To pay housing loan in cash to save CPF OA? Or to pay with CPF OA and do voluntary contribution later? Since they will spread to MA and SA with more interest? - Seedly
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Syalon

Asked on 05 Aug 2020

To pay housing loan in cash to save CPF OA? Or to pay with CPF OA and do voluntary contribution later? Since they will spread to MA and SA with more interest?

Hi

I am paying my house loan with CPF currently and looking to change.

Not being investment savvy, i'm looking to put money into CPF for stable growth.

I have set aside enough money for emergency funds n dailys so no worries on that.

Should I pay the loan in cash instead so there are more money in OA, or, should i pay with OA, and later do a VC so that the money can spread out to MA and SA which have higher interest?

Understand at 55 yo, will be able to draw out after setting aside Life amount.

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Augustine
Augustine
Top Contributor

Top Contributor (Aug)

Level 6. Master
Answered on 06 Aug 2020

If you believe that you can earn a higher interest rate with your cash (4%) via investing on your own, then pay by OA.

If you aren't confident you can earn a higher interest rate than what CPF offers, then pay via cash and leave more money in your OA.

2 comments

ūüĎć
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Syalon

06 Aug 2020

Thanks for replying. Im not confident in investing so more incline to park money with CPF. Question is, should i pay loan directly with cash (not touching OA), or let the OA be deducted, and then do a voluntary contribution back to CPF with the same amount? Since with VC some of the money will go to MA/SA which have a higher interest of 4%? Additionally there will be income relief for the VC amount .
Augustine
Augustine

2w ago

Hi there, Based on what you've mentioned above, it seems to me that paying your housing loan via CPF OA first and then making a voluntary contribution thereafter sounds like a slightly better choice. However you might want to take note of a few things: 1. You will need to be very diligent in terms of managing your voluntary contributions 2. Take note of the CPF Annual Limit of $37,740 for your voluntary contributions 3. Also, do take note of the personal income tax relief of $80,000, which applies to the total amount of tax reliefs claimed, including any reliefs from voluntary contributions. Hope this helps!
Thank You!
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