#ReturnOurCPF $$
Organisers claim #ReturnOurCPF protest drew 6K despite initial drizzle,
blazing sun <link : yahoo.sg.com>
Some may still remember this news or saga that created a big "huha" at that time. The #ReturnMyCPF movement in Singapore, which gained attention around 2014, was a grassroots campaign initiated by citizens to express concerns and frustrations over the Central Provident Fund (CPF) system. The CPF is a mandatory savings plan for Singaporeans and Permanent Residents, primarily for retirement, housing, and healthcare needs. The movement centred on key issues like the "lack of transparency of the CPF Board in using the money for investment/withdrawer age and policies/adequacy of retirement saving/ CPF interest rate, etc."
The purpose of the blog post is not to debate who is right, and who is wrong, I think the government has already given enough explanation on most of the issues, instead, my problem is the government is going to return my CPF this year as I turn 55 this year ๐
( for those OA $ that exceeded the FRS ). Since the government has also closed the loophole of shielding SA accounts to get higher interest rates, my predicament is what am I going to do with the money in my OA?
Every year, on the 1st day of January, CPF members ( including me and Mrs STE ) are happy as it marks the crediting of their CPF interest for the year before. This annual interest payout rewards members for their savings in the Ordinary, Special, and Medisave Accounts, offering competitive rates of up to 6% per annum, depending on their account type and age. Everyone will stand by to log in to their CPF account to see the new balance and total interest received. ๐
Uncle and Mrs were also happy this year that our CPF balance increased by $43,6317.2 ( including $10,190.4 interest received from buying the 6-month T-Bills and $3,637.5 from Dividend received under CPFIS ).
Don't Mix Up CPF as Investing :
As someone who values long-term financial stability, I always believe the CPF is a cornerstone of retirement planning for Singaporeans. While some may view CPF as restrictive, it’s crucial to recognize its importance and how it can serve as a powerful tool in building a secure future. As I mentioned in my blog post before, I treat CPF as a long-term AAA bond and when I get older, I will treat it as a short-mid term (5-10 years bond). Now, it become a 6 months T-bill for me ... hahaha ๐
Why I say CPF is not an investing instead it is a " force / mandatory" saving tool designed to "save " and let the compound interest play the magic in the long run to meet our "basic retirement" requirements.
While CPF is a safe and reliable option, it’s important to complement it with other investments like equities, REITs, or annuities to diversify your portfolio and hedge against inflation. CPF forms the risk-free portion of your portfolio, allowing you to take calculated risks with other assets for higher returns as CPF saving only gives one a "predictable" 3+% blended yield. If I include CPF as the total portfolio, the equity portion will drop to around 72%. Of course, if one has a low "risk" profile, he/she still can use the CPF as a good saving tool to let their money compound at 3+% ROR.
While CPF provides a reliable foundation for retirement, it may not be sufficient to fully meet all retirement needs due to inflation, rising healthcare costs, and longer lifespans. CPF offers stability and guaranteed returns, but its growth may not keep pace with higher living expenses or aspirations for a more comfortable lifestyle. Investing in assets like stocks, REITs, or bonds allows you to diversify, achieve higher returns, and hedge against inflation, an opportunity to grow wealth beyond CPF's structured framework, ensuring a more comprehensive and resilient retirement plan tailored to your goals.
We ( Mrs STE and I ) didn't top-up much into our CPF , only did some for tax rebate purposes and we did transfer some idle funds from OA to SA ( some VC3A top-up in 2019/2020 due to the low interest rate and such top-up gave us a 3+% returns at that time). To increase our yield, we use some of our balance in OA to invest through CPFIS to generate better returns. You may do so if you think that you will be able to beat the 2.5% interest given in OA, else it is better to let the $ stay in OA and let it compound.
** I will try to avoid REITs under CPF-IS / SRS due to the complication of applying the right issues.
I am happy that we still able to achieve a higher return than 2.5% in our CPF-IS by investing in SG Banks / Conglomerate.
CPF Not A Super-Hero
As I highlighted and blogged before ( Link), the CPF system is a strong foundation for housing, healthcare, and retirement, but it cannot meet all retirement needs on its own. Its savings and payouts often struggle to keep up with rising costs, such as inflation and healthcare expenses, which can quickly erode its value. Additionally, CPF funds are multi-purpose, and using them for housing or healthcare may leave less for retirement. While CPF LIFE offers steady monthly payouts, these amounts might be insufficient for retirees with higher lifestyle aspirations or unexpected expenses. Furthermore, as people live longer, the risk of outliving CPF’s financial support becomes more pronounced. To address these limitations, CPF should be complemented with personal savings and diversified investments to ensure flexibility, higher returns, and a more comprehensive retirement plan.
Also, it is a matter of choice, if we use the OA balance for housing, it will defeat the purpose of letting it compound using the magic of the " compounding effect ".
But overall, I think CPF is still a good system and we should treat it strategically, such as through voluntary top-ups and leveraging its tax relief benefits, you can maximize your savings and enjoy steady growth. CPF complements other investments, allowing you to diversify while relying on CPF as your financial safety net.
Again, as I mentioned earlier, treat your CPF as long-term AAA Bonds if you are still young in your early 20-30s, as a mid-long-term bond if you are in your 40s and as a short-term bond if you reach your 50s and for those like Uncle now at 55 years old, it suddenly looks like T-Bill. ๐
To choose between #ResturnOur CPF $$ or #HuatWithCPF ๅชๆฏไธๅฟตไนๅทฎ, is up to you, whether you believe the system or not, your $$, your choice! ๐๐
Cheers !!
Till next update...
STE
.jpg)
Congratulations to the 55. Uncle seeing 60..lol.
ReplyDeleteThanks Bro, you too, enjoy your retirement life now..!๐๐๐
DeleteHi STE ๅคงๅฅ
ReplyDeleteThanks for your detailed and insightful write-up, as always.
I'd like to understand a bit more on this part 'We...didn't top-up much into our CPF, only did some for tax rebate purposes'
May I know what kind of 'tax rebate' are you referring to here?
Happily retired since years ago, I am assuming this is not your income tax relief?
TIA for your response
Hi Sinteck, thanks for the comments, sorry, maybe my messages not so clear, what Im referring to was the tax rebate when I still working/ before retired. I only top up $8k into SA to get the tax rebate. Hope this clarify ๐๐
DeleteAh, i see. Understand now.
DeleteWow...without 'topping-up much', yet you managed to amass such an impressive sum in your CPF. High-income earner, for sure.
And good investment returns on CPFIS too,, I presume.
Congrats~! You are a great inspiration and learning model
Hi , sintek, thanks for the compliment/ comments, yes, my higher than 2.5% of CPFIS helps ๐๐, also , the magic of compound interest since I didn't use much of my OA for housing ๐
DeleteDoes anyone knows what would happen to our CPFIS stocks when we passed away? Assuming there are 3 beneficiaries but with unequal shares in the nomination.
ReplyDeleteHi, Henry, this is what I got from ChatGPT, best is to call CPF Board and ask๐๐
DeleteWhen a CPF member in Singapore passes away, the treatment of their CPF Investment Scheme (CPFIS) investments depends on their CPF nominations. Here's what happens:
### **CPFIS Investments Upon Death**
1. **Liquidation of Investments**:
- CPFIS investments are usually liquidated upon the member's death. This means the stocks, bonds, or other assets held under CPFIS will be sold, and the proceeds will be transferred back to the deceased's CPF accounts.
2. **Distribution of CPF Monies**:
- The total CPF monies, including the proceeds from the liquidation of CPFIS investments, will be distributed to the nominated beneficiaries according to the CPF nomination.
- If there is no CPF nomination, the CPF monies will be distributed to the deceased's family based on the **Intestate Succession Act** or **Muslim inheritance laws** (for Muslims).
### **How Beneficiaries Receive the Proceeds**
- The CPF Board will pay out the monies directly to the nominated beneficiaries **in cash**.
- The beneficiaries are notified and may need to provide identification and other documents to claim the payout.
### **Important Notes**:
- **Nomination Required**: CPF nominations must be made separately from wills, as CPF savings do not form part of the deceased’s estate and are not covered by the will.
- **Tax-Free Distribution**: The proceeds are generally tax-free.
- **Review Nominations Regularly**: It’s important to keep CPF nominations updated to reflect life changes (e.g., marriage, divorce, or children).