Unemployed, almost 55 and worried about CPF.

Reader says:

I have been following your useful CPF blog and learn alot. Lately I noticed something quite disturbing and what i deem as unfair.

We live a in HDB flat which had been fully paid off about 8 years ago. 

But I only noticed recently that the accured interest (supposed this is the amount I owed to CPF Board) has been increasing every month even after I fully paid off my flat long ago. 





I feel that this practice is unfair.

The accured interest should stop increasing the year that we pay off our loan. 

This kind of contradict the saying that the CPF money is ours. Seems that we always owe the government something somewhere.

It appears quite ridiculous because we had already paid hundred of thousands in interest during the loan term but still have to pay interest even after paying off the loan completely. 

If we borrow from banks, the interest would had stop once we clear the loan right?

I am unemployed and will reach 55 in a few years' time, how will this affect me? 

Kind of worried as retirement approach and without a job for sometime now.

I believed many Singaporean are unaware of this because we don't really track this item. 

How can we deal with this government policy? 

Do we have to pay CPF Board that substantial amount of interest if we sell off our HDB or downgrade to a smaller unit? 

Or when we reach 55 or 65? I get the feeling that one day I have to pay back that huge interest amount. 





How to retire peacefully without worrying about money in this place?

If I give the flat to my son later when I pass on, does he has to take over that accured interest?

Hope you can advise and share your thoughts.

Many thanks AK.

Best Regards

AK says:
The CPF is to help us with retirement adequacy. If we use the CPF money to pay for our homes, there is an opportunity cost. 

The government stops paying us interest and if we should sell our home, we have to pay ourselves interest in order not to compromise on the original purpose of the CPF.

In your case, you might be interested in this blog post: http://singaporeanstocksinvestor.blogspot.sg/2015/09/how-to-stop-accrued-interest-we-owe-cpf.html


Although it might appear otherwise, we don't pay the CPF Board, we are paying ourselves.



Upon reaching age 55, if you already have the MS (now the FRS) in your CPF account, you don't have to pay yourself anything if you were to sell your flat. 

The objective of the CPF to help with your retirement adequacy has been met.




If you do not have the FRS yet, then, it is a different story. 

Some of the money from the sale of your flat will have to go to your CPF account to fulfil this objective. 

There is also the option of BRS in which you pledge the value of your flat but that is another topic.





As long as we remember what is CPF's primary objective, everything makes sense.

Related posts:
1. Use CPF savings or cash to pay for our home?

2. Changes to CPF: BRS, FRS, ERS.
3. Retirement funding adequacy.

Saving money with good deals is common sense but...

As investors, we know that businesses that take cash from customers and enjoy credit terms from their suppliers are in a very good place.

Get paid now but pay vendors much later? Wow! This is one reason why Walmart is a good business, right?

When we go to a supermarket, we don't get to leave the place with the stuff we want unless we pay for it. Of course, we can pay with a credit card to enjoy some shopping benefits but it is essentially a case of "no pay, no take".

When we see a very good deal on something that we consume often, we could buy a lot more to save money. Instead of buying one, we buy more. That makes many of us happy!


Question:
If the supermarket told you that you could buy more of a special deal item but you could only collect one now and the rest on a monthly basis in future, would you bite?

Pause.


Pause.


Pause.

Would you?

Hanor.

Then, what about this?

I shared this on my FB wall 2 days ago.

It happened earlier this year.

I actually told the California Fitness salesman that I didn't mind paying on a monthly basis but a lump sum payment for a 3 years membership?

Sorry, not interested.

Saving money with good deals is common sense? I must be stupid not to take up the offer.

I was adamant.

I could tell that the salesman was disgusted.

AK was such a disgusting customer.

Disgusting and heng ah!

Remember, saving money with good deals is common sense but paying in advance and in full to get good deals is not as sensible.

California Fitness is not the first example and it won't be the last one either.


Related post:
1. 6 points in response to an expensive lesson.
2. Nobody cares more about our money...