace of mind. 

You decide. :)

Since I am on the subject, recently, we have been bombarded with advertisements to use our CPF OA money to invest in properties. 

I always say that no one cares more about our money than we do.

Who are these people telling us it is OK to use our CPF OA money to invest in properties if we do not have cash and that owning multiple properties is not something only the rich can do?

These people have vested interest in making us part with our money.

We buy a property through them, they make money.

If the property does not do well later on and if we have to sell, they make money too.

They have nothing to risk and everything to gain.

Don't bite off more than we can chew because some do choke and some choke to death.

Related posts:
1. Buy 2nd property and pay ABSD?

2. Disastrous investments in property market.

3. $500,000 stuck in property investment.

4. Don't do silly things and retire smart.

5. This condo investment has been a drag.


Unknown said...

Good to see u back with new post! :)

AK71 said...

Hi Unknown,

It has been a while since I talked to myself on this matter.

So, I thought it would be good to blog a reply to the reader.

Enjoy eavesdropping. ;)

Tonny said...

Thanks AK for the reply! Indeed interest rates are super low now. I went to search for mortgage rates after reading your comments and most of the bank's are offering ard 1.2 to 1.3% fixed rates. Another idea popped into my mind. Maybe I can choose to take a bank loan rather then paying off completely, leaving my monies in CPF to earn the 2.5% interest and maybe paying off the loan in part cash part CPF. However, you are also right to say that having a peace of mind is the most important and nothing beats being debt free. :) I have more then a year to ponder about this.

Tonny said...

Hi AK,
Thank you so much for your reply. I agree that peace of mind is the most important at the end of the day and it depends on each individual's risk appetite. I will take my time to ponder over the choices. But it's hard not to take profit off the table for the bank, esp when they are going higher and higher everyday and the profits are equivalent to years of dividend. However I believe that there are more catalyst for upside, one of which is the much anticipated announcement from MAS to remove the dividend cap.

AK71 said...

Hi Tonny,

Just talking to myself but you are welcome. ;)

It is never wrong to take profit, as the saying goes, but because I am mostly invested for income, even if I do take profit, I don't usually sell my entire position.

The local banks are capable of paying out higher dividends and I am still waiting for MAS to say the word to have a much needed boost to my passive income.

If you are interested in taking out a home loan, locking in ultra low interest rates at least for the near term is definitely an option.

I have an older blog on this which might or might not be helpful:
Fixed rates, SIBOR, FHR18 or HDB housing loans?

All the best! :)

The Dreamzola Traveller said...

Well, I do use my OA to finance my housing loan. The premium used to be pretty high for me as I am a sole payer of my house. I didn't like it so I paid it down slowly with cash to a comfortable amount.

Now I m sleeping better, with OA still growing (after deducting the premium), and SA hitting minimum CAP soon.

Personally, I feel CPF is like a life annuity which can be financed and build through our regular salaried job.

laurence said...

Our Oracle of REITs now also has all our banks cornered!
AK is truly laughing all the way to the banks ............ ;)

AK71 said...


The CPF is like a AAA rated sovereign bond which eventually becomes an annuity and this will help all of us achieve a higher level of financial security in time to come.

Well, it will work for people who believe in it and who take full advantage of it. ;)

1. CPF can be our best friend.
2. CPF is all we need unless we are very rich.
3. Retire with an investment grade bond and an annuity.

AK71 said...

Hi Laurence,

I was pretty lucky to increase my investment in the local banks when I did. :)

1. Buying DBS, OCBC, UOB...
2. 3 local banks, 3 REITs and SIA.

d said...

cpf is not risk free. policy risk is super high. I'd rather empty it out and depend on my own investments for retirement.

AK71 said...

Hi d,

You have to do what you believe is best for you, of course. ;)

FIREworks said...

I'm always inspired by your blog articles and writing even though you're writing to yourself, AK!

I really think CPF is our best friend, and I'm happy that my CPF journey brings me a step closer to retirement, hopefully. I have maxed out both SA and MA, and investing my OA with Endowus in which I choose to pay my mortgage using cash. Hopefully can get to 1M48. :)

All thanks to you AK!


AK71 said...

Hi HK,

I also believe that the CPF can be our best friend in our golden years. Gambatte! :)

CPF can be our best friend in our golden years. CPF is a bond, an annuity and a savings account.

merxantia said...

Hi AK,

Hope you have been doing well. Would you be able to talk to yourself on the recent iReit acquisition in France please?

DS said...

Hi AK,

Is ireit having a rights issue again? I saw it in a forum but can't be sure if it really is indeed the case. Any thoughts on whether you will be subscribing for it? Thanks!

AK71 said...

Hi merxantia and DS,

Please see latest blog. :)

IREIT Global: 214 for 1000 rights issue.

ASimpleWife said...

Hi AK,

My husband and I follow your blog, and we realize the benefits of having CPF work for us, to form the AAA rating bond part of our investment. When we purchased our HDB 2 years ago, I chose to use cash for mortgage payment while my husband uses his CPF OA. He also uses CPF-IS to fund some investments but he’s thinking of selling to lock in some gains. Do you know if the capital gains from his investments could be used to offset some of the accrued interest from his mortgage payments? Or are these two separate things altogether?

Thanks in advance!


AK71 said...

Hi VK and Ron,

I can only speak in general terms since I don't know the specifics of your case.

If his investment has made more money than the accrued interest lost from using his CPF money for investment and housing purchase, then, yes, it would cover. Otherwise, there would be a shortfall.

Whatever the case may be, I am glad that your husband has made money from his investment using CPF money as most people are better off leaving their CPF money untouched. :)

Jason said...

CPF SA acc can also be used for investment right? If we had max out our SA acc and then withdraw for investment, can we top up the amount we withdrawn via cash?

AK71 said...

Hi Jason,

I don't think that is allowed but it would be better for you to check with the CPF Board. :)

You might also be interested in this blog:
Maximising CPF savings...

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