You're listening to a CNA podcast? Hi, I'm Andrea Heng and I am back with a brand new episode of Money Talks. And this is where we talk about all things money, what you can do with it and what it can do for you. Now, on the previous episode, we started a new conversation about your CPF moneys specifically how you can use it to its fullest potential if you're in your twenties and thirties, this is just about the time you're entering the prime of your life, launching your career,
buying a home, starting to invest and save. Now if you are in this age range and you're thinking about how you can maximize your CPF hop on over to Spotify or Apple podcasts and tune in to that episode. So as I said, you're coming into the prime of your life in your twenties and thirties, the peak of it arguably is your forties growing kids an established career. But you know what, you've got other priorities on your mind, too, aging parents, your own retirement. It's still a distance to
go before you say goodbye to the workplace. Or if you think it's too late to strategize your CPF monies. Well, you might want to reconsider helping me walk you through. This is Christopher Tan CEO of he is no stranger to us here and I'm happy to finally talk to him in the flesh. Welcome to Money Talks,
Chris, thank you. Thank you for having me.
Ok. So did I get that right, Chris, by your forties? Many of us would be at the peak of life, you know, marriage, kids, elderly parents in one hand, hopefully a thriving career, healthy savings and investment portfolio in the other.
I think it's like the peak of your expenses. That's a good way of, I'm not sure that's the peak of your life. But I mean, in terms of career, I think your peak is really the 50. But well, at 40 years old, you have a lot of commitments, right? Your parents are probably still around, you got to take care of your parents and you have probably Children, you got to take care of Children and like you said, mortgages and all things like that and then you have
to plan for retirement. So I think in terms of expenses, it's really quite a heavy commitment at that age. It's a
burden. I can tell you that and I don't have kids yet yet. So by the time I reached my forties, that's not very far away for me. You know, I have worked 20 years, bought a house and that's possibly the biggest ticket item that I would use my CPF for. Right. Chris. And I've only just realized that I could have invested some of that CPF money. The question I really want to ask is, is it too late? Has my investment runway shortened to the point where I can't actually do anything about it? No,
I think you have a lot of time. 40 I'm 53 and you know, so for you have long runway. right? I mean, I guess you're asking this question because if you buy a house, your money is in your ordinary account probably got wiped out. And that's natural. Right? Because how many Singaporeans actually have got a few 100,000 to put down for a deposit of a house? Right.
And then you have to service that monthly mortgage. So I think it's quite normal that if you buy a house, your money is in your ordinary account get wiped out. But not to worry. I mean, you can use your cash still to invest for your retirement. I mean, you can even use your cash if you want to, to top up in your special account. So I can't say it's too late. So there
are options if in my forties and I still want to do some investment using my CPF money. I
wish I was in my forties and plenty of time. Ok.
Ok. I hope I can wind back the clock for you in this episode and make you feel young again. So at this juncture in my forties, what kind of CPF investment products can I look at and how I think more importantly, how would they differ from investment products that the younger folks, the twenties and thirties folks would be looking into?
Yeah, I would say first, don't look into investment products, right? I mean, make use of your CPF special account because it's giving you 4 to 5% with almost no risk, right? And there are very few products out there. In fact, there aren't any products out there that can give you a guaranteed 4 to 5% capital guaranteed AAA risk, none out there, right? So before we go out there and start looking for products to buy insurance and all that, start considering topping up your
CPF special account, right? The only thing you have to accept is that putting money in your special account is like joining secret society very easy to join, very difficult to get out, right?
Because the 4 to 5% is just so
good, it's so good, but then no liquidity. So once you put it in, you got to accept no liquidity. But consider that that makes that to be your first place to consider putting your investments in after you have done that and you can't top up anymore, then you can think about investing into other products, right? And when it comes to investing in other products, we always say true. The source of funds that gives you a lower interest first. So between cash and ordinary account right now, cash is
giving you a higher yield right now, right? You can buy t bills, you can put a fixed deposit easily. You be 2.5% right? So right now, you might want to use if you still have got money in your O A to invest, you, you still want to consider that. But if you look at it over the long term and this rise interest rate environment won't be here forever, right? So when the interest rate starts to come down and go back to normal, then you might want to start investing using
your cash first. Don't invest your CPF, right? Unless you have to. Ok.
So ensuring that there is liquidity in the first place to even invest or make some investments. That's a separate matter from what you should do with your CPF.
Yeah, you actually brought up a very good point, right? If you want to use your cash to invest, please also make sure that you have got sufficient emergency fund, right? And if I use the previous scenario near 40 going to buy a house CPF wiped out, you probably need some money for your renovation, you know, and all that,
there's a huge cash out.
Yeah, so I would say don't be too hurried to go and invest. So all those expenses first, you start to build up your cash to have an emergency fund before you start investing.
Ok. That's very good advice. Now, let's talk about the O A for a second. My money is already compounding in there in the O A the ordinary account at 2.5% interest without me really doing anything. I mean, it's the same with the special account which we'll get into in a bit if I choose not to or am unable to invest my CPF moneys. Since like you said, it's locked in somewhere such as my home. Are there other ways for me to maximize it for some kind of sizable return?
I mean, if you want to make use of, if it's purely on CPF I going back to that first option. Sure. Top up your special account, right. That's your first option and then your O A you won't have much to use anyway. That's right. Yeah, you won't have much to use will be out anyway. Yeah, that's right. And so just leave it there. Ok. Don't worry about it, you know, because you still need some money in your O A to pay for your monthly mortgage, right? Consider using cash to invest instead.
I mean, later on, if you have more cash as your career progresses and you have savings, you can always if you want to do a housing refund if you want to, right? Because the money that you have taken out to pay for your mortgage, plus the accrued interest that you didn't get because you take the money out from oe, right? So you are losing 2.5%. So that accrued interest later on in life. If you want to top it back up into your O A using the housing refund scheme, you
can do that if you want to. There you go.
That's an option. So just because you're using your CPF to pay for your mortgage, it's not the end of the road for your CPF money. You can actually earn it back in some way. Yes,
if you have cash, you can always choose to put it back again. Ok. That's
fantastic to know. And as you said, one of the best things you can do is to top up your special account because that's earning you a 4 to 5% interest. Apparently there's an optimum time of the year to do these top ups.
Well, I mean, yes, I mean, people usually want to top it up before the end of the year. So that at the beginning of the year, that's when CPF will pay interest, right? But I think that we don't have to be so specific, you know, to try and capture that little
1% is in.
Yeah, I mean, I don't do it myself, right? It's too, it's too tiring, right? So I will say along the way, the best thing to do is along the way, put it in slowly, right? I find it very difficult to suddenly put in one lump sum in your special account because knowing that once you put in, you can, you can't take it out until 55 years. So that's the first time you can withdraw. So there's a lot of inertia. So I would suggest that people start putting in small amount like
100 205 100. That's very. And then after that, when you get more comfortable, then you put it in. Now, of course, the Top Up scheme, in fact, the specific name for it is called Istu retirement sum top up scheme, right? Is just one way. Once you reach the full retirement sum, you can't do it anymore. And this year the full retirement sum is 198,800. That's the, that's the cap, right? So you can't do
it anymore. But there are other ways to put in more money and that's the voluntary contribution scheme.
Ah OK. Talk to us
about that. Yeah. So if your total your contribution in that 12 months, your contribution plus your employer's contribution has not exceeded $37,740 you can always voluntarily contribute, right? But take note that when you do that, you cannot choose which account you want to contribute into, right? So every dollar that you contribute, using the voluntary contribution scheme, it gets split into the three accounts, right? Oas A and ma according to the CPF allocation rate for your age ban.
Right. It's not say, oh, ok. I'm gonna top, I have extra cash lying around. Let's top up my oa I can't do that because it goes according to the way we've been receiving our CPF contributions
exactly for your age. But that is another way to put in more money into your CPF if you want to.
Right. Ok. Now, at the age of 40 or so it will be about 15 years before the O A and the S A get converted into the R A, the retirement account. Right? So what's a safe sound investment move? Now that that account has been created? I have topped up my S A, it's pretty healthy. What's a safe sound investment move ahead of turning 55?
Well, I mean, if by that time you have built up a sizable amount of money in your O A, despite the fact that you have used it to pay your mortgage and you have used your cash to invest and you really, really want to invest your ordinary account. Right. Then you can use the ordinary account and go and invest into the stock market. You can maybe buy a unit trust for it. I wouldn't recommend you to buy an insurance using your ordinary account, right?
Because your ordinary account is already giving you between 2.5 to 3.5%. Correct. Right. Because your 1st 20,000 year old is giving you 1% more So that's 3.5 and then the rest is 2.5. So you're getting 2.53 0.5%. There are very few insurance products that can beat that, right? I mean, there are of course a lot of projections, but on average, I would say that
the insurance product cannot beat it convincingly. So if you want to use your O A, you can choose to invest it into funds that invest into the equity market. That should at least be like 3.54%.
Ok. So that's to say I'm investing my O A as it becomes the R A of course.
Oh, if you are talking about post 55 talking about post 55
55 now. Ok. What can
I do? What happens at 55 is that CPF board will first go to your S A to try and take the amount of money to meet the full retirement sum. So assuming this year you are 55 the first thing CPF Board will do is they will try and look into your S A and try and get 100 and $98,800
or the maximum that you have in there. Yes.
Right. So if you 198,800 so the 198,800 will go into your R A. Yeah, and it's done. Yeah. Whatever is left in your S A and whatever that is left in your O A now, you can take it out if you want to. Ok. Right now, let's assume that at 55 years old, you
don't have 100 and 98,800. Ok? Then they will take whatever there is in your S A put into your R A and CPA board will go to your O A and take whatever they need to make up the balance, the FRS and whatever that's left in your O A, you are free to do whatever it is as good as cash for you got it. Now, money is in your R A sitting there can't be invested, right? It will sit there until at the earliest age 65 if you decide to draw down via the CPF Life scheme and that's when it happens. And
that's why you're saying before we turn 55 if we have enough in the O A or healthy amount in the O A go and invest it. So you want
to. So some people, they want to do this thing called shielding cash, right? So it's quite popular and for people whom they have got sufficient cash in O A and S A. So that must be done before your 55th birthday to be safe, do it. I'll say one month before your 55th birthday, right? Because it takes a while for money to come out, right? So this is what happens. So before your 55th birthday, you go to your S A and you invest all the amount that is above 40,000. Ok. Right. Because the
1st 40,000 you can't invest C off. That's right. Ok. And then you can invest it in a very low risk instrument like tea bills if you want to or a short duration bond fund and you do the same for O A. You take anything above the 1st 20,000, you go and buy that same low risk instrument it, right? So you have done that. Your S A is now left with 40 your O A is now left with 20. That's right on your 55th birthday CPF board will wipe away the 60,000 and put into your R A. Now right after that, you
sell off whatever investment you have bought, ok? If it t bill don't sell, you gotta wait until six months before the mature. But if you buy other instruments, you can sell off one day after your birthday. It all goes back into your O A and S A and it becomes cash, right? But your R A has only 60,000. If you remember now, you take cash and you top up your R A up to the prevailing full retirement sum, right? So in effect, you are actually switching cash from your bank account to your O A
and S A, right? It's like you're putting
it in a temporary basket just to safeguard it first.
That's right. That's right. That's right. And the whole idea is want as much money in your O A and S A after 55 not in your bank because after 55 your O A and S A, they are like, cash their bank account because you can draw it out and at a higher interest rate. Ok. So this is something people do CPF shielding and a lot of people do it just before 55. Are you planning to do that? I've got two more years. If the board doesn't take away this feature. Yes, I'm going to do
it. Ok. Hello, everyone. My name is Christina and I'm Adrian and we're the host of a podcast called Work It If you never heard of it. Well, it's a good time to tap in, in the last 20 episodes. We've discussed topics like how to negotiate for a salary increase or how to get along with younger colleagues who have different values from you, which
incidentally it's our top performing episode. If work consumes your life and you want some perspective on issues like management, stress, even office romance, then this podcast should be on your list. A new episode drops every Monday. Catch us on the CN AM or wherever you get your podcast. Now, Chris, I have a scenario that I wanted to get your opinion on. Ok. A newlywed couple in their late thirties, early forties buys an H DB flat. They're paying off the loan in at least the first year
using full CPF. Right. There's advice out there to obviously pay this mortgage in full cash so that money in the O A gets to grow and you don't end up wiping your CPF because it's obviously best to keep at least 20 K 20,000 in the O A as you mentioned. And of course, that's what HEB and CPF advise as well. Question number one. What if full cash is not an option to pay off my mortgage loan?
Basically, I mean, to be honest, very few people would have the amount of cash to pay off. Exactly. Right. I mean, I don't know of anyone at all actually, that has got the money to use cash to pay off the whole house. Yeah. Right. So the only way is really to take your CPF money to do it. There's no other option, right? And subsequently, even your monthly mortgage will have to use your money in your O A right now. Let's assume that you have got cash. Should you
do it? Even if you have got cash to do it right now, it depends, it depends on what you are doing with this cash. If you are doing nothing with this cash and interest rate falls down to the level where we saw before 2022. Right. So if you are putting your savings account and you're getting like 1% 100% and you Absolutely. You're not going to do anything about it then. Ok, use your cash to go and pay off
the house, right? Because it is better to leave money in the O A because you're getting 2.5 right now. Even if you do that, I would say don't wipe away all the cash always set aside money for rainy days. Right? Emergency because the advantage of cash is that he has got liquidity. O A has no liquidity. So very few, I would say very few people will do
nothing with cash. They will probably find ways to invest the cash to at least beat the 2.5% 0 A. So I will say use your O A, use your cash for investment unless you are so conservative, you are not touching your cash at all. You're just leaving it in the bank or putting it under your pillow and you might as well just pay off your,
I mean, it's not earning much more sitting in your pillow, right? Ok. So what about doing partial, so partial CPF partial cash? Is that something? I mean, that's obviously to help sort of cushion the blow a little bit in terms of liquidity as well as not wiping out the CPF. I think also it applies to people in their forties or, and depending on the age of the house as well. If you've bought a pretty old decaying resale flat, you're not going to be able to use your full o a up to a certain point.
I mean, that's wise, in fact, if you have got cash and you have got money in your oa I would say use both also for the purpose of bringing down the loan amount, right? So that's a wise thing to do, right? So yeah, bring it down because the lower your debt, the lesser total interest you have to pay. Right? And sometimes it's not just a financial decision, right? Because the investment people like me will tell you that no, don't
pay down so much. I mean, the loan rates are not high, especially if you're using the H DB concessionary loan rate which is currently fixed at 08 plus 0.1% which is 2.6. If you can invest anything above 2.6 I'll say take the loan right and go and invest your cash right now. That seems like the correct investment advice. However, not everything
is financial, right? It gives you peace of mind knowing that your loans are at a minimal, you can sleep at night in peace even even if it is not the best financial decision, I think it's a good decision because at the end of the day, it's all about money is about helping you to be happy. What's the point of making all the right investment decision?
But you are stressed over it? Yeah, so I would say, yeah, if you are just wanting to lower your debt, pay off your debt even though it doesn't make investment.
So sleep and peace of mind over the best investment, financial decision, you think it
is any time I will make that decision.
That's very wise, that's really very wise, especially those in their thirties and forties, starting a family and very worried about lots of, lots of expenses. I don't have kids and I'm already worrying about how to provide for my parents when they get older and to provide for myself as well. It's a lot to think about. It's quite burdensome, right? Being the sandwich
generation. Yeah, I mean, I'm 53 and I will say that when you have no debt, you have options for sure. Yeah, and that's the most important thing in life that financial
freedom. So
yeah, I mean you don't like your boss. We are not listening to this in office but you don't like your I like my. That's fine. Ok. Yeah, so you can set your boss, you can pursue things that are meaningful for you. So don't let that be the master. Yeah, be the master of that. So if you have to make a decision, it may not be wise from an investment standpoint, but it makes sense from the debt and peace of mind standpoint. Make it.
Ok. Here's a follow up scenario. I have five K in my O A because I've wiped it out to buy the flat, but I do have 32,000 lying around somewhere in CPFIS. The investment scheme. Should I leave the latter there or should I take it back out? Withdraw it, put it back in my O A or option C take that 32,000 in my CPFIS and chuck it into S A, what's the move?
It's a difficult question to answer because it all depends on what you are buying in that cpfiso. A. Right. Right. So if you are buying a lousy insurance product and it's giving you like 3% it doesn't make sense at all. Right. So take a look at the numbers. Really? Yeah, I mean, you are buying an investment that is doing very badly and there's no point leaving
it there because you're just going to lose even more.
Right? So I would say that if your investment is bad, then consider terminating it and bring it back first to your O A and then you can decide what to do. Of course, you can transfer to your essay if you want. That's one thing I need to say. I mean, a lot of times people will say this, I don't want to terminate their investment because if I terminate, I will take the loss, right? And I don't want to, but you
don't really suffer the loss. If you are selling it and moving into something better, you only take the loss if you sell it and move it into cash, giving you 0% or 1%. Right.
You're moving it into a vehicle that actually lets you grow, not only enough to make up for the shortfall you may have, but even more because you're leaving it in there.
Precisely an analogy I use is that if your pill is leaking, praying and hoping that you will not leak further, is not going to help you transfer into a pill that will not leak and even have a chance to be filled again when you put water into it. Right? So if your CPR S investment is doing very badly, I will say consider selling it, move it back to O A. Now, if you have trouble paying off your mortgage, that becomes a buffer.
You have no problems actually paying your mortgage. You can consider moving some to your S A to grow it at a higher interest.
Ok. That's it. Right. So I have one last CPF hack that I read about that. I wanted to get your thoughts on transferring your O A savings to your S A. It's something that we've been banging on about for this entire conversation because it earns a higher interest of 4 to 5%. Is this possible to do while we have other CPF commitments at this age and where we feel like turning 55 and beyond, feels like a lifetime away.
Yes, it's always good to transfer if you can O A to S A. But practically speaking, when I was in my forties, late thirties, forties. It was not possible for me to do that. Right. Because I have to service my mortgage. Exactly. Right. And I depend on it a lot. Right, to do it. And also I'm not sure whether I will lose my job. Right.
Job security is a
thing. And remember I say that when you top up your s a, it's like joining secret society, it's irreversible. Right. So if you're going to transfer O A to S A at that age, what happens if you lose your job? What happens if your O A runs dry and you can't pay it anymore? You o anymore, right? So I will not practically speaking at the age of 40 depending on your circumstances. I will not suggest that you do a lot of transfer from your OE to your
S A. Ok. Yeah, if you have cash put in slowly into your S A is your O A more like a mortgage emergency fund just in case, just in case you lose that job, you have some spare to pay your mortgage.
It's just to weather. The rainy day is a little bit better. Yeah, it's just from a practical standpoint and to think about the special account, the S A more as an instrument to top up to rather than making big transfers that you, as you said, cannot reverse. Yeah,
unless you are much older things have stabilized and you got no more mortgage and ok, you can consider transferring more money from OE to S A.
Alright. So while investing your CPF is a long game, it's not too late yet to play when you're in your forties. As long as you plan it well, and strategize wisely, think about that sleep, that you need that peace of mind that will weather you better in the long run. And we hope that this episode has introduced you to some of those strategies. Thanks so much Chris for helping us out. Thanks for having me and thank you to you our listener.
If you've enjoyed this episode of Money Talks, there's always more, more content for you to enjoy. Simply follow us on Apple podcasts or Spotify. Give us five stars maybe leave a review while you're there. The team behind Money Talks is Jacqueline Chan, Joanne Chan Tiffany Ang, Christina Roberta and I'm Andrea. He.