I'm a fresh grad and just started my first full-time job. I am planning to do a $5k(from my savings) voluntary contribution to my CPF account. Is this the best way to use the 5k? - Seedly
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Anonymous

Asked on 05 Dec 2018

I'm a fresh grad and just started my first full-time job. I am planning to do a $5k(from my savings) voluntary contribution to my CPF account. Is this the best way to use the 5k?

It's an unpopular opinion/decision. Any advice or 'better' ways to use that $5k?

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Arpita Mukherjee
Arpita Mukherjee, Community Evangelist at Kristal.AI
Level 6. Master
Answered on 14 Nov 2019

Hi Anon,

Although a CPF account is not a bad idea, there are other safe ways to invest your money and have it grow. You can go for REITs, other ETFs and bonds, but before you do that, I'd suggest you read up as much to understand what a Robo-advisor really does. Robo-advisory platforms assess your current financial position and recommend a portfolio strategy after reviewing your risk profile. These bionic advisors are still not very different from your ordinary financial advisors as both options will still have a management fee incurred for users. The difference lies with the amount, as Robo-advisors have lower management fees. And the best part is that they give you the most unbiased advice.

You can read here for a better understanding.

I work at Kristal.AI, and my mojo is to help people make the right financial decisions. If you think I helped you, do give me "Thumbs up". If you think my response was biased let me know, I will work on it.

I hope this helps you make the right decision.

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Kenneth Lou
Kenneth Lou, Co-founder at Seedly
Level 9. God of Wisdom
Answered on 06 Dec 2018

Interesting that you are planning to do that, in fact you can read this article I wrote about. The pros and cons are highlighted below.

Essentially this act of topping up the SA account is about your retirement funds compounding at a faster rate of 4%+ risk-free rate.

By doing this action:

  • It locks up your money with the CPF Special Account till age 55

  • You are unable to use this money for property, education or CPF approved investments

  • You cannot reverse this action and take out the funds

If you plan to withdraw it in the next 10 years, maybe a SSB at around 2.4% would work better? no fees to withdraw also.

https://blog.seedly.sg/should-you-transfer-cpf-oa-to-sa/

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Geraldo L.
Geraldo L.
Level 7. Grand Master
Answered 3w ago

It's good that you think of topping up your CPF at a young age, as long as you are fully aware of the risks involved. Personally, I would still take some money out of the $5k to get my feet wet in investing either through a decent course or the stock market itself. It might sound like you are forgoing the opportunity cost of earning 4%-5% interest in your SA account but learning how to invest will serve you well in the long run.

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Frankie Aufhauser-Rappaport
Frankie Aufhauser-Rappaport
Top Contributor

Top Contributor (Feb)

Level 8. Wizard
Answered on 27 Feb 2020

There are many different possibilities

with equity investing you must be in the situation

to put yout funds locked in for at least 5, better 10 years.

here are some low cost and (in the past at least) very successful

ideas:

https://seedly.sg/questions/what-is-your-general-investing-philosophy-strategy

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MT2020
MT2020
Level 7. Grand Master
Answered on 25 Feb 2020

Erm, although there is totally nothing wrong with doing that, but why don't you invest the 5k instead as the returns will be much higher as compared to putting into your cpf. And also, you will not be able to get back the 5k until you are 55 years old.

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Jeff Yeo
Jeff Yeo, amateur Social contributor at School of social sharing
Level 7. Grand Master
Answered on 04 Jan 2019

I think you should build up 6 months of emergency funds and stash it away in a higher interest account first.

After that you can consider different investment options such as SSB, ETFs, stocks and maybe just cost dollar average into the STI.

The Top up CPF is really a one way street. Personally I didn’t take this option as I wanted to use the money for property down payments

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Loh Tat Tian
Loh Tat Tian
Level 8. Wizard
Answered on 05 Dec 2018

It depends on your objective. Money that goes into CPF cannot be taken out in the short term.

1) Do you have a 6 months emergency fund?

2) Do you have any plans for any cash use that is foreseeable in the next 5 years? (hint wedding, house, travel)

3) When I was 25 years old, I was already planning to spend $30,000 for wedding and $20,000 for basic renovation. Hence I only put my money in high interest saving account (OCBC 360 that time). I didn't touch or invest because pretty much foreseeable expenses.

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