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CPF account is recovering almost $700K. Thoughts.

Tuesday, January 30, 2024

Regular readers know that I strongly believe in the CPF system.

I believe that it is a good habit to sock away some money consistently.

In other words, I believe in saving money.

We never know what could go wrong in life and having some savings, substantial savings, is really comforting.

Of course, I also say that we should put our money to work.

We don't want to spend our life working for money.

We want our money to work so that we can enjoy our life more.

So, parking our money in the CPF in an environment of lower interest made good sense as it paid much higher interest rates.

However, in an environment of higher interest rates, to be fair, 2.5% p.a. is pretty decent too.

Still, we would like to have higher returns where possible from instruments with the same risk profile.

This was why I bought a 1 year T-bill with CPF OA funds about one year ago.

Well, the T-bill is maturing today and the money is coming back.

I will perform a transfer from CPF IA to CPF OA when it happens.

Unfortunately, it would not make it back into my CPF OA before the end of the month.

So, I will lose 2 months of additional interest from the CPF OA instead of 1 month.

The breakeven cut-off yield for that T-bill is 2.92% p.a.

For those who are interested in finding out the breakeven cut-off yields, here is a link to a blog that does it:

Since that 1 year T-bill had a cut-off yield of 3.87% p.a., I received additional interest of more than $6K.

The funds deployed was almost $700K which explains that more meaningful difference.

Better than leaving the funds inside my CPF OA.

Since I received it as a discount immediately upon the commencement of the T-bill, the interest rate really was higher than 3.87% p.a. compared to a fixed deposit where interest earned is received at the end of the tenure.

I also bought another T-bill with CPF OA funds, leaving only $20K in the CPF OA, and that is maturing in March.

That was a much smaller sum.

Like I said in an earlier blog post, I would place competitive bids using CPF OA funds to buy T-bills.

Non-competitive bids run the risk of getting a cut-off yield that is lower than the breakeven using CPF OA funds.

Since the highest breakeven cut-off yield is 3.33% p.a. which is for 6 months T-bills possibly losing 2 months of additional interest from CPF OA, a sensible competitive bid is 3.5% p.a.

So, that is the plan.

When I turn 55 years old in 2026, after setting aside the Full Retirement Sum in the newly created RA and locking up the Basic Healthcare Sum in the MA, the rest of my CPF savings becomes my emergency fund since I could withdraw the money anytime I want.

That would free up my existing emergency fund which would become part of my war chest.

That would be quite a substantial boost since my current emergency fund is able to cover 24 months of expenses for my parents and myself.

Years of careful planning and patient execution is paying off.

If AK can do it, so can you!


Chenheyuan87 said...

hello ak! happy early cny to u. Is income investing for local market still relatable to people who are in their 20s 30s for the next 30 40 years? how would you position yourself on country risk as no ppl will ever know if SG will still be as propserous in next few decades

Siew Mun said...

My OA is in dismal state as I look forward to my 1-year T-Bill matures in Oct 2024. I posted on my CPF amount in a financial interest group. One reader commented that I should spend my $1.35m in my CPF and not save so much. I replied I do spend in hawker centres. I do go to good restaurants with my family on special occasions. I don't spend on branded goods or Starbucks type coffee. I do travel, but on economy or budget airlines, I stay in Airbnb not 5-star hotels/resort. The last trip in Sydney and Adeleigh we go to supermarkets, cook our breakfasts and dinners. For lunch we tarpow sandwiches. We do go out to eat dinner on 2 nights for a good steak in a restaurant. It's fun to DIY.

Similarly, another reader I replied what I have learn from you. I do not eat the chickens that lay eggs for me. I plan to use dividends/interest income and CPFLife payouts for my retirement expenses. Ultimately, I want to more eggs to buy more chicken during my retirement. That does not resonate with the reader lol. Financial literacy seemed to low for some people I encountered.

AK71 said...

Hi Chenheyuan87,

Happy early CNY! :)

Whether investing for income is suitable for someone, I believe, has more to do with a person's temperament than his age.

In an interview, I said that it suit most people, regardless of age, because most people cannot stomach higher risk and volatility.

Seeing our investments generating income and being paid consistently is very comforting for most people.

As for whether Singapore will continue to do well, who knows? -.-"

I will say that all the countries in the world are at risk because fiat currencies are very flawed.

That was why I said what I said in this blog article:
Gold, silver and Bitcoin as insurance.

AK71 said...

Hi Siew Mun,

I know what you mean as my OA only has a little more than $20K in it. -.-"

I just made a request to refund money from IA to OA as the money from the matured T-bill came in at 5pm.

DBS says the refund will take up to 3 business days to complete.

I will check tomorrow to see if a miracle happens. ;p

You are also right to point out the dismal state of financial literacy in Singapore.

Most people are just not very good with money.

I don't wish for a bad economic recession to happen but many people just have to learn the hard way.

Of course, I can imagine the government issuing more vouchers and rebates in such a situation which isn't always helpful.

People grow used to hand-outs and will expect more free money in future.

Oh, well...

Lim KS said...

You can put in request by today 30 Jan to your bank handling your cpf investment account, and in the case of DBS, they never failed me a single time to have cpf credit the money back to Cpf-oa by the end of the next day, meaning for your case it will be the night of 31 Jan.

In my case it is dbs cpf investment acct

KingKhong said...

Hi AK71,

I wanted to express my thanks for the insightful lesson from this blog post.

Your mention of refunding money from IA to OA after the T-bill matured grabbed my attention. Excitedly, I made a request to refund my matured T-bill amount back to OA too without paying attention to your note on DBS stating a 3-day refund duration.

The lesson taught me to keep my matured T-bill capital in my IA and apply it immediately to BS24102S for 6-Month (auction on 01 Feb 2024, issuance on 06 Feb 2024, maturity on 06 Aug 2024) and apply it for another T-bill, BS24116E for another 6-Month (auction on 15 Aug 2024, issuance on 20 Aug 2024, maturity on 18 Feb 2025). This strategy may potentially yield a higher interest, perhaps above 3.32%, for another year.

This lesson serves as a valuable reminder for me to plan more strategically before making any swift moves.


Larry said...


I have been following your blog for few years already and find your blog is meaningful. However I need your advice on the following stock issue which is not related to CPF

Apology. And sorry for the inconvenience caused if any.

I have been holding Dyna Mac using CPF IA and recently the company announced bonus warrant. As this is my first time encounter warrant in the share where I use CPF IA. I have some questions which need your advice.

1. If I wanna utilize this bonus warrant, how should I proceed? And the money going to be spend need to come from CPF IA?
2. if I do not wanna utilize, what’s should I do?

Hope you can talk to yourself. Many thanks in advance

Bear Legends said...

Hi AK,

When I turn 55 years old in 2026, after setting aside the Full Retirement Sum in the newly created RA and locking up the Basic Healthcare Sum in the MA, the rest of my CPF savings becomes my emergency fund since I could withdraw the money anytime I want.

I read from CPF website saying that the top-up monies cannot be withdraw even though we have met the FRS.

So, the excess monies can be withdraw after 55 years old should be total SA+OA amount - FRS - top-up monies = emergency monies?

If we top-up the CPF monies now, is that mean we cannot withdraw the excess amount after met FRS?

AK71 said...

Hi Lim KS,

I just blogged about it too!

My faith in DBS is restored! ;p

AK71 said...

Hi Larry,

Unfortunately, I have no idea what to do in such an instance.

You might want to ask your stock broker for advice.

AK71 said...

Hi Bear Legends,

When we do Top Ups to our CPF SA, we have to understand that it is money meant to fund our retirement.

We cannot withdraw the said Top Ups as the money will go into our CPF RA at age 55.

We will be allowed to withdraw all money in the OA and SA once we have set aside the FRS in the RA at age 55.

Remember that we are not allowed to Top Up beyond the prevailing Full Retirement Sum anyway.

So, no extra money is locked up in the RA other than the Top Ups (if any) to the prevailing FRS.

AK71 said...

Hi KingKhong,

Well, I am glad to say that the funds are back in my CPF OA.

DBS says "up to 3 business days" but it only took one business day. :D

I just blogged about it too. :)

Ivy said...

I have been following your blog since 2015.
My brother recommended me to read about you... In the end, he didn't have the courage to do what I did.
I basically empty out my OA to tfr to SA till I reached my FRS in 2018. I was not making a lot of money, but it felt good since I have met FRS for the last few years ..
I'm still working but somehow I think I don't have to be stressed out over money as the SA account has about $270 k
And my MA is always max on the first day of the year... Since I always follow what you have done.
I can't invest my OA as we spent it in a condo as an investment... We are not staying in it.
I am dressed like an aunty who doesn't have much money.
Every meal I take, I think carefully what is the sum I'm paying even though I have enough...
Good to hear more about your investing
I don't have 700k in my CPf. Taking sa and ma I have about 330k only. There is still 11 more years before I reach 55...
But I'm really thankful I found out about maximizing cpf since 2015.

Ps my 3 kids, cpf contribution -- I started seriously putting some $$ every other month.
Each year, they gain about 2k per person, I'm happy they have at least about 15k each.
Ps... I really don't earn a lot.. it's every bit and scrape I can find, I'll put into it. 😍

AK71 said...

Hi Ivy,

Thank you so much for sharing your story with us. :D

The CPF system is a good risk free way to help CPF members who help themselves. ;)

Not everyone has the stomach for higher risk and volatility when it comes to investing their money.

I invest in stocks but I also firmly believe in the CPF system which serves as my ultimate safety net.

I am glad that sharing my experience has inspired many readers like yourself to take full advantage of the CPF system.

We CPF members are a lucky bunch.

Unfortunately, not every member knows this and it is often those who need the help most who do not believe in it.

Doing what you have done, you have secured a cornerstone in retirement funding adequacy! :D

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