I am a freelancer, will it be good to make personal investment into my CPF?

Dear Khye Loh, thank you for your question. Both Josh and Tat Tian have already answered your question somewhat but please allow me to add on.

There are a few advantages when putting aside a portion of your salary into CPF. Let me list out 3 big ones:

1. Tax savings - as mentioned by Seedly members below. Your voluntary contribution up to $37,740 will not be taxable.

2. Forced savings for retirement which will accumulate into a sizeable amount to buy an annuity when you reach age 65. In my opinion, every retiree should have an annuity in their retirement portfolio.

3. High interest rates at almost no risk - You get between 2.5% to 5% p.a. interest across the 3 accounts.

However, the biggest "downside" of CPF is that you lose liquidity. One you put your money into your CPF, the earliest you can "take it out" is at age 55. Some people do not like this at all. But do consider this:

1. If you have a mortgage to pay off, you can put your money in CPF, earn the 2.5% -3.5% p.a. interest and still use it to pay off mortgage.

2. If you are paying your IP/MediShield Life/ElderShield premiums from medisave, by contributing into medisave (which is compulsory for a self-employed anyway), you earn 4-5% interest) and you still use it to pay your insurance premiums or medical expenses.

In a nutshell, combining all the answers given by the members below with mine:

1. Ensure you have enough liquidity (at least 3-6 months of your monthly expenses) before you put money into your CPF. This is especially important for a freelancer where income might not be as certain.

2. If you have better options to invest your cash, you might only want to top up your CPF-SA as it gives you 4-5% p.a. interest. Treat it as a high yield bond but without the high yield bond risk and no capital upside.

I empathize on your dilemma.

If you are starting out freelancing or producing little income at current stage, it's probably not a good idea to lock in capital into CPF. Invest in yourself.

If your work or business is stabilized and you are looking to reduce taxes, then yes, making a personal investment into your CPF could make sense. Your peers in full employment would have built up something quite substantial for retirement use in 5years. It is good to be savvy on why you have more cash on hand.