How to transfer from CPF-IA to CPF-OA? Must buy T-bill?

In my last blog post, I made a passing mention about a 6 month T-bill which I bought using money in my CPF-OA maturing in the same week.

I made a request to transfer the money back to my CPF-OA when I saw the funds sitting in my CPF-IA a day later.

It was all rather easy with DBS online banking.

I simply logged in and went to the "Invest" tab and selected "More investment services."

Then, I chose "Refund to CPF Board."

Clicked on "Refund Full Amount", and it was basically done after clicking "Next" and "Submit."

Today, I checked my CPF account and found that the funds are back in my CPF-OA.

Now, I am wondering whether I should buy another 6 months T-bill with the money.

To be quite honest, I am not as enthusiastic as before because the cut-off yield has reduced so much since the start of the year for 6 months T-bills.

In January, it was as high as 4.2% p.a.

The T-bill that matured last week had a cut-off yield of 3.93% p.a.

I am hazarding a guess that the cut-off yield for this week's auction is probably going to be around 3.7% p.a. or similar to what we got in the last auction.

For a sum of $50,000, we are looking at an additional interest income of less than $200 compared to what the CPF-OA would pay for a 7 months period.

Nothing to write home about.

Anyway, with CPF-OA money, I will not go the path of non-competitive bids just in case the unthinkable happens.

I will put in a competitive bid of 3.5% p.a. because I don't think I am interested in anything lower than that.

If the cut-off yield should come in at 3.5% p.a., the difference in interest income is going to be less than $120.

The cut-off yields for 6 months T-bills are declining but the CPF-OA still pays 2.5% p.a.

So, the difference is shrinking and it is really not a big deal.

There is quite a bit of talk in social media that we should all use our CPF-OA money to buy T-bills.

To be honest, unless the sum of money is relatively large, it isn't anything to worry about.

If we do not have a large amount of money sitting in our CPF-OA, we really are not missing out on any meaningful passive income.

I think some people would say don't sweat the small stuff.

Of course, I am just talking to myself.

If AK can talk to himself, so can you!

60% higher interest income from age 55?

Reader:
Would you leave your money in CPF-OA (beyond 55)? 

I can understand CPF-SA @ 4%. 

Wouldnt it be better to move into CPF Life for better returns? 

Noted that leaving it in CPF-OA will provide more flexibility. Thanks.

AK:
We have the option of moving more funds into the CPF-RA up to the prevailing ERS (1.5x the prevailing FRS) at age 55. Is it better? 

If what you want is a higher payout from CPF Life, yes.

However, do note that you will be required to move funds from your CPF-SA first and not from your CPF-OA. 

Only when the CPF-SA has insufficient funds, then, the CPF-OA is tapped.





So, let us say we have quite a bit of money remaining in our CPF-SA after our CPF-RA is created and FRS requirement met at age 55, it is not all that more beneficial for us to move more funds into the CPF-RA because we are not getting a higher interest. 

It is the same 4%, assuming things were to remain unchanged.

However, for someone whose CPF-SA is depleted after the creation of his CPF-RA, if he wants to have the ERS in his RA, he would be moving funds from his CPF-OA and the funds would then be receiving 4% instead of 2.5% interest. 

That is 60% more in interest income!





Like you said, flexibility is sacrificed but, in my opinion, the loss is well compensated.

Sweet but not available for everyone.

I have the happy problem of having much more in my CPF-SA than the prevailing FRS. 




So, will I move more money into my CPF-RA at age 55 to meet ERS? 

I will decide when I turn 55.





To anyone who just dropped in, another blog on the CPF was published earlier today. 

See:
CPF Life Escalating Plan.

A great crash is coming and I am ready (UPDATED).

Reader says...
Grateful if you could please talk to yourself on what are criteria for stock selection when buying stocks using my CPF OA?

Given that cpf money is sacrosanct, naturally we have to be more selective and careful.

Grateful for your self talk please?







AK says...

CPF-OA money? 

It is quite simple. 

I wait for a market crash. ;)







Is a market crash coming soon? 

Your guess is as good as mine.

I cannot predict a crash. 

I can only prepare for one.

WAH!!!

Say:

"I am ready for a great crash."

How to have peace of mind as investors?
I explained how the CPF-OA money should be the last war chest we use because it earns 2.5% per annum in interest, risk free.





I also said many times before not to borrow money for investments.

The reason is simple.

We don't want to be caught in a situation where we might have to liquidate our investments at times and prices not of our own choosing.

If a market crash happens, we would be glad we did not borrow any money to invest with.

There is no free lunch in this world.

Banks (and brokerages) are fair weather friends.






Related posts:
1. Simple investment wisdom.
2. Holistic approach.
A bird in hand is worth two in the bushes (provided that they are of the same size). If AK says so, it must be so.

AK showing off his CPF-OA and MA (2017).

I thought that only my CPF-SA numbers garnered a following but it seems that my CPF-OA numbers have a following too. 

So, I agreed to share more of my CPF numbers here. 





Latest CPF numbers, OA, SA and MA:

If we add all the three accounts together, the total amount of savings I have in the CPF is:

S$723,088.16

At the ripe old age of 45 too.





I know this is impressive to many people and although it is achievable, please don't think that this should be a benchmark for you to latch on to. 

Remember, we have to be realistic. 

Not many of us who want to buy our first property can leave our CPF-OA money untouched. 






Indeed, regular readers know my story. 

My CPF-OA savings was not always untouched.

See: 
How did AK amass so much money in his CPF-OA?





For most of us, what is more achievable and more rewarding is to top up our CPF-SA and CPF-MA. 

These accounts pay higher interest and they will help with our retirement and hospitalisation funding. 

Be pragmatic. 

These accounts should have priority.

See: 
1. How to upsize $100K to $225K?
2. How to get free medical insurance with CPF-MA?





Interest earned in the CPF-MA will flow to the CPF-OA if both the CPF-SA and CPF-MA have hit their ceilings. 

That interest will help the CPF-OA grow. 

I know because this is what happens to me.





Later on in life, to grow our CPF-OA savings faster, if we have spare cash, we can always think about doing voluntary refunds to our CPF-OA. 

Of course, when we are older, we could also sell our property and downsize.

See: 
How to stop accrued interest we owe from growing in CPF-OA?


The CPF can go a long way to providing us with a financially more secure future.





We have to help the CPF to help ourselves and the earlier we do it, the better.

Now, I wonder how much my lump sum withdrawal from CPF at age 55 could be? 

What? 

The government allow a withdrawal of $5,000 only? 

Not for me.

Related posts:
1. AK showing off SA numbers again?
2. AK showing off CPF-OA and MA (2016).







"They all say CPF is XXX... How like that?"

CPF OA to SA transfer or MS Top Up to SA?

Reader:
"I would like to make transfer from OA to SA so I did a check with CPF. Assuming that I reach the full retirement sum at age 55, they mentioned that I cannot withdraw cash top up to SA and its accrued interest but I am allowed to withdraw the OA to SA funds transfer and its accrued interest. I am confused however. My initial understanding is if my combined sum in OA and SA exceeds the full retirement sum, I am allowed to withdraw the access funds. If that is the case, whether it is cash top to SA or OA transfer to SA, should not make any difference. If you could clarify on this issue, I will be greatly grateful. Thank you."

AK:
"MS Top Up is a cash top up meant to help us with funding our retirement. It is an additional input and not part of the of the annual contribution limit (mandatory + volutary).The OA to SA transfer is money that is already in your CPF account.

"The OA money is from mandatory contributions and voluntary contributions (if any). These are made within the annual contribution limit and not in addition to the limit.The CPF is meant to help every member with retirement adequacy.

"Whether we choose to do OA to SA transfer or MS Top Up will depend on our circumstances. Whatever those circumstances might be, the MS (or the FRS) will go to our CPF-RA at age 55 and cannot be withdrawn (unless we choose the BRS by pledging a property) until age 65 at the earliest in the form of an annuity (i.e. CPF Life).

"Unless our CPF savings are made up entirely of cash through MS Top Ups to the SA, it is unlikely that we won't have a more meaningful lump sum withdrawal at age 55 if we should exceed the prevailing MS (FRS) significantly by then."

Related post:
1. Almost 55 and worried about CPF.
2. Did CPF Top Ups but denied lump sum payment.

A note on the CPF and a break from blogging.

Regular readers know that I only want to be a happy peasant. I was never royalty or an aristocrat. I am of the masses. 

DPM Tharman said before that the CPF is meant to help the working masses. That is why there is a limit to doing OA to SA transfer, to doing MS Top Ups to the SA and also to doing Voluntary Contributions to the MA.

For many people, it is easy to miss the big picture. A fixation on theoretical opportunity cost could turn out to be costly. 

In our investment portfolio, the CPF should be considered an investment grade bond component that gives us peace of mind (and relatively good coupons). It is not, however, the be all and end all in a sound retirement funding plan. 

We cannot build a house on just a cornerstone but to give up a cornerstone in a house, we must have a high level of certainty that whatever takes its place is going to be just as strong or stronger. 

If the alternatives have a higher level of risk or a greater degree of volatility, then, we would need a helping hand from Lady Luck to ensure the house remains standing in the years to come.

Be careful who we listen to when we build a house of our own.

I will be taking a break from blogging etc. for a few days. It is probably a good idea to get away from things familiar for a bit. 

Don't worry. I will be back. :)

In the meantime, keep building your house carefully. ;)

Related posts:
1. AK is showing off his CPF-OA and MA.
2. AK's SA outperformed in 2015.
3. Building a cornerstone in retirement funding.

AK is showing off his CPF-OA and MA numbers.

A reader said he shared my update on my CPF-SA with his elder brother and his brother was not only incredulous but called me a show off. 

I consoled the reader by saying there are many different people in this world and they will not all react in the same way.

Having said this, I must say that it took a lot to get me out of my comfort zone to share the numbers. They should be confidential. 

However, because AK's identity remains largely a secret, he has some protection. With all the numbers out in the open, AK will need his anonymity even more.

When I share personal numbers and they could be my passive income, my CPF-SA, OA, MA or even my body weight, I am sharing important messages. 

What people wish to focus on and how they want to interpret the blog posts, I have no control over.

Now, at risk of being labelled a show off once more, I am sharing numbers for my CPF-OA and MA. Again, there are important messages here:

What are the important messages? I won't repeat myself. If you are interested:

See my message on the CPF-OA: here.

See my message on the CPF-MA: here.

Of course, for the recent blog post on my CPF-SA savings (here), the most important message was that the magic of compounding takes time to work and giving it a boost by injecting more funds in the early years, it gets even more magical.

Alamak, I just repeated myself.

I am glad that talking to myself has helped many people. I used to feel somewhat sad but I guess I have to accept that there will always be many more who ASSI cannot help because they refuse to help themselves.

So, go ahead, share the messages but don't feel down if the reactions are negative. At least, you have tried.

Related post:

Getting the most out of ASSI.

Aim to pay off home loan and hit the MS ASAP.

The title of the reader's email was "CPF Haywire". So, imagine my trepidation as I clicked on the email.

Hi AK!

I've been reading your blog here and there and my eyes go haywire... so many nuggets of gold! Kam Sia very much for your contribution to society.

I just bought my first HDB and OA start from scratch. I calculated I'd have about 10k in a year. 

In order to meet the MS when i turn 55 in 15yrs time (about $244k if at 3% yearly right?), would you suggest that every few years to transfer a bit (thinking about 10k) from OA to SA for the compounding effect to be greater and yet leave some in OA for financing the 30yr loan? 







I have about 4 years worth of monthly deductions from CPFIS (principal amount), and this is my backup plan to tap on in case I lose my job.

Like you I choose to be conservative with my CPF and not take any chances in the stock market (aside from the only investment I made before purchasing the flat on the advice of my insurance agent) so my aim is to finish my loan ASAP and be able to hit the MS for retirement payout. 

Would you suggest to make partial payments every few years to lessen the years of loan or to stretch it out to 30 years?

I'm aware about tax reliefs or incentives doing VC, MS top-up, contribute to SRS but am not considering these because I have limited cash on hand.

I have 6 months emergency fund and every month I save some (for holidays, etc) and invest some for dividends (Spore ETF, REITS). Its not much because I started late in life (wish can turn back time to tell my bochap younger years to buck up!) and I'm hoping that I can still 'fix things' to ensure I have an okay retirement. 

Do you have any advice on what else can I do to improve my financial situation?

Many thanks,

OhwhatcanIdo

AK replies:
Hi,

Welcome to my blog. :)

I hope you did not buy an ILP from your insurance agent. There is no way to guarantee that you will get back the same amount you put in if you need the money.

I say this because you are looking at it as a backup plan in case you lose your job.








Money in an investment should not be looked upon as money in your emergency fund.

Of course, I will have some other stuff to say about ILPs but you can do a search for these blog posts in my blog.

I shall talk to myself now:






1. I just bought a HDB flat. I want to make sure that I have enough in my OA to service 12 months of mortgage. If I am 40 or older, 24 months would be prudent because it could be more difficult to find a job. The rest of the money I have in my OA, I can transfer to my SA.







2. I bought some investments with my OA money. The money invested could have serviced 48 months of mortgage payment. I should look at possibly liquidating the investment if there is a gain or if it breaks even as my motivation was never to invest with my CPF-OA money. Then, I would have more money to transfer to my SA.







3. If the interest rate on my housing loan is less than 2.5%, it makes sense not to pay down the loan with CPF-OA money as the CPF-OA pays 2.5% in interest. I might want to consider the POSB HDB Home Loan.







4. I might want to contribute to SRS and use the money to invest for income. I will save on income tax and still be able to invest. Have my cake and eat it? Sure.

This talking to myself illness is getting worse by the day. Cham.

Best wishes,
AK






Related posts:
1. POSB HDB Loan.
2. How much to have in emergency fund?
3. OA to SA transfer before buying a flat?
4. SRS: A brief analysis.

How to stop accrued interest we owe (CPF) from growing?

Added 30 Jan 17:

 --------------------------------------------------------------------------


UPDATED. FROM CPF BOARD (NOVEMBER 2016):

Q	I am not selling my property. Can I make voluntary refund on the housing amount withdrawn? If yes, how do I go about doing it?

A

Yes. You can refund the following amount via a cheque/cashier's order to the Board: a) Full principal amount b) Partial principal amount c) Full principal amount and full accrued interest d) Full accrued interest (You can only refund the accrued interest after you have refunded the full principal amount.) Please complete the Form HSD/VR  Updated Form: HSD/VR (2017) and prepare a cheque/cashier's order made payable to "CPF Board". On the reverse side of the cheque/cashier's order, please write your name, CPF Account No. and the property address. Mail both the form and the cheque/cashier's order, before 20th of the month if you wish to earn interest on the refunded amount from the following month, to: Central Provident Fund Board  Housing Schemes Department  238B Thomson Road #08-00 Tower B Novena Square Singapore 307685 Alternatively, you can deposit the cheque/cashier's order and this form at any CPF service centres. The refund will be credited to your CPF account(s) within five working days from the receipt of your cheque/cashier's order (subject to cheque/cashier's order clearance). If you wish to use your CPF savings to service the outstanding housing loan after making the full cash refund, you will need to submit a fresh application, "Application to Use CPF Savings to Purchase Residential Property" to the Board through your lawyers. You will incur legal costs in the process as we need to lodge a new CPF charge on the Property to secure the refund of new CPF savings used for the Property before we allow your CPF savings to be withdrawn for the Property.

-------------




One of the things I have blogged about is how in using our CPF-OA money to purchase a property, we must be aware of the opportunity cost that comes with the decision. 

CPF money is meant to help fund our retirement. Our CPF money also enjoys relatively attractive interest rates from the government.

In the event that we use our CPF-OA money to purchase a property, we are losing out on interest payments by the government. Also, in line with the idea that our CPF money should grow for it to be a more meaningful source of retirement funding, we would have to pay ourselves interest for the CPF money we have utilised in the event that we sell the property with a capital gain.

Having understood this, a reader wrote and asked if we could voluntarily return the money we used from our CPF-OA in the purchase of our homes and here is the reply from the CPF Board:
 

You can refund the CPF savings that you have used for your HDB flat without selling the flat.

If you intend to make the voluntary refund, you can refund the following:

a) full principal amount withdrawn towards the property and accrued interest; or

b) full principal amount withdrawn; or

c) part of the principal amount withdrawn

With your SingPass, please check the Principal Amount used plus the Accrued Interest if you would like to proceed. The steps are as follows:

1. Logon to CPF website www.cpf.gov.sg and click on "Login Here ---à "

2. Key your SingPass ID and password

3. You will now see your CPF statement and a column of options on the left panel of the screen

4. Click on "My Statement". Scroll down to select "Section C" - "Net Amount Used & Amount Available"

5. Click on "Property >>"

Please note that you will not be able to apply for a refund of the monies once it is credited as the voluntary refund is irrevocable. 

However, the credited monies in your Ordinary Account can be used under the various CPF Schemes.

If it is a full voluntary refund i.e. full principal amount used and the accrued interest, your monthly instalment and the Home Protection Scheme cover (if any) will be terminated and the unused premium will be refunded to your Ordinary Account.

If you would like to make the voluntary refund, please complete the Form HSD/VR and let us have your cashier’s order or cheque made payable to ‘Central Provident Fund Board’  before 20th of the month (e.g. before 20 September, before 20 October and so on). 

On the reverse side of the cashier’s order/cheque, please indicate your name, NRIC number and property address.

Please send your cashier’s order/cheque together with the HSD/VR Form to:

Central Provident Fund Board     

Public Housing Section

79 Robinson Road

CPF Building

Singapore 068897

The refund will be credited to your CPF Ordinary Account within five working days from the receipt of your cashier’s order/cheque.

I would be glad to assist if you require any clarification on the Public Housing Scheme. Alternatively, you may call us on 1800-2271188 
(Monday to Friday 8.00 am - 5.30 pm).

Coincidentally, a friend also did this recently after we had a chat on the matter. He is quite pleased that the government has once again assumed a greater responsibility for helping him grow his CPF savings.

Please note that I am not suggesting that everyone does this but I feel that for people who are in their 40s or early 50s, who might have excess cash and who are somewhat risk averse could consider doing this to build bigger retirement nest eggs. 

In fact, they could also consider doing an OA to SA transfer if they should do this in order to enjoy a higher interest rate on their CPF savings if their CPF-SA has yet to hit the Minimum Sum (now called the Full Retirement Sum).




Why did I mention people in their 40s or early 50s? Well, apart from the fact that they are more likely to have some excess cash than people in their 20s or 30s, they are also closer to the number 55. 

At age 55, that is when we are allowed to withdraw a lump sum payment from our CPF in excess of the prevailing minimum sum. So, it would be like getting a short to medium term investment grade bond with an attractive coupon for people in their 40s and early 50s. Good deal.

Related posts:
1. How AK amassed money in his OA?
2. Retirement: AK buys a 12 year bond.

Letters on risk free, volatility free retirement funding.

Regular readers would have guessed what this blog post is about.

Letter number 1 from a lady:

Hi ASSI,

Sorry if I sent this email to the wrong email address, not sure if this is only meant for ad enquiries only.

I enjoy reading your blog and these few days I keep coming across CPF-SA on your blog. It got me thinking about whether I should transfer some $ from OA to SA.

I just realised I have abt $50k in my OA and $20k in SA. Is there a cap on the amount transfer-able from OA to SA? I read about a $7k limit but it seems to be voluntary contribution cap as well as tax deductible.

I'm in my 20s, married with kids and have a HDB loan but it is not serviced with my OA. Do you think it is advisable for me to transfer as much as possible to my SA account?

What should be the considerations I have for leaving the balance in OA vs transferring to my SA account?

From what I gather, it sounds advantageous for me to transfer those in excess of $20 from my OA (thinking since 1st $20k earns additional 1% interest) to SA.

should I have an aim of say x% dividend yield/captial gain given that money in SA is already earning 4% and it's risk-free.

Thank you.

Cheers,

Y

The ant stored food for the coming winter.

My reply:

Hi Y,

Welcome to my blog. :)

Well, if you don't have any use for the money in your CPF-OA, it would make sense to do an OA to SA transfer. Yes, leave $20K in your OA since it makes 3.5% per annum.

The first $40K in your SA will make 5% per annum. The rest will make 4% per annum.

OA to SA transfer and Minimum Sum Top Up to the SA will be limited by the ceiling imposed by the CPF. This year, it is $161K, I believe. So, people who have $161K in their SA already cannot do any transfer or top-up.

$7K in Minimum Sum Top Up to the SA each year is eligible for income tax relief. You could Top Up more than $7K but you won't get tax relief for anything more than $7K. There is no tax relief for OA to SA transfer.

There is a place for risk free and volatility free instruments in our investment portfolio, I firmly believe. I treat my CPF as the bond component of my portfolio. ;)

Best wishes,
AK

Risk free, volatility free retirement funding.

Letter number 2 from a gentleman:

Hello Bro,

I saw your blog and am very impressed with the article you wrote on CPF SA.

I was doing some calculation but unable to really get the correct numbers and have tried using CPF compound interest calculator but the numbers I get seems to be wrong....

Wondering if you can help ?

Case Scenario : Age 33 with $40K in SA and contribute $7K to SA for the next 12 years (Till Age 45)

How much SA will I have at age 55?

My calculation comes up to about $384K which is definitely wrong....

Regards,

C

Sorry bro forgot to add that after age 33 to age 55, a constant contribution of just $300 to SA from employment and $7K is a cash topup. At age 45 the cash topup will stop with just $300 contribution to SA from employment.

Power of compounding.

My reply:

Hi C,

If you notice, in my blog, my math is usually very simple. I think if we can be approximately right, that is good enough.

If you contribute $300 to your CPF-SA each month from age 33 to 55, starting with a base of $40K at age 33, you would have $223,381 at age 55.

Principal: $119,200.
Total interest: $104,181.

I used the CPF Compound Interest Calculator.

Of course, you would probably end up with more than this because the first $40K in your SA will get 5% interest per annum and not 4%.

Now, if you were to do a $7K Minimum Sum Top Up to your CPF-SA every year from age 33 to 45, I don't know what you might end up with at age 55. I will say "a lot more". ;p

A lump sum $7K compounding at 4% per annum for 22 years will become $16,852. Total interest: $9,852. Since you plan to stop doing Minimum Sum Top Up after age 45. Then, your final contribution at age 45 will compound for 10 years which will give you $10,436. Total interest: $3,436.

You could do the rest of the calculations yourself (11 years to 21 years) and total them up.

You will have a lot of money in your CPF-SA at age 55. ;)

Best wishes,
AK

Related post:
How to upsize $100K to $225K?