facebookI have been throwing all my CPF contributions to property despite having spare cash on hand as my concern is that the CPF retirement age will be pushed back? - Seedly

Anonymous

18 Apr 2019

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I have been throwing all my CPF contributions to property despite having spare cash on hand as my concern is that the CPF retirement age will be pushed back?

AMA 1M65

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Joash Chua

20 Nov 2018

Financial Consultant at IPP Financial Advisers Pte. Ltd.

Don't forget that you can actually withdraw the excess monies from your CPFRA account (created by withdrawing the balances from CPFOA and CPFSA at age 55), AFTER setting aside for the Basic Retirement Sum (half of Full Retirement Sum) - assuming you own a property and have sufficient property charge.

So the point where your CPF monies become much more liquid is actually when you reach 55 years old, not the statutory retirement age. Once you hit 55, you make a decision on whether you wish to pledge your property (basically it means you promise to the CPF board that if you sell this property, you will refund back half of the Full Retirement Sum to your own CPFRA account with interest). If you do pledge your property, then you set aside the Basic Retirement Sum and this is untouchable. The rest of the money is yours to withdraw or to let it sit in the CPFRA account to enjoy a guaranteed interest rate.

Here's an illustration:

You are 54 years old and you have the following in your CPF.

CPFOA: 200,000

CPFSA: 150,000

CPFMA: 80,000

When you hit 55 years old, your CPF should look roughly like this:

CPFOA: 0

CPFSA: 0

CPFRA: 350,000

CPFMA: 80,000

Lets assume the Full Retirement Sum (FRS) is 250,000. The Basic Retirement Sum would be 50% of the FRS, so the BRS is 125,000. If you pledge your property and opt to set aside BRS, you can choose to withdraw 225,000. I hope this illustrates how your CPF actually becomes quite liquid at 55.

And as for using CPF contributions to settle property, its really up to the individual risk profile. I have clients who are super risk adverse and only trust Gahmen stuff i.e. CPF etc., and then I have clients who prefer to have more cash on hand to pursue other investments which, given a long enough period of time, can potentially yield twice as much as CPF.

Based on historical data of the S&P 500, from 1919-2017, the average annual returns over 20 years during this period is about 8%.

Loo Cheng Chuan

07 Nov 2018

Founder at 1M65 Movement

As shared previously (a few times tonight in fact! :)), I am not a big believer of property as an investment tool so I would not have followed your investment strategy. Instead, I would have built up my CPF for 1M65 and leverage all other funds for equity investments. I also have little concern for the CPF retirement age being pushed back because it will have a high political cost for the Government and the ruling political party will avoid such a measure if they could.

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