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

Personal Finance 101 (LLI)

Asked by 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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Kenneth Lou
Kenneth Lou, Co-founder at Seedly
Level 8. Wizard
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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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 6. Master
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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