To SA or not to SA, that is the question? - Seedly
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Asked by Heng Kai Le

Asked on 28 Dec 2019

To SA or not to SA, that is the question?

Just want to ask fellow parents: how do you strike a balance between leaving money in your CPF OA account so that you can pay for your children's university fees in future and transferring your money to CPF SA account to hit the Full Retirement Sum asap?

Thanks in advance!

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I would agree with Wilson's answer and I would give the same answer.

I would prioritize my retirement first, so my children would not be a sandwich generation. Nowadays, cooperations value skillsets over qualifications and I personally feel the more we provide for our children, the less "hungry" they are. It's good to plan for them but we should plan for ourselves first.

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Heng Kai Le
Heng Kai Le

31 Dec 2019

I agree about the need to instill a "hungry" mentality in our kids :)
Wilson Nid A Break
Wilson Nid A Break
Level 8. Wizard
Answered on 29 Dec 2019

To me, its not a matter of striking a balance, but more of which goal to prioritize.

I would prioritize self-retirement (which mean transfering OA to SA to hit FRS), so my children regardless of their academic/career success later on, would not be a sandwiched generation. Besides, your children would have to repay the full amount of money withdrawn and the interest (based on the prevailing CPF rate) on it from the time it was withdrawn. So its not interest free to the children at the end of day. These days, university education does not guarantee monetary success as before, but your CPF SA gurantee a minimum of 4%, so do the math

Another thing to take note, OA account is only 2.5% (barely beating general inflation rate & def not beating the university fees hikes). Would rather invest in US-ETFs via Robo-Advisors to prepare for your children's future education expenses outside of CPF.

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Heng Kai Le
Heng Kai Le

31 Dec 2019

Thanks for helping me to reframe my dilemma :)
Takingstock @
Takingstock @
Level 6. Master
Updated on 30 Dec 2019

Kudos to taking the initiative to future planning!

Simplifying my answer into two parts to help address your dilemma

1) if your OA balance is more than 20k (to earn the extra 1% interest), then focus on transferring the interest earned on OA balance earned for the year, at end of January.

2) learn investing and use some of your CPF OA to do some safe investments. Transfer the dividends generated from the investments to SA.

Given that the contributions and interest from MA will flow to OA (after the MA hits BHS cap, and SA reaches FRS cap), your OA balance will actually grow pretty fast after you hit both caps.

Given the lack of details, I think these two principles, help provide a guiding point which helps to ensure the OA balance is healthy and tries to help you fulfill both goals.

If you are up for longer explanation for the rationale, then here goes:

A) The simple method of only transferring the interest earned will self-adjust based on how much you contribute to cpf and how much you deplete it for home payments. This should keep your OA amounts healthy for emergencies (eg sustaining mortgage payments during retrenchment, touch wood), and sufficient to grow for the education costs within your means.

B) The investing approach advice comes from my real life approach. My current CPF investments are Mapletree Commercial, Parkway Life and VICOM, and the expected dividend yield for 2020 is about 4.7%, which is almost twice of the CPF OA interest rate. I think if you make use of the balances to focus on a sustainable dividend approach, and sensible investing, it will only benefit you in time. Once you hit the FRS balance, you can think of withdrawing these investments at 55 and transferring to your CDP for a small fee, and these dividends become your future pocket money that provides for your retirement on top of the CPF life payout.

C) Personally I would have first wanted to tell you to take advantage of the tax relief on RSTU, but I thought that from you asking specifically on cpf transfer might mean that you are tight on cash in some way. If you aren't, please do consider taking advantage of the RSTU.

D) Sometimes I find focusing on reaching a specific amount can be stressful as you start thinking about how to optimize, whether you lose out by doing this or not. Instead, I would recommend you to start thinking of cycles like

  • making use of the MA contributions and interest (to SA / OA) once it exceeds BHS

  • only transferring the interest and dividends

Personally I have a lot of cycles (one other is using the dividends from SRS for RSPs). The benefit of thinking in cycles it that they will eventually grow larger, and even be self sustaining when bad things happen that may force you to cut your cashflow to that activity. This gives me a lot of peace as they can be rather resilient, and its only a matter of whether the cycle is going fast or slow, as long as they keep turning, I think I am good.

hope it helps.

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Heng Kai Le
Heng Kai Le

31 Dec 2019

Thanks sia. You came back and updated your answer, right? When i read your first answer, i thought to comment, "for someone who doesn't know my exact situation, you gave darn good advice." i remember what you wrote about transferring the OA interest into my SA; it's a new way of doing things that i haven't thought of i love what you say about cycles! yup i think the key thing is to build healthy money routines and internalise these practices. thanks for the idea!
Takingstock @
Takingstock @

31 Dec 2019

Yup I updated the answer. As long as you find the advice useful. And cycles are great. Once they are up, in good times or bad, you dont need to worry so much, coz they should be able to spin on their own. Its a bit like farming on certain games, slow but once you ramp up, it is great.
Lok Yang Teng
Lok Yang Teng
Level 8. Wizard
Answered on 28 Dec 2019

Not a parent here, but:

  1. You can try predicting the future price of uni fees and work around the estimates - start planning how much to keep

  2. Make full use of the grants out there (CDA/Dollar-for-Dollar matching/...) - dont have to fork out from OA

  3. The more cruel method: make your child work for it - either through scholarships or part time job and this way they are less likely to take the education for granted

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Heng Kai Le
Heng Kai Le

31 Dec 2019

I totally agree with your point 3)

Firstly, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/

Next, understand the options available to fund your children's education. The use of CPF for children's education is similar to taking a loan on its own. As a result, interest is accrued and payable as well.

With this in mind, you may wish to consider creating a budget to help plan for your children's education. This is because you either earn interest to pay for education later or you borrow money and pay interest later. In any case, here is how I do my budgeting that is capable to helping you save for any purpose: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/

On the whole, I will prefer to pay cash for education that to accrue unnecessary interest. The opportunity cost of it doesn't make sense to me.

Here is everything about me and what I do best.

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Heng Kai Le
Heng Kai Le

31 Dec 2019

Thanks for sharing your blog posts. will check them out :)
Pang Zhe Liang
Pang Zhe Liang

31 Dec 2019

You are most welcome! šŸ˜ƒ