Asked on 12 Sep 2018
Currently 21, serving NS.
Personally, I would not top-up the CPF SA at aged 21 as you still have over 30+ years to go before you can use the money! I would say to keep your money liquid in the time before you reach the withdrawal age for short term use.
Yes, the compounding effect can turn you into a millionaire on paper, but the funds can only be accessed after you're 55. Think about your own goals and needs.
What would you be doing in the time before you can withdraw that money? What would you do with that large sum of money at age 55?
There is no harm starting early to take advantage of the 4% interest rate that will have compounding effects in the Special Account. Just my humble opinion.
Better choice? No at your current age.
Putting in cpf = can only be withdrawn at age 55
I am confident in getting better returns with investment
Exploring your choices
If you are very confident you can get higher returns from your investment, then by all means go ahead and invest. This is because CPF can only give you 2.5% or 4% and you can only withdraw it when you are 55 years old.
As you are only 21 serving NS, suggest you save enough for emergency funds (6months expenses), save some for investment and put about 5 to 10% monthly and top up into CPF SA for the compound interest and as part of your investment portfolio. Once you start work and continue to top up this will becomes your compulsory savings that gets 4% compounding interest for retirement and helps to get tax rebate.
Hi, if you can afford to topup your CPF and with a healthy emergency fund I'd encourage you to start right away. The interest rates for CPF has stayed for the longest time and it is pretty much reliable in my opinion; but to invest all into it without an emergency fund is a no-no because you never know when rules might change and turn the table on you.
Let the compound interest works for you but keep yourself buffered too. In the event that other investment comes up you will still be able to take part with your cash (optional!) If you have specific ideas about what other benefits you're referring to; maybe it would be better to put it here so we can speculate. hahah. Hope to be of help!
There is no really a need to wait for other benefits cause no one really know are there going to be other benefits that is worth losing the compound interest so just top up. BUT if you are willing to take more risk buying stocks and ETF, at your age might be better. Because you are young can take more risk and also not much liabilities
1) Do you believe in the CPF system ? If yes meaning the future change in TnC in the usage of your CPF is something you can agree to no matter how positive or negative It might be. Then yes put it in now cos the longer term 4% compound interest is good And “risk free”
2) if you do not believe in the system then maybe you want to read up, learn more and become more savvy in your investments to build up your retirement funds on your own.
Based on your age, I'd say that its better to invest whatever you can with higher risk instead. It makes mathematical/financial sense, while you (generally) have few dependents and other irritating factors that someone looking to get married or someone in their 50s would have, where CPF as an option becomes increasingly more appealing.
Investing is a skill that you can pick up at an early age, and I also offer customizable plans to guide you through the process. Early commitment breed wealth, and you'll have the power of compounded interest across many years to give you a large fortune when you need it most in the future. Especially in your late 40s...unhappy aged parents, unhappy wife, unhappy children and tons of expenses. You just want to cry in a big pile of money. Trust me, its best to start now.
You can reach me at https://www.facebook.com/luke.ho.54 if you'd like help on this. I enjoy working with young people and making them significantly richer than they would be otherwise.
To address a counterpoint - CPF would be best if you're extremely conservative - scared of losing money, if you fully intend to stay here until you're 65 and above, and if you want to dodge taxes. As a 21 year old, its unlikely that all 3 would apply to you at once, hence my advice as an investment specialist and professional financial advisor.