Many seem to recommend transferring money from CPF OA to SA for higher interest rates, what kind of people should do that? - Seedly

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Asked by Anonymous

Asked on 12 Jun 2019

Many seem to recommend transferring money from CPF OA to SA for higher interest rates, what kind of people should do that?

I am still young and just started working, have not bought a house or anything yet. Can I move the money back from SA to OA if I need to use it?

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Kenneth Lou
Kenneth Lou, Co-founder at Seedly

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Level 8. Wizard
Updated on 16 Jun 2019

This is indeed one of the biggest 'hacks' and 'recommendations in today's working adult world to contribute and top up your CPF SA for higher interest rates. TL;DR: It’s all about 2.5% vs 4.0%

Essentially this act of topping up the SA account is about your retirement funds and allowing it to compound at a faster rate of 4% to 5% p.a 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 (normally from your OA)

WARNING: You cannot reverse this action and take out the funds!

Thus by going by the above illustration, the people who should do that are people who:

  • Are willing to lock up their funds till 55 years old
  • Are likely single and plan to stay single (with no kids for education)
  • Do not plan to buy any property using your CPF OA (housing)

Hope this helps :)

You can read more about this topic in a blog post I wrote some time back also: https://blog.seedly.sg/should-you-transfer-cpf-oa-to-sa/

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Question Poster

12 Jun 2019

This is so helpful 👍 Thank You!
Vivien Lee Feng
Vivien Lee Feng

()

Level 4. Prodigy
Answered on 14 Jun 2019

This is good for those who do not intend to use CPF to pay housing loan, insurance premiums, children’s education and investment. In my opinion, if you ultimately decided to transfer, it would be good to leave some money in OA for emergency use. eg in case you have cash flow problem and need to use cpf to pay for housing loan.

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Serene Toh
Serene Toh

()

Level 5. Genius
Answered on 12 Jun 2019

If I remember correctly, the transfer is non reversible. If you think you will be using the money in your OA, just leave it there.

SA is mainly for retirement. This option will not be relevant to you, since you are still young. You should consider it after you’ve gotten your commitments in place and know if you can afford to not use your CPF for any future purchases.

A better option will be to top up your OA account, especially if you are planning to buy a place in future. This allows some tax relieve, though the amount might not be critical if you belong to the lower tax tier.

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Seh Xiong Chong
Seh Xiong Chong

()

Level 4. Prodigy
Answered on 18 Jun 2019

For ppl who do not need the money in OA to buy house/ pay for your children's education

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Transferring from OA to SA is irreversible. Only do this if you are comfortable to lock up OA funds till age 55 because you cannot use funds in SA for any purpose at the moment other than some investments.

So only if you do not intend to use OA monies for a property, investment, education, and want that extra 1.5% interest, sure go ahead.

If not, keep it in OA.

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Eleanor Ng Lai Hong
Eleanor Ng Lai Hong

19 Jun 2019

You can only do voluntary top up to SA n MS subject to cap. Contribution to OA can only be done via employmt or voluntary contribution (eg if you are self employed) and this contribution will be allocated to all 3 accts ie OS, SA n MS. The % allocatn is age dependent.
Ryan Pham
Ryan Pham

()

Level 2. Rookie
Answered on 18 Jun 2019

In my own opinion, I wouldnt transfer the money to SA unless you have settled the basics. So whats the basics? 1. Buy a house (Dont need to buy condo or too big a place but at least buy one as a Singaporean, thats the best way to utilize our CPF money.)

  1. Have 6-12 months liquidity in your OA to cover your mortgage just in case you get out of job.

  2. Look at CPFIS equity counters, there are alot of bluechips or Reits that return good dividends above 4% as well. Granted that the price is not guaranteed but I would buy GIC linked companies with good economic moats. https://api2.sgx.com/sites/default/files/2019-01/Stocks%20Under%20CPF%20Investment%20Scheme_1.pdf

  3. Singapore Government Bonds - There are some that is returning 3.x% see if that can be used by CPF. Once you covered those, then I think it make sense to put money in the SA. I dont advocate putting all your eggs into one basket and also having such a long time before you can take your money.

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For your situation, I will not recommend doing so. Because you have not bought your first property, you should set aside funds in your OA so that you will be able to utilize them in your first property purchase. And every transfer is irrerversible.

I believe the only time you should do the transfer is when you bought your first home, and your mortgage monthly installment is able to cover fully by your CPF OA. Hence, if you have any excess out of it, transfer those that you want into SA to build your retirement funds.

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3

Sadly, OA to SA is a one way trip.

One must make sure that there is no other need for the OA before moving it.

4% interest in SA is very attractive but you cannot touch it till at least 55 years old.

Property and HDB will need your OA unless you can pay the deposits and loan by cash.

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Germaine Chong
Germaine Chong

()

Level 4. Prodigy
Updated on 14 Jun 2019

You can consider transferring if you do not intend to use your OA.

OA can be used for ​housing, insurance, investment and education.

Note that this action cannot be reversed. Hope it helps.

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Vivien Lee Feng
Vivien Lee Feng

14 Jun 2019

This is so helpful 👍
Ernest Yeam Wee Leong
Ernest Yeam Wee Leong

()

Level 4. Prodigy
Updated on 19 Jun 2019

I do it every month and the amount i transfer from OA to SA is basically the amount that is below the hundreds of my OA.

eg. if my OA is $18,532, i transfer $32 from my OA to SA so that my OA looks nicer as $18,500.

Cause i am looking to get a house in the near future and having money in the OA is crucial.

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Eleanor Ng Lai Hong
Eleanor Ng Lai Hong

19 Jun 2019

If it is risk free 4% which cpfsa is currently getting which appeals to you i would do cash top up. This way, i benefit from additional tax relief or i would top up my MS. Once MS is max to current cap $57.2k, contribution due to MS will then be pour over to my SA. All these are assuming you do hv the liquidity at hand.
Zen Rogue Xuan
Zen Rogue Xuan

()

Level 5. Genius
Updated on 26 Jun 2019

OA can be used for education and housing. On the other hand, SA is solely meant for retirement. The transfer is one-way and cannot be revoked. As such, funds in OA are more liquid compared to SA. A good rule of thumb would be to ask yourself if you need the liquidity?

I am also in a situation similar to yours, and I opted to transfer about 10k from my OA to SA so as to take advantage of the bonus interest(4+1%) :)

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KH Puah
KH Puah

()

Level 1. Freshie
Answered on 24 Jun 2019

Once the cpf housing loan is paid (by than about 40 to 50 yrs old), transfer all from OA to SA to earn the 4%.

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Teo See Hwa
Teo See Hwa, MArketing Associate at Propnex

()

Level 3. Wonderkid
Updated on 19 Jun 2019

Can I move the money back from SA to OA if I need to use it? No.

Not enough inform from you to give a more accurate sharing.

Here is my sharing if I got the money.

In 2006 I have spare cash of $108,000 about 20% of $535,000 price of a 2 bedroom condo in D7.

Calculate how much will I get now if I put the $108,000 into SA now.

My condo now can sell for $1,550,000. with a rent income of $4,000.

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0
Question Poster

19 Jun 2019

Haha wa shiok good property investment!
Beng Kuan Soh
Beng Kuan Soh

()

Level 1. Freshie
Updated on 18 Jun 2019

If you think enough for future in OA based on monthly contribution projection, suggest putting at SA to fulfill FRS. You cannot top up more in SA as the amount is restricted to only the FRS level advised for the current year, which is projected to be increased at $5000 yearly. That means if current year FRS is at $170,000, you can only top up till that amount. Once FRS reached, you no longer have to top up anymore as with the interest (4%) is already self sustaining to cover the increment of $5000 per year unless Govt policy for FRS changes.

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Hariz Arthur Maloy
Hariz Arthur Maloy

18 Jun 2019

You mean FRS not BRS. From the 170k you mentioned, I know you mean FRS. Just got the terms mixed up.
Beng Kuan Soh
Beng Kuan Soh

18 Jun 2019

Thanks all for pointing the mistake. Yeah, mixed up the terms. Have corrected them. Cheers.
Wilfred HO
Wilfred HO

()

Level 1. Freshie
Answered on 17 Jun 2019

No, money from OA to SA is one way. But I still did it. Every year, I would move 50% of my OA to SA. No trouble paying for my housing loan with the remaining 50% left in my OA.

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Low Yong Han
Low Yong Han

()

Level 1. Freshie
Answered on 17 Jun 2019

I’ll recommend topping up in small amounts of about SGD 500 per year or more based on a % of your annual CPF OA contributions i.e. 3%. I’m doing the former. Assuming you are below 35 years old, your CPF contribution is 37% of your income (20% from your own salary and additional 17% from your employer). Breaking it down further:

  • 23% of your monthly pay goes into OA

  • 6% to SA

  • 8% to medisave

This will ensure that there’s a balanced approach to achieving both the benefits of higher interest in your SA and accumulating funds in your OA for your housing and education needs.

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On the flip side I would recommend not doing the transfer. The cost of housing is long up and the lump sum down payment can be huge. If you transfer the money you might not have enough to pay for the initial down payment. This is especially so so if you are single and plan to buy a condo If you are living with parents and housing is not an issue, you might consider transfering

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Ronald Szie
Ronald Szie

()

Level 4. Prodigy
Answered on 17 Jun 2019

I will think rather than transferring a large sum to SA, transferring the rounding amount (e.g. $12345 to $12000) to SA regularly can help to achieve higher interest. Will not impact your funds for future home purchases but set aside some amount to retirement. Also the earlier you start the higher interest you will earn too.

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