What is your opinion on transferring funds from one’s Ordinary Account to their Special Account? Are there more advantages than disadvantages to this approach, and what are they? - Seedly

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Asked by Anonymous

Asked 1w ago

What is your opinion on transferring funds from one’s Ordinary Account to their Special Account? Are there more advantages than disadvantages to this approach, and what are they?

Could you illustrate with a real-life example or a hypothetical scenario?

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The advantage would simply be the accelerated impact of compounding in SA. I sometimes wish I had done that earlier in my 20s, as 10 years does make a difference. (In my case, I would probably have around 50K more in SA by now if I transferred every cent during the first 2 years of my work) It will help you get to FRS faster, and you will worry less about the FRS going up year on year. If your sum in SA is sufficient, the interest alone will negate the yearly increase in SA, and help build your retirement safety net.

Having said that, it is a one-way thing, so you will have lesser CPF OA funds available for housing, education and the like. You will have to weigh your options based on where you are in life now.

However, I do advocate leaving at least $20K in OA as that earns 3.5% interest, which is not too far off from 4%, but still gives you the flexibility to utilize for housing payments, etc.

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Evelyn

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Level 3. Wonderkid
Answered 1w ago

At the very least, transfer OA to SA till it reaches 40k! 25 years down the road, you’ll get more than 100k for that 40k! That itself is a big plus plus plus point!

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It's definitely a good approach to consider. The benefits are quite simple. A higher interest from 2.5% to 4%. And for many, this is good enough already!

But there are some cons of course.

1) The transfer is one-way and irreversible. This means once it's moved to SA, it's done.

2) You lose out on the ability to use this money for your home, child's education, and CPFIS-OA (which is another way to invest and potentially earn a higher return).

So unless you are certain that you can give up the flexibility for an increase in interest, go ahead.

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