AK is showing off his CPF numbers graphically (Updated for 2017).

UPDATED for 2017.
-----------------------
Whether to pump more money into our CPF Special Account is something that some of us struggle with, especially younger CPF members because it could be a very long time before they see any of the money again.

Although I cannot say that what has worked for me would definitely work for them, I can say, if we believe in having some investment grade bonds in our portfolio, that it is something worth considering.





Hello AK,

I have been a follower of your blog and I have one question to ask.

I like to take the low risk style to invest, and that's why I have been investing in unit trusts and shares like Singapore Airlines and Singtel.

However, I realised that we can do self top ups to Special Account, which will earn a guranteed 4% per annum interest.

Considering that is risk-free, I think it is a worthy decision to transfer my investments to this special account.

Do you think I should transfer to the special account?

I do know that I can only withdraw from it at 55 years old, but I'm planning for the future :0

Kind Regards,J

Whose CPF statement is this? 
Whose? Whose?

UPDATED for 2017:

My reply:
Hi J,

OA to SA transfer was something I did consistently in my early years. ;)

It has turned out very well for me. :)

Best wishes,
AK

UPDATE (22 AUG 17):
See my blog on the 4 ways we can beef up our CPF account for a more complete picture HERE.





It is also worth reminding ourselves that the CPF is not only risk free, it is also volatility free which is good for my heart.

This isn't Quantum Physics. 

It is simple math.


Related posts:
1. AK's CPF SA outperformed in 2015.
2. AK is showing off his CPF OA and MA.
3. Building a cornerstone in retirement funding.
4. Some people say AK "how lian".
5. A note on the CPF and a break from blogging.

"Aiyoh, people so sour grape to say you how lian!"

An email from a very regular reader:

Saw your post on CPF balance. 

Aiyoh, people so sour grape to say you how lian. 







But nevermind, I support you to be how lian, k?


SMOL's comments soooo hilarious. Really made my day! ROFL. 


Honestly, OA savings aside, I think growing the SA is quite achievable.








In Jan 2008, I only had $17,084 in my SA, accumulated through the course of my active employment. 

Was contemplating to do the transfer earlier but decided to keep the money in OA for investments. 








I first transferred some funds from OA to SA in 2009 and by end 2009, I had $52,893 in SA after earning $1670 interest for the year.  

In 2010 I didn’t do anything cos I resigned from XXX and took 6 months sabbatical to finish my Masters.


No income, so nothing much to transfer. :P







Then I resumed the transfer in 2011 to 2013 till I met the prevailing CPF ceiling. 

My CPF-SA now stands at $182,213.73 after earning $7,474 of interest last year.







This year there will be more contributions accumulated since the ceiling has been raised to $6K. Happy!

So, don't say it cannot be done.

Never try, why say cannot?

Don't sour grapes.

Grapes can be sweet.





I know because I am eating sweet ones now.


Related posts:
1. AK is showing off his CPF numbers.
2. 2016 changes to the CPF and SRS.

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.

An update on AK's CPF-SA which outperformed in 2015.

Exactly one year ago, I shared my CPF-SA numbers, as a friend put it, to shock and awe the most cynical of readers into action. 

I think it worked as that blog post has received almost 400 FB Likes so far and also generated quite a bit of discussion.

Last month, I receive a request from a reader:

At that time, I was not sure that it would be helpful to share my CPF-SA numbers one year on but, on second thoughts, it could be a good idea. 

After all, the shock and awe generated by that blog post a year ago could have worn off by now.






So, here are the numbers:

"VC" stands for voluntary contribution. 

AK is not allowed to do Minimum Sum (MS) Top Up to his CPF-SA anymore as he has exceeded the MS.

There was a "VC refund" for excess contribution made the year before. 





I blogged about it here: 
The CPF is a national PONZI scheme.

So, I received a full year interest of $8,210.28 for my CPF-SA savings. 

The interest I receive yearly, I believe, would more than cover the planned 3% annual increase in the MS, now the FRS, from year 2018.





To find out more about the BRS, FRS and ERS, read this: 
Proposed changes to the CPF system.


All of us should try to benefit fully from the CPF system and make our CPF savings a cornerstone of our retirement funding strategy. 

To me, it is really a no brainer.





The CPF outperformed the S&P 500 and the STI in 2015. S&P 500 was flat. 

The STI declined 15% and Barclays junk bonds ETF dropped 12%.
Source:
http://www.cnbc.com/2015/12/30/singapores-cpf-saving-plan-beat-markets-in-2015-with-steady-returns.html

We should always make room for a risk free and volatility free component in our investment portfolio. 

What might that be? 

I am sure you know the answer.





(If you are new to my blog, you might want to read related post number 1 below.)

Related posts:
1. A lot of money in my CPF SA is... 
2. 2016 changes to the CPF and SRS. 

2016 changes to the CPF and SRS for a better retirement.

I was reading the papers on changes to the CPF and SRS which took effect on 1 Jan 2016 and thought to myself that working Singaporeans are a lucky bunch.

If you are a middle income worker, rejoice because mandatory CPF contributions by both employer and employee per month are now based on a higher salary ceiling of $6,000 a month instead of $5,000 a month. Your CPF savings will grow at a faster clip.

If you are a worker between 50 to 65 in age, your employer will now contribute an additional 0.5% to 1% based on your monthly wage into your Special Account (SA). 

If you are 55 years old or older, you will also receive an additional 1% interest on your first $30,000 in CPF savings which means you get 6% interest per annum, risk free!

It would be a good idea for younger readers to communicate this change to their parents. If at all possible, consider topping up your parents' CPF SA or MA if they do not have that first $30,000 in their accounts. 

We really should not pass on a 6% annual return from a AAA rated sovereign bond!

A comfortable retirement need not be a dream.

As for the SRS, the ceiling is raised to $15,300 for Singaporeans and PRs. It is $35,700 for foreigners. So, if you pay plenty of taxes each year, this is another tool to help pay less in income tax.

I think it is important to count our blessings and not keep complaining. Probably, there is more than a handful of people who think that the changes are not good enough. Fion Lau, 41, said that the changes do not go far to provide retirement adequacy.

Well, I would like to remind Fion that the CPF is, like I always say, a cornerstone in our retirement adequacy strategy. It is not the entire foundation.

Related posts:
1. SRS: A brief analysis.
2. Retiring before 60 is not a dream.
3. Retirement: Buy a AAA rated bond.

Extra 1% interest for CPF savings and MSTU.

The following is contributed by a reader:

 

The CPF Board's response is appended below. I've edited the questions and part of the response to mask personal information hence, the flow of CPFB's reply may not make sense but I trust that the key points of interest are in there. Feel free to reproduce it:
 

Question: How would the extra 1% interest earned on OA + SMRA be earned? 

 

The extra 1% interest per year is currently paid on the first $60,000 of a member’s combined CPF balances.

 

The priority of the accounts that make up the $60,000 is as follows: 

 

1. Retirement Account (RA), including balances used to pay for the annuity premium under CPF LIFE

2. Ordinary Account (OA), up to $20,000

3. Special Account (SA)

4. Medisave Account (MA)

 

In general, CPF interest is computed monthly, and will be credited and compounded to your respective accounts yearly.

 

Any excess of the FRS will remain in the OA/SA which the member can apply to withdraw.  

 

There are no restrictions on when a member, age 55 and above, can make the withdrawals throughout the year. Now, they can apply for withdrawal at any time as long as they have the withdrawable monies and the Board will assess their applications.

 

 

 

 

 

 

 

Question: Assuming FRS of $X and MSTU of $(X + Y) including interests. At age 55, can $Y be withdrawn? 

 

No, the top-up monies of $Y cannot be withdrawn as these are meant for recipient’s retirement needs. Hence, the member cannot apply to withdraw the top-up monies:

(a) for payment of education, investments, insurance, housing, etc;

(b) by pledging his property in lieu of the Full FRS; and

(c) via exemption from the Retirement Sum Scheme.

 

Related posts:

1. Retire with a bond and an annuity.

2. CPF MS Top Up and interest computation.

Use CPF savings or cash to pay for our home?

I remember telling a friend who was disgruntled with the CPF that we don't really have a choice. 

It is like being married and not liking our mother-in-law.

We can kick our mother-in-law in the butt if we divorce our spouse. 

We can kick the CPF in the butt if we give up our citizenship.

Fortunately, I rather like my mother-in-law, er, I mean, the CPF. 

Some might not have mandatory contributions to the CPF for various reasons and might wonder how the CPF fits in their lives?



Here is one example:

Reader:
I accidentally came across your blog only this year, find it very sensible & rational. So, I took few weeks to read all your past articles since Day 1 (I think).

Need your advice or please to talk to yourselves J

I’m a self-employed & have been doing max voluntary contribution to CPF some of the years to service our HDB mortgage through our CPF…

We have no intention to fully pay maybe until when we buy our 2nd property

My question is what is the downside to continue doing VC with the ultimate aim to buy 2nd property using CPF (I’ve set aside the Basic Retirement Sum needed in SA)?

I’m confused on paying back CPF & accrued interests part when & if I were to sell the property

Am I worst off when compare those who bought using Cash???

Awaiting your enlightenment

Thank you J

 

AK:

Welcome to my blog. I am glad you enjoy my muttering and mumbling. ;)

With regards to the CPF, people must remember that it is really meant to help Singaporeans fund our retirement.

For people who do not have sufficient cash on hand or other means, they could use their CPF savings in the OA to help pay for their homes but that is not the primary purpose of the CPF.

However, for people with sufficient cash on hand or other means, especially in an environment of low interest rates, they don't really have to use their CPF savings to purchase their homes. 




They should look at their CPF savings as a back up only to be utilised in case they have to. Well, at least that is how I look at it.

There is an opportunity cost to using our CPF money meant for our retirement to purchase real estate whether for own stay or investment.

I would do VCs to my CPF account if I were self employed because I want some sense of financial security in retirement down the road and not really for anything else.




It is very often a matter of perspective.

How we look at something would determine the way we treat it.

Related posts:

1. Stop interest we owe (CPF) from growing?
2. Proposed changes to the CPF system.
3. Buy the biggest/most expensive home?

Withdrawn CPF money in excess of the Minimum Sum.

If we have planned well, we should be able to meet and even exceed the CPF Minimum Sum when we reach age 55.

If we should exceed the CPF Minimum Sum at age 55, we would be able to withdraw probably much more than a token $5,000 then.

Hi AK

 

Where is the best place to keep the “untouchable” portion of our retirement money (ex-CPF money)

 

Would be delighted to hear you “talk to yourself”

 

Thanks for a great blog

 

R

Hi R,

It would depend on whether it is our only source of retirement funding. If it is our only source of retirement funding, then, we should not take much risk with it. Fixed deposits with promotional interest rates (e.g. 1.8% interest per annum) are safe options.

If we have other sources of retirement funding, then, this could be seen as extra money. Then, it might not be that "untouchable". We could take a bit of risk investing in REITs and dividend paying blue chips then.

We could always opt to buy annuities too, of course.

You might want to search ASSI for the blog post "Is it too late to plan for retirement at age 57?" which was published recently.

I am glad you like my blog. :)

Best wishes,
AK

Related posts:
1. Proposed changes to the CPF system.
2. A lot of money in my CPF-SA...
3. How to upsize $100K to $225K?

Retire with an investment grade bond and an annuity (UPDATED).

The CPF is a risk free and volatility free retirement funding tool that Singaporeans should learn to take advantage of.

However, depending on what we want it to do for us, the way we use it would be different.






Reader says...
Hi AK! Can I ask u for some advice.. or rather ask u to talk to urself! 

My wife and I r both self employed, and I want to boost our CPF SA account, but I'm not sure whether we should boost just one or both accounts.


My SA has Xk and i'm XX, she has Xk and XX, and I'm thinking if we both contribute to her account, its quicker to reach the minimum sum and exceed that, so we can draw out a lot in excess of the MS when she reaches 55.





Whereas if we contribute to both i have to work harder to reach the MS and we may just slightly exceed the MS when we reach 55 in our respective accounts, and can't withdraw as much.


I'm contributing 2k a month, and she 800 a month to our SA atm. If you are faced with this, what is the more sensible choice?






I sidestepped the question about whether it is better to contribute to only one account or work harder to contribute to both accounts. I think the reader has the answer somewhere in his head. 

It really is a matter to be decided by him and his wife. 





I don't want them to scold me for some reason when they hit 55.

However, I had this to say:


AK says...
I think you might also want to consider maxing out the annual contribution limit for the CPF. 

The limit this year is $31,450 (mandatory and voluntary contributions combined).

{CPF annual limit in 2018 is $37,740.}





The money voluntarily contributed gets apportioned into your OA, SA and MA. 



You could then do an OA to SA transfer as long as your SA has not hit the ceiling (which is the prevailing MS). 

Note that there is no income tax relief for OA to SA transfer unlike MS Top Up to the SA (for the first $7K per year).







CPF savings has a bond like feature which allows us a larger lump sum withdrawal (i.e. anything above the prevailing MS) at age 55 but it is also an annuity component (i.e. CPF Life) that pays us a monthly income for life in our golden years.

 

Note:
Whether we are able to withdraw Top Ups and the accrued interest would depend on the age at which the Top Ups are done.






"Top-up monies are set aside specifically for retirement needs and will be used to increase the recipient’s payout level and/or payout duration. 

"Hence it cannot be used for other purposes such as education, investment, insurance premium payments, housing, pledging and/or exemption.





"If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55.


"Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55."






Source: CPF FAQ.

Related posts:
1. How to upsize $100K to $225K in 20 years?
2. Another step towards retirement adequacy.
3. What happens to our CPF money at age 55?

The "secret" to AK's success as an investor.

I was talking to a friend over a cup of tea recently and we agreed that most people naturally do not have the temperament to be good investors.

Most of us are not born into a family of good investors. Those who are will have an advantage, for sure. For the vast majority of people, AK included, we might start the journey later in life and we might have to try a bit harder but unless severely disadvantaged, financial freedom is definitely not beyond us.

Having the right philosophy in life is essential as our philosophy will guide all our thoughts and actions. I have achieved what I have today financially largely because of my philosophy in life. Remember the story about the grasshopper and the ant? (See my blog post on being a happy peasant.)

Regular readers would know that I believe in saving money, the more the merrier, of course.




Something I blog about pretty often is the CPF and how we should try to take full advantage of it as Singaporeans. 

I said that if we bulk up our CPF-SA as soon as we could, we would be helping the CPF to help us build a more meaningful retirement fund more quickly. Compounding at 4% per annum over a long period of time without risk would be more magical if there is a larger base to start with.

Imagine compounding $10,000 over 20 years at 4% per annum versus compounding $100,000 over 20 years at 4% per annum. How much we get at the end of 20 years would depend on how much we put in right at the start, everything else remaining equal.

Quite easy to see that, isn't it?




Many of us are probably familiar with the idea that our CPF savings is not going to be enough for us to retire on and that we should save more money. 

Of course, a more sophisticated idea is that we should have investments that will help to fund our retirement and this argument is a very attractive one too.

At this point, let me tell you a story.

One of the stories which I enjoy sharing is how I bought my very first lot of ST Engineering's stock at $1.55 a share donkey years ago. I was attracted to how they were paying 100% of their earnings as dividends to shareholders. 

Back then, when I told some friends what I did and I had more friends donkey years ago, some went:

"Wah! So expensive! That is $1,550 a pop and then there is brokerage fee! You so rich!"

Well, something like that. 

Brokerage fee was more expensive in those days and, yes, one lot was 1,000 shares until not so long ago.

Of course, for us young people who just graduated and drew a salary of about $3,000 a month, $1,550 was a lot of money. Yes, I was a young person once upon a time.

A reader's little niece drew this.

What was even more amazing to many, including my mom, was how I bought more of ST Engineering's stock as its price rose. I remember buying at $1.70, $1.80, $1.90 etc. Well, not at those exact prices but you get the idea. 

I was buying almost every month and I have reaped the benefits of being a shareholder over many years. The very first 1,000 shares I bought are probably free of charge twice over or so by now.

So, similar to my narrative on the CPF and my strategy, it is about saving as much money as possible early in life and putting the money to work as early as possible in life, investing in good dividend payers. 

We don't have to be a genius to do this but the will to save more money right from the start must be strong.








Not too long ago, a fellow blogger whom I respect said that he admires my money habits. He commented that I am probably successful more because of my money habits than my investment acumen. I cannot remember his exact words but his comment is in my blog's comments section somewhere. 

I will be the first to say that I am not a very good investor but I can grow my wealth relatively quickly. This is not because I make a lot of money. It is because I do save a lot of money relatively quickly.

Be much better savers as early as possible in life. 




If we do this, it will allow us to become wealthier faster as it gives us more capital to invest with earlier in life and we will have more time to reap the rewards of being invested (i.e. becoming wealthier). 

If we are able to save much more money than our peers, even if we are not fantastic investors, just by investing prudently for income, all else being equal, we are most likely going to enjoy a much better outcome financially compared to our peers.

Related posts:
1. To be a happy peasant.
2. How did AK create a 6 digits passive income?
3. Greater financial well being is not beyond us.
4. The Millionaire Next Door.
5. Buying a $500,000 watch after 3 years of work.

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.