Skip to main content

Thoughts on CPF, Housing, and How Long Does It Take For Me to Reach FRS

I have been transferring the money in the Ordinary Account (OA) to Special Account (SA) every month and actively topping-up money in SA. The $7,000 tax relief and the 5% interest rate is really attractive. In fact, my CPF interest last year was already more than the bread I bring home in my first month of work.

Another popular way to look at it is by treating it as a long-term AAA-rated bond that you can redeem in your retirement.

The money in the Ordinary Account is commonly used for education and housing, which for education, I intend to use cash savings, and for housing, I plan to use as much cash as possible for a downpayment so that I don't have to touch the money in my CPF, and if I really need to take up a mortgage loan, I won't have to borrow too much money beyond my means. This also helps me to limit my options to housing that I can really afford. 

If I were to get married, I'm open to the option of staying with my parents or in-laws until my partner and I are financially comfortable enough to afford a house. I know housing is a fast appreciating asset in the tiny sunny island, but I don't like the idea of 1) paying interest to bank/CPF 2) be financially stretched out that I have to worry about one of us losing the job, thereby not able to afford the mortgage and eventually loses our home. Yes, I'm not a risk-taker when it comes to the benefit of my family. I would rather lose the opportunity to make a tidy sum of profit from property than to put my family into a potential situation of financial distress.

To me, CPF's priority is for retirement, so I'm planning to keep boosting up SA to hit the Full Retirement Sum (FRS) before starting to accumulate in the OA, which may then be used for mortgage instalment if I have to take up one and I don't earn enough to pay for it in cash.

Conservatively, as long as things remain as well as now and factoring the FRS increment (3%) into consideration, I should be able to hit the FRS by Dec 2024. Hopefully, everything goes better then I can hit this goal earlier! 

Most of my seniors and relatives who are married and proud homeowners are telling me that 4~5% interest in CPF is too low and it may be locked up longer than expected, thus investing in property is a much better idea because the returns are much higher and quicker. Quite a number of them actually managed to sell off their property at 50% to 100% profit a couple of years back. 

Some of them even advise that I could save up for another few years to get a downpayment on a private studio apartment (with a loan, of course) and rent it out for income since I'm still staying with my parents, instead of waiting to buy a HDB when I get married or hit 35 (that's still a very long way to go and I'm really expecting myself to earn more than $7,000 by then which would make me ineligible for HDB). The rents collected can be used to repay the mortgage loan and its interest so it's like getting someone to pay for your property at the end of the day. Thereafter, if I want to buy a HDB, I can always sell off the apartment probably at a profit so that I'd be eligible to purchase a HDB. If the property market is bad, I can still keep renting it out, or stay in it with my spouse if I got married. 

While what they say seems to make sense to me and it seems like a strategic move, I'm not confident that I can manage it financially for a long term, especially when I may become the sole breadwinner of the family soon and I'm already worried that even my income may be affected given the current gloom economy. Furthermore, I doubt that it's easy to get a tenant (and one who doesn't stir troubles) in times like this when there are already a lot of foreigners leaving Singapore. I still think it's hard to weather the fluctuating property prices and rental demands.

What do you think about my opinion on CPF and housing in this post? Do you think I'm focusing too much on building up my CPF funds? Or perhaps it's still better to use set aside some money in CPF OA for housing? Am I too foolish to insist on paying everything in cash, when cash is king when the economy is bad? Should I have left more money in OA so that I could whip up an investment opportunity that my relative recommended? What are your opinions on getting a private property for investment like this? 

Please share your thoughts with me and many thanks for reading.

Comments

  1. Being said "I'm open to the option of staying with my parents or in-laws until my partner and I are financially comfortable enough to afford a house'... Will you and yr partner be giving maintenance allowance to them for allowing both of you to stay, willingly or not, and if you are, how much do you think is adequate to supplement in terms of accommodation and food, etc

    ReplyDelete
    Replies
    1. Hey thank you for your reply.

      I think for the maintenace allowance it is something to be given regardless if you are staying with them or not, the amount is subject to discussion with the family and very much depends on the income and their needs.

      I have talked to my parents about my plans to further my studies, save up for a house and build an investment portfolio, so they are fine with me starting to give them allowance after I finished my studies or get married which ever comes first. This is feasible because my dad is still working and my parents aren't in need of my support yet.

      If I were to stay with my parents / in laws after marriage, I think it's fair to pay for the food and utlilities, or any maintenance and household appliances required in the house.

      I would see it more like helping to shoulder the expenses rather than paying for rent. But then again I'm the only child and this is already expected of me once my Dad retires (and that's probably soon), so I think it really depends on the family.

      For my family, everyone goes out to buy groceries and everyone doesn't mind cooking with each other's food (because we have very different schedules so we hardly eat together) and whoever takes away from outside or order delivery shares their food with everyone. This blurs the line on who spent how much on food and other things and we are pretty cool with it. We just share and don't count who contributed what.

      It might be very different for my hypothetical spouse, which is why I think it's best to avoid a one size fits all approach and discuss with the family members

      Delete
  2. I’m with you on the CPF and have been doing likewise. In general we seem to have similar risk appetites and I would say don’t let anyone try to distract you from your goal. I have paid quite a number of school fees just to come to the position you started with and I think you will do fine with this strategy!

    ReplyDelete
    Replies
    1. Thanks for your advice, it's heartening to find someone who share similar views. May I ask what are the school fees you are referring to?

      Delete
  3. Flooded with money and low interest, quality property in major cities has been proven the only asset to ride through many past crisis. When older, CPF SA is high yield but low risk bond for retirement and even children education.

    ReplyDelete
    Replies
    1. Hi there,

      May I clarify, if you mean that it's better to invest in property at a younger age and then work on the CPF later?

      Delete
  4. Agreed that it makes a lot sense to build up your CPF to meet FRS as soon as possible, unless you are aiming for tax relief for high tax bracket payer.

    https://journeytofinancialindependence.finance.blog/

    ReplyDelete
    Replies
    1. Hi Jacky,

      Yes, I hope to meet that goal soon, maybe I will only start to consider investing in property after that

      Delete
  5. good day everyone.

    Am Steve Paul Blank ATM Card World Wide.

    Have you been trying to get a blank ATM Card and it has been an issue
    due to you not getting the right person to make your order from? Here i am at ( visacreditcardsolution@gmail.com ) you can make your order today and
    receive the card before you know it, it's easy and affordable. Contact us
    now at: visacreditcardsolution@gmail.com  
    My cards can be used in any part of the world at any ATM machine,
    stores and POS. With a daily limit of $3000 to $50,000.00 and
    available in any currency with our programmed cards. Contact me at:
    visacreditcardsolution@gmail.com  
    Cost of cards available and fees to be paid.

    $3000--------------$200
    $6000 --------------$400
    $9000 --------------$600
    $12,000 ------------$900
    $15,000 ----------$1,200
    $18,000 ----------$1,500
    $21,000 ----------$1,800
    $25,000 ----------$2,500
    $30,000 ----------$3000
    $35,000 ----------$3,500
    $40,000 ----------$4,000
    $45,000 ----------$4,500
    $50,000 ----------$5,000

    Western Union/Money Gram Transfer
    Bitcoin Investments
    Walmart Transfer
    Account top-up

    Contact us with the following information below now at (
    visacreditcardsolution@gmail.com ).

    Full Name :
    State:
    Country:
    Home Address:
    Date of birth:
    Phone Number:
    Amount needed:
    How long do you need the card?

    Email address: visacreditcardsolution@gmail.com


    You can never be so sure until you give it a try by
    contacting us today for your order, because we assure you.

    Thanks.Steve Paul   

    ReplyDelete

Post a Comment

Popular posts from this blog

How I Saved $200,000 in 3.5 years Without A Degree

Yes. I have finally hit the momentous milestone of achieving 200K! It's actually a surprise for me because I have been busy with work for the past 2 weeks and wasn't keeping a tab on the whole picture of my assets. I decided to reconcile my assets today because the STI was inching towards the 2,500 support level so I wanted to figure out how much I can afford to invest in the market in case it is going to present another opportunity in near future. When I finally get the calculations done, I was taken aback by the overall figure.  At the point of writing, my net worth, which consists of cash savings, investment portfolio, CPF, and a loan to a friend, adds up to a total of $201,074.97 Net Worth = Assets - Liabilities.  As a side note, I don't have any debt, so my liability is zero. CPF is included as assets because I actively pump money into it and money in CPF can be utilised in many areas. The loan is to help a friend with his university's tuition fees and he has been

Am I being Filial or Manipulative? A Weekend Discussion with My Parents on Housing and Retirement

Over the weekend I had a more serious conversation with my parents on the topic of money, in particular in the area of investing and properties. My parents and I currently live in a 41-year-old 3-room HDB flat in a matured estate, one which is very close to many amenities and convenient for my dad and me to get to work. As my parents are approaching 55 in a couple of years time, and my dad seriously considers to retire in a few years after that, they are considering to apply for a BTO flat around the region, in view that the HDB is already middle-aged and they want a bigger unit with 3 bedrooms, hoping to sublet one of the rooms for rent, and maybe two of them if I moved out of the house. This will not only fund for their retirement income but also serves as a means to preserve the value of their assets, as while it's unlikely that they will outlive the HDB lease, they didn't appreciate the idea that the value of the property coming close to zero by the time they part and there