WEBVTT - Maximising your CPF: Tips for your 40s 0:00:00.009 --> 0:00:02.339 You're listening to a CNA podcast? 0:00:05.159 --> 0:00:08.359 Hi, I'm Andrea Heng and I am back with a 0:00:08.369 --> 0:00:11.119 brand new episode of Money Talks. And this is where 0:00:11.130 --> 0:00:14.300 we talk about all things money, what you can do 0:00:14.310 --> 0:00:17.389 with it and what it can do for you. Now, 0:00:17.399 --> 0:00:20.809 on the previous episode, we started a new conversation about 0:00:20.819 --> 0:00:24.690 your CPF moneys specifically how you can use it to 0:00:24.700 --> 0:00:26.590 its fullest potential if you're in 0:00:26.670 --> 0:00:30.159 your twenties and thirties, this is just about the time 0:00:30.170 --> 0:00:34.119 you're entering the prime of your life, launching your career, 0:00:34.130 --> 0:00:38.380 buying a home, starting to invest and save. Now if 0:00:38.389 --> 0:00:41.119 you are in this age range and you're thinking about 0:00:41.130 --> 0:00:44.278 how you can maximize your CPF hop on over to 0:00:44.290 --> 0:00:48.040 Spotify or Apple podcasts and tune in to that episode. 0:00:48.540 --> 0:00:50.790 So as I said, you're coming into the prime of 0:00:50.799 --> 0:00:53.650 your life in your twenties and thirties, the peak of 0:00:53.659 --> 0:00:59.150 it arguably is your forties growing kids an established career. 0:00:59.479 --> 0:01:02.299 But you know what, you've got other priorities on your mind, too, 0:01:02.419 --> 0:01:06.330 aging parents, your own retirement. It's still a distance to 0:01:06.339 --> 0:01:09.400 go before you say goodbye to the workplace. Or if 0:01:09.410 --> 0:01:13.500 you think it's too late to strategize your CPF monies. Well, 0:01:13.510 --> 0:01:16.830 you might want to reconsider helping me walk you through. 0:01:16.839 --> 0:01:19.089 This is Christopher Tan CEO of 0:01:19.610 --> 0:01:22.250 he is no stranger to us here and I'm happy 0:01:22.260 --> 0:01:24.819 to finally talk to him in the flesh. Welcome to 0:01:24.830 --> 0:01:25.349 Money Talks, 0:01:25.360 --> 0:01:27.169 Chris, thank you. Thank you for having me. 0:01:27.309 --> 0:01:29.819 Ok. So did I get that right, Chris, by your forties? 0:01:29.830 --> 0:01:31.660 Many of us would be at the peak of life, 0:01:31.669 --> 0:01:35.360 you know, marriage, kids, elderly parents in one hand, hopefully 0:01:35.370 --> 0:01:39.110 a thriving career, healthy savings and investment portfolio in the other. 0:01:39.519 --> 0:01:42.919 I think it's like the peak of your expenses. That's 0:01:42.930 --> 0:01:45.220 a good way of, I'm not sure that's the peak 0:01:45.230 --> 0:01:47.349 of your life. But I mean, in terms of career, 0:01:47.360 --> 0:01:49.199 I think your peak is really the 50. But 0:01:49.589 --> 0:01:52.919 well, at 40 years old, you have a lot of commitments, right? 0:01:52.930 --> 0:01:54.809 Your parents are probably still around, you got to take 0:01:54.819 --> 0:01:56.550 care of your parents and you have probably Children, you 0:01:56.559 --> 0:01:58.699 got to take care of Children and like you said, 0:01:58.709 --> 0:02:01.169 mortgages and all things like that and then you have 0:02:01.180 --> 0:02:04.839 to plan for retirement. So I think in terms of expenses, 0:02:04.849 --> 0:02:07.300 it's really quite a heavy commitment at that age. It's 0:02:07.309 --> 0:02:07.319 a 0:02:07.330 --> 0:02:09.619 burden. I can tell you that and I don't have 0:02:09.630 --> 0:02:10.889 kids yet yet. 0:02:11.910 --> 0:02:14.880 So by the time I reached my forties, that's not 0:02:14.889 --> 0:02:17.529 very far away for me. You know, I have worked 0:02:17.538 --> 0:02:21.990 20 years, bought a house and that's possibly the biggest 0:02:22.000 --> 0:02:25.539 ticket item that I would use my CPF for. Right. Chris. 0:02:25.610 --> 0:02:28.990 And I've only just realized that I could have invested 0:02:29.000 --> 0:02:31.919 some of that CPF money. The question I really want 0:02:31.929 --> 0:02:34.948 to ask is, is it too late? Has my investment 0:02:34.960 --> 0:02:37.610 runway shortened to the point where I can't actually do 0:02:37.619 --> 0:02:38.809 anything about it? No, 0:02:38.820 --> 0:02:40.110 I think you have a lot of time. 0:02:40.380 --> 0:02:44.288 40 I'm 53 and you know, so for you have 0:02:44.300 --> 0:02:47.589 long runway. right? I mean, I guess you're asking this 0:02:47.600 --> 0:02:50.600 question because if you buy a house, your money is 0:02:50.610 --> 0:02:54.160 in your ordinary account probably got wiped out. And that's natural. Right? 0:02:54.169 --> 0:02:57.788 Because how many Singaporeans actually have got a few 100,000 0:02:57.800 --> 0:03:00.660 to put down for a deposit of a house? Right. 0:03:00.669 --> 0:03:03.779 And then you have to service that monthly mortgage. So 0:03:03.788 --> 0:03:06.509 I think it's quite normal that if you buy a house, 0:03:06.520 --> 0:03:08.970 your money is in your ordinary account get wiped out. 0:03:09.220 --> 0:03:10.820 But not to worry. I mean, you can use your 0:03:10.830 --> 0:03:13.740 cash still to invest for your retirement. I mean, you 0:03:13.750 --> 0:03:16.350 can even use your cash if you want to, to 0:03:16.360 --> 0:03:19.100 top up in your special account. So I can't say 0:03:19.110 --> 0:03:20.258 it's too late. So there 0:03:20.270 --> 0:03:23.470 are options if in my forties and I still want 0:03:23.479 --> 0:03:25.948 to do some investment using my CPF money. I 0:03:25.960 --> 0:03:30.130 wish I was in my forties and plenty of time. Ok. 0:03:30.139 --> 0:03:32.619 Ok. I hope I can wind back the clock for 0:03:32.630 --> 0:03:34.910 you in this episode and make you feel young again. 0:03:35.169 --> 0:03:38.460 So at this juncture in my forties, what kind of 0:03:38.470 --> 0:03:38.830 CPF 0:03:38.929 --> 0:03:42.070 investment products can I look at and how I think 0:03:42.080 --> 0:03:46.500 more importantly, how would they differ from investment products that 0:03:46.509 --> 0:03:49.270 the younger folks, the twenties and thirties folks would be 0:03:49.279 --> 0:03:49.970 looking into? 0:03:50.130 --> 0:03:54.460 Yeah, I would say first, don't look into investment products, right? 0:03:54.470 --> 0:03:57.630 I mean, make use of your CPF special account because 0:03:57.639 --> 0:04:01.830 it's giving you 4 to 5% with almost no risk, right? 0:04:01.839 --> 0:04:04.100 And there are very few products out there. In fact, 0:04:04.110 --> 0:04:06.389 there aren't any products out there that can give you 0:04:06.399 --> 0:04:08.559 a guaranteed 4 to 5% 0:04:08.820 --> 0:04:14.009 capital guaranteed AAA risk, none out there, right? So before 0:04:14.020 --> 0:04:15.919 we go out there and start looking for products to 0:04:15.929 --> 0:04:20.179 buy insurance and all that, start considering topping up your 0:04:20.190 --> 0:04:22.549 CPF special account, right? The only thing you have to 0:04:22.559 --> 0:04:26.089 accept is that putting money in your special account is 0:04:26.100 --> 0:04:27.790 like joining secret society 0:04:28.260 --> 0:04:31.269 very easy to join, very difficult to get out, right? 0:04:31.279 --> 0:04:33.230 Because the 4 to 5% is just so 0:04:33.238 --> 0:04:35.880 good, it's so good, but then no liquidity. So once 0:04:35.890 --> 0:04:37.899 you put it in, you got to accept no liquidity. 0:04:37.910 --> 0:04:40.649 But consider that that makes that to be your first 0:04:40.660 --> 0:04:43.690 place to consider putting your investments in after you have 0:04:43.700 --> 0:04:46.339 done that and you can't top up anymore, then you 0:04:46.350 --> 0:04:50.540 can think about investing into other products, right? And when 0:04:50.549 --> 0:04:53.130 it comes to investing in other products, we always say true. 0:04:53.338 --> 0:04:56.588 The source of funds that gives you a lower interest first. 0:04:56.976 --> 0:05:01.928 So between cash and ordinary account right now, cash is 0:05:01.937 --> 0:05:04.757 giving you a higher yield right now, right? You can 0:05:04.767 --> 0:05:07.687 buy t bills, you can put a fixed deposit easily. 0:05:07.697 --> 0:05:11.477 You be 2.5% right? So right now, you might want 0:05:11.488 --> 0:05:13.337 to use if you still have got money in your 0:05:13.347 --> 0:05:15.588 O A to invest, you, you still want to consider that. 0:05:15.597 --> 0:05:17.608 But if you look at it over the long term 0:05:17.618 --> 0:05:18.088 and this rise 0:05:18.175 --> 0:05:21.305 interest rate environment won't be here forever, right? So when 0:05:21.315 --> 0:05:23.015 the interest rate starts to come down and go back 0:05:23.026 --> 0:05:26.825 to normal, then you might want to start investing using 0:05:26.835 --> 0:05:31.215 your cash first. Don't invest your CPF, right? Unless you 0:05:31.226 --> 0:05:32.186 have to. Ok. 0:05:32.196 --> 0:05:35.145 So ensuring that there is liquidity in the first place 0:05:35.156 --> 0:05:39.196 to even invest or make some investments. That's a separate 0:05:39.205 --> 0:05:42.006 matter from what you should do with your CPF. 0:05:42.135 --> 0:05:43.045 Yeah, you actually 0:05:43.134 --> 0:05:45.053 brought up a very good point, right? If you want 0:05:45.063 --> 0:05:48.773 to use your cash to invest, please also make sure 0:05:48.783 --> 0:05:52.074 that you have got sufficient emergency fund, right? And if 0:05:52.084 --> 0:05:55.722 I use the previous scenario near 40 going to buy 0:05:55.734 --> 0:06:00.074 a house CPF wiped out, you probably need some money 0:06:00.084 --> 0:06:02.144 for your renovation, you know, and all that, 0:06:02.803 --> 0:06:03.944 there's a huge cash out. 0:06:04.153 --> 0:06:06.373 Yeah, so I would say don't be too hurried to 0:06:06.384 --> 0:06:07.243 go and invest. 0:06:08.092 --> 0:06:10.661 So all those expenses first, you start to build up 0:06:10.671 --> 0:06:14.921 your cash to have an emergency fund before you start investing. 0:06:14.951 --> 0:06:19.101 Ok. That's very good advice. Now, let's talk about the 0:06:19.111 --> 0:06:22.582 O A for a second. My money is already compounding 0:06:23.002 --> 0:06:26.970 in there in the O A the ordinary account at 2.5% 0:06:26.981 --> 0:06:30.671 interest without me really doing anything. I mean, it's the 0:06:30.682 --> 0:06:32.611 same with the special account which we'll get into in 0:06:32.622 --> 0:06:32.962 a bit 0:06:33.269 --> 0:06:37.118 if I choose not to or am unable to invest 0:06:37.130 --> 0:06:39.909 my CPF moneys. Since like you said, it's locked in 0:06:39.920 --> 0:06:43.029 somewhere such as my home. Are there other ways for 0:06:43.040 --> 0:06:46.920 me to maximize it for some kind of sizable return? 0:06:47.170 --> 0:06:49.510 I mean, if you want to make use of, if 0:06:49.519 --> 0:06:53.380 it's purely on CPF I going back to that first option. Sure. 0:06:53.390 --> 0:06:56.510 Top up your special account, right. That's your first option 0:06:56.660 --> 0:06:58.720 and then your O A you won't have much to 0:06:58.730 --> 0:07:01.518 use anyway. That's right. Yeah, you won't have much to 0:07:01.529 --> 0:07:04.320 use will be out anyway. Yeah, that's right. And so 0:07:04.329 --> 0:07:06.690 just leave it there. Ok. Don't worry about it, you know, 0:07:06.700 --> 0:07:08.500 because you still need some money in your O A 0:07:08.510 --> 0:07:13.220 to pay for your monthly mortgage, right? Consider using cash 0:07:13.230 --> 0:07:14.359 to invest instead. 0:07:14.690 --> 0:07:18.880 I mean, later on, if you have more cash as 0:07:18.890 --> 0:07:22.700 your career progresses and you have savings, you can always 0:07:22.709 --> 0:07:25.489 if you want to do a housing refund if you 0:07:25.500 --> 0:07:28.209 want to, right? Because the money that you have taken 0:07:28.220 --> 0:07:31.260 out to pay for your mortgage, plus the accrued interest 0:07:31.269 --> 0:07:33.390 that you didn't get because you take the money out 0:07:33.399 --> 0:07:37.309 from oe, right? So you are losing 2.5%. So that 0:07:37.320 --> 0:07:39.040 accrued interest later on 0:07:39.149 --> 0:07:41.779 in life. If you want to top it back up 0:07:41.790 --> 0:07:44.410 into your O A using the housing refund scheme, you 0:07:44.420 --> 0:07:46.299 can do that if you want to. There you go. 0:07:46.309 --> 0:07:49.230 That's an option. So just because you're using your CPF 0:07:49.239 --> 0:07:51.869 to pay for your mortgage, it's not the end of 0:07:51.880 --> 0:07:53.920 the road for your CPF money. You can actually earn 0:07:53.929 --> 0:07:55.059 it back in some way. Yes, 0:07:55.070 --> 0:07:56.850 if you have cash, you can always choose to put 0:07:56.859 --> 0:07:58.260 it back again. Ok. That's 0:07:58.269 --> 0:07:59.679 fantastic to know. 0:07:59.899 --> 0:08:02.730 And as you said, one of the best things you 0:08:02.739 --> 0:08:06.260 can do is to top up your special account because 0:08:06.269 --> 0:08:09.720 that's earning you a 4 to 5% interest. Apparently there's 0:08:09.730 --> 0:08:13.160 an optimum time of the year to do these top ups. 0:08:13.760 --> 0:08:16.709 Well, I mean, yes, I mean, people usually want to 0:08:16.720 --> 0:08:18.709 top it up before the end of the year. So 0:08:18.720 --> 0:08:20.890 that at the beginning of the year, that's when CPF 0:08:20.899 --> 0:08:22.450 will pay interest, right? 0:08:22.739 --> 0:08:27.059 But I think that we don't have to be so specific, 0:08:27.239 --> 0:08:29.390 you know, to try and capture that little 0:08:30.170 --> 0:08:31.750 1% is in. 0:08:31.760 --> 0:08:33.820 Yeah, I mean, I don't do it myself, right? It's too, 0:08:33.830 --> 0:08:36.989 it's too tiring, right? So I will say along the way, 0:08:37.000 --> 0:08:39.400 the best thing to do is along the way, put 0:08:39.409 --> 0:08:40.250 it in slowly, 0:08:40.520 --> 0:08:44.189 right? I find it very difficult to suddenly put in 0:08:44.200 --> 0:08:47.039 one lump sum in your special account because knowing that 0:08:47.049 --> 0:08:49.098 once you put in, you can, you can't take it 0:08:49.109 --> 0:08:51.460 out until 55 years. So that's the first time you 0:08:51.469 --> 0:08:54.260 can withdraw. So there's a lot of inertia. So I 0:08:54.270 --> 0:08:57.228 would suggest that people start putting in small amount like 0:08:57.260 --> 0:09:01.099 100 205 100. That's very. And then after that, when 0:09:01.109 --> 0:09:04.000 you get more comfortable, then you put it in. Now, 0:09:04.010 --> 0:09:05.468 of course, the Top Up scheme, 0:09:05.596 --> 0:09:07.726 in fact, the specific name for it is called Istu 0:09:07.736 --> 0:09:11.346 retirement sum top up scheme, right? Is just one way. 0:09:11.606 --> 0:09:14.245 Once you reach the full retirement sum, you can't do 0:09:14.255 --> 0:09:18.125 it anymore. And this year the full retirement sum is 198,800. 0:09:18.356 --> 0:09:20.846 That's the, that's the cap, right? So you can't do 0:09:20.856 --> 0:09:23.726 it anymore. But there are other ways to put in 0:09:23.736 --> 0:09:26.655 more money and that's the voluntary contribution scheme. 0:09:26.934 --> 0:09:28.596 Ah OK. Talk to us 0:09:28.606 --> 0:09:30.584 about that. Yeah. So if your total 0:09:30.671 --> 0:09:35.182 your contribution in that 12 months, your contribution plus your 0:09:35.192 --> 0:09:44.101 employer's contribution has not exceeded $37,740 you can always voluntarily contribute, right? 0:09:44.111 --> 0:09:47.281 But take note that when you do that, you cannot 0:09:47.291 --> 0:09:50.682 choose which account you want to contribute into, right? So 0:09:50.692 --> 0:09:55.160 every dollar that you contribute, using the voluntary contribution scheme, 0:09:55.271 --> 0:09:55.660 it gets 0:09:55.747 --> 0:10:00.078 split into the three accounts, right? Oas A and ma 0:10:00.088 --> 0:10:03.797 according to the CPF allocation rate for your age ban. 0:10:03.807 --> 0:10:06.427 Right. It's not say, oh, ok. I'm gonna top, I 0:10:06.437 --> 0:10:09.046 have extra cash lying around. Let's top up my oa 0:10:09.057 --> 0:10:11.708 I can't do that because it goes according to the 0:10:11.718 --> 0:10:13.796 way we've been receiving our CPF contributions 0:10:13.807 --> 0:10:17.277 exactly for your age. But that is another way to 0:10:17.288 --> 0:10:19.757 put in more money into your CPF if you want to. 0:10:19.768 --> 0:10:20.737 Right. Ok. 0:10:21.124 --> 0:10:25.023 Now, at the age of 40 or so it will 0:10:25.033 --> 0:10:28.363 be about 15 years before the O A and the 0:10:28.374 --> 0:10:32.603 S A get converted into the R A, the retirement account. Right? 0:10:32.934 --> 0:10:37.823 So what's a safe sound investment move? Now that that 0:10:37.893 --> 0:10:40.973 account has been created? I have topped up my S A, 0:10:41.093 --> 0:10:44.453 it's pretty healthy. What's a safe sound investment move ahead 0:10:44.463 --> 0:10:45.754 of turning 55? 0:10:46.179 --> 0:10:48.710 Well, I mean, if by that time you have built 0:10:48.719 --> 0:10:51.710 up a sizable amount of money in your O A, 0:10:51.789 --> 0:10:54.190 despite the fact that you have used it to pay 0:10:54.200 --> 0:10:57.969 your mortgage and you have used your cash to invest 0:10:58.179 --> 0:11:02.520 and you really, really want to invest your ordinary account. Right. 0:11:02.530 --> 0:11:05.039 Then you can use the ordinary account and go and 0:11:05.049 --> 0:11:06.650 invest into the stock market. 0:11:06.940 --> 0:11:09.829 You can maybe buy a unit trust for it. I 0:11:09.840 --> 0:11:13.479 wouldn't recommend you to buy an insurance using your ordinary account, right? 0:11:13.489 --> 0:11:17.530 Because your ordinary account is already giving you between 2.5 0:11:17.690 --> 0:11:21.450 to 3.5%. Correct. Right. Because your 1st 20,000 year old 0:11:21.460 --> 0:11:24.989 is giving you 1% more So that's 3.5 and then 0:11:25.000 --> 0:11:28.630 the rest is 2.5. So you're getting 2.53 0.5%. There 0:11:28.640 --> 0:11:31.390 are very few insurance products that can 0:11:31.534 --> 0:11:33.804 beat that, right? I mean, there are of course a 0:11:33.815 --> 0:11:36.914 lot of projections, but on average, I would say that 0:11:36.924 --> 0:11:39.575 the insurance product cannot beat it convincingly. So if you 0:11:39.585 --> 0:11:41.344 want to use your O A, you can choose to 0:11:41.354 --> 0:11:45.994 invest it into funds that invest into the equity market. 0:11:46.005 --> 0:11:49.744 That should at least be like 3.54%. 0:11:50.034 --> 0:11:54.184 Ok. So that's to say I'm investing my O A 0:11:54.195 --> 0:11:55.984 as it becomes the R A of course. 0:11:56.299 --> 0:11:59.599 Oh, if you are talking about post 55 talking about 0:11:59.609 --> 0:12:00.330 post 55 0:12:00.809 --> 0:12:02.309 55 now. Ok. What can 0:12:02.320 --> 0:12:06.108 I do? What happens at 55 is that CPF board 0:12:06.119 --> 0:12:08.880 will first go to your S A to try and 0:12:08.890 --> 0:12:12.189 take the amount of money to meet the full retirement sum. 0:12:12.440 --> 0:12:15.848 So assuming this year you are 55 the first thing 0:12:15.859 --> 0:12:17.340 CPF Board will do is they will try and look 0:12:17.349 --> 0:12:18.848 into your S A and try and get 100 and 0:12:18.859 --> 0:12:20.280 $98,800 0:12:20.289 --> 0:12:22.409 or the maximum that you have in there. Yes. 0:12:22.830 --> 0:12:23.450 Right. So if you 0:12:23.539 --> 0:12:28.929 198,800 so the 198,800 will go into your R A. Yeah, 0:12:28.940 --> 0:12:31.630 and it's done. Yeah. Whatever is left in your S 0:12:31.640 --> 0:12:34.710 A and whatever that is left in your O A now, 0:12:34.719 --> 0:12:37.049 you can take it out if you want to. Ok. 0:12:37.059 --> 0:12:40.109 Right now, let's assume that at 55 years old, you 0:12:40.119 --> 0:12:43.070 don't have 100 and 98,800. Ok? Then they will take 0:12:43.080 --> 0:12:45.719 whatever there is in your S A put into your 0:12:45.729 --> 0:12:48.359 R A and CPA board will go to your O 0:12:48.369 --> 0:12:50.669 A and take whatever they need to make up 0:12:50.780 --> 0:12:54.150 the balance, the FRS and whatever that's left in your 0:12:54.159 --> 0:12:55.869 O A, you are free to do whatever it is 0:12:55.880 --> 0:12:58.619 as good as cash for you got it. Now, money 0:12:58.630 --> 0:13:01.900 is in your R A sitting there can't be invested, right? 0:13:01.909 --> 0:13:06.210 It will sit there until at the earliest age 65 0:13:06.520 --> 0:13:10.010 if you decide to draw down via the CPF Life 0:13:10.020 --> 0:13:11.780 scheme and that's when it happens. And 0:13:11.789 --> 0:13:14.659 that's why you're saying before we turn 55 if we 0:13:14.669 --> 0:13:17.000 have enough in the O A or healthy amount in 0:13:17.010 --> 0:13:17.710 the O A 0:13:18.099 --> 0:13:20.010 go and invest it. So you want 0:13:20.020 --> 0:13:22.429 to. So some people, they want to do this thing 0:13:22.440 --> 0:13:26.400 called shielding cash, right? So it's quite popular and for 0:13:26.409 --> 0:13:29.140 people whom they have got sufficient cash in O A 0:13:29.150 --> 0:13:32.190 and S A. So that must be done before your 0:13:32.200 --> 0:13:36.179 55th birthday to be safe, do it. I'll say one 0:13:36.190 --> 0:13:38.979 month before your 55th birthday, right? Because it takes a 0:13:38.989 --> 0:13:41.699 while for money to come out, right? So this is 0:13:41.710 --> 0:13:45.150 what happens. So before your 55th birthday, 0:13:45.450 --> 0:13:49.939 you go to your S A and you invest all 0:13:49.950 --> 0:13:53.049 the amount that is above 40,000. Ok. Right. Because the 0:13:53.059 --> 0:13:57.469 1st 40,000 you can't invest C off. That's right. Ok. 0:13:57.479 --> 0:13:59.199 And then you can invest it in a very low 0:13:59.210 --> 0:14:03.090 risk instrument like tea bills if you want to or 0:14:03.099 --> 0:14:05.939 a short duration bond fund and you do the same 0:14:05.950 --> 0:14:09.900 for O A. You take anything above the 1st 20,000, 0:14:09.909 --> 0:14:10.640 you go and buy that 0:14:10.734 --> 0:14:13.854 same low risk instrument it, right? So you have done that. 0:14:13.994 --> 0:14:17.044 Your S A is now left with 40 your O 0:14:17.054 --> 0:14:19.434 A is now left with 20. That's right on your 0:14:19.445 --> 0:14:23.515 55th birthday CPF board will wipe away the 60,000 and 0:14:23.525 --> 0:14:26.664 put into your R A. Now right after that, you 0:14:26.674 --> 0:14:29.304 sell off whatever investment you have bought, ok? If it 0:14:29.315 --> 0:14:30.945 t bill don't sell, you gotta wait until six months 0:14:30.955 --> 0:14:33.395 before the mature. But if you buy other instruments, you 0:14:33.405 --> 0:14:36.715 can sell off one day after your birthday. It all 0:14:36.724 --> 0:14:39.025 goes back into your O A and S A 0:14:39.289 --> 0:14:43.510 and it becomes cash, right? But your R A has 0:14:43.520 --> 0:14:47.429 only 60,000. If you remember now, you take cash and 0:14:47.440 --> 0:14:51.099 you top up your R A up to the prevailing 0:14:51.109 --> 0:14:56.190 full retirement sum, right? So in effect, you are actually 0:14:56.200 --> 0:15:00.570 switching cash from your bank account to your O A 0:15:00.580 --> 0:15:02.409 and S A, right? It's like you're putting 0:15:02.419 --> 0:15:05.190 it in a temporary basket just to safeguard it first. 0:15:05.200 --> 0:15:07.739 That's right. That's right. That's right. And the whole idea 0:15:07.750 --> 0:15:08.270 is 0:15:08.450 --> 0:15:11.489 want as much money in your O A and S 0:15:11.510 --> 0:15:16.780 A after 55 not in your bank because after 55 0:15:16.789 --> 0:15:18.979 your O A and S A, they are like, cash 0:15:18.989 --> 0:15:21.530 their bank account because you can draw it out and 0:15:21.539 --> 0:15:24.539 at a higher interest rate. Ok. So this is something 0:15:24.549 --> 0:15:27.890 people do CPF shielding and a lot of people do 0:15:27.900 --> 0:15:30.419 it just before 55. Are you planning to do that? 0:15:30.429 --> 0:15:33.450 I've got two more years. If the board doesn't take 0:15:33.460 --> 0:15:36.500 away this feature. Yes, I'm going to do 0:15:36.510 --> 0:15:37.500 it. Ok. 0:15:40.590 --> 0:15:43.739 Hello, everyone. My name is Christina and I'm Adrian and 0:15:43.750 --> 0:15:46.059 we're the host of a podcast called Work It If 0:15:46.070 --> 0:15:48.080 you never heard of it. Well, it's a good time 0:15:48.090 --> 0:15:50.799 to tap in, in the last 20 episodes. We've discussed 0:15:50.809 --> 0:15:53.890 topics like how to negotiate for a salary increase or 0:15:53.900 --> 0:15:56.500 how to get along with younger colleagues who have different 0:15:56.510 --> 0:15:57.880 values from you, which 0:15:57.965 --> 0:16:01.604 incidentally it's our top performing episode. If work consumes your 0:16:01.614 --> 0:16:05.275 life and you want some perspective on issues like management, stress, 0:16:05.284 --> 0:16:09.174 even office romance, then this podcast should be on your list. 0:16:09.354 --> 0:16:12.265 A new episode drops every Monday. Catch us on the 0:16:12.275 --> 0:16:15.275 CN AM or wherever you get your podcast. 0:16:20.869 --> 0:16:24.210 Now, Chris, I have a scenario that I wanted to 0:16:24.219 --> 0:16:27.650 get your opinion on. Ok. A newlywed couple in their 0:16:27.659 --> 0:16:31.760 late thirties, early forties buys an H DB flat. They're 0:16:31.770 --> 0:16:34.559 paying off the loan in at least the first year 0:16:34.570 --> 0:16:36.340 using full CPF. Right. 0:16:36.770 --> 0:16:40.210 There's advice out there to obviously pay this mortgage in 0:16:40.219 --> 0:16:43.250 full cash so that money in the O A gets 0:16:43.260 --> 0:16:45.669 to grow and you don't end up wiping your CPF 0:16:45.679 --> 0:16:48.440 because it's obviously best to keep at least 20 K 0:16:48.489 --> 0:16:51.080 20,000 in the O A as you mentioned. And of course, 0:16:51.090 --> 0:16:56.520 that's what HEB and CPF advise as well. Question number one. 0:16:56.940 --> 0:17:00.570 What if full cash is not an option to pay 0:17:00.580 --> 0:17:01.609 off my mortgage loan? 0:17:01.619 --> 0:17:04.409 Basically, I mean, to be honest, very few people would 0:17:04.420 --> 0:17:07.420 have the amount of cash to pay off. Exactly. Right. 0:17:07.430 --> 0:17:10.939 I mean, I don't know of anyone at all actually, 0:17:11.060 --> 0:17:13.270 that has got the money to use cash to pay 0:17:13.280 --> 0:17:14.859 off the whole house. Yeah. Right. 0:17:15.180 --> 0:17:17.530 So the only way is really to take your CPF 0:17:17.540 --> 0:17:21.409 money to do it. There's no other option, right? And subsequently, 0:17:21.430 --> 0:17:25.300 even your monthly mortgage will have to use your money 0:17:25.310 --> 0:17:26.790 in your O A right 0:17:27.189 --> 0:17:31.550 now. Let's assume that you have got cash. Should you 0:17:31.560 --> 0:17:34.199 do it? Even if you have got cash to do 0:17:34.209 --> 0:17:37.140 it right now, it depends, it depends on what you 0:17:37.150 --> 0:17:40.349 are doing with this cash. If you are doing nothing 0:17:40.359 --> 0:17:42.770 with this cash and interest rate falls down to the 0:17:42.780 --> 0:17:46.550 level where we saw before 2022. Right. So if you 0:17:46.560 --> 0:17:49.879 are putting your savings account and you're getting like 1% 100% 0:17:50.280 --> 0:17:53.280 and you Absolutely. You're not going to do anything about 0:17:53.290 --> 0:17:53.540 it 0:17:54.199 --> 0:17:57.020 then. Ok, use your cash to go and pay off 0:17:57.030 --> 0:18:00.679 the house, right? Because it is better to leave money 0:18:00.689 --> 0:18:04.010 in the O A because you're getting 2.5 right now. 0:18:04.020 --> 0:18:06.599 Even if you do that, I would say don't wipe 0:18:06.609 --> 0:18:10.939 away all the cash always set aside money for rainy days. Right? 0:18:10.949 --> 0:18:14.900 Emergency because the advantage of cash is that he has 0:18:14.910 --> 0:18:18.849 got liquidity. O A has no liquidity. So 0:18:19.479 --> 0:18:21.979 very few, I would say very few people will do 0:18:21.989 --> 0:18:25.410 nothing with cash. They will probably find ways to invest 0:18:25.420 --> 0:18:28.199 the cash to at least beat the 2.5% 0 A. 0:18:28.530 --> 0:18:31.069 So I will say use your O A, use your 0:18:31.079 --> 0:18:34.989 cash for investment unless you are so conservative, you are 0:18:35.000 --> 0:18:38.109 not touching your cash at all. You're just leaving it 0:18:38.119 --> 0:18:40.459 in the bank or putting it under your pillow and 0:18:40.469 --> 0:18:42.359 you might as well just pay off your, 0:18:42.670 --> 0:18:46.780 I mean, it's not earning much more sitting in your pillow, right? Ok. 0:18:46.790 --> 0:18:51.979 So what about doing partial, so partial CPF partial cash? 0:18:52.084 --> 0:18:55.145 Is that something? I mean, that's obviously to help sort 0:18:55.155 --> 0:18:58.155 of cushion the blow a little bit in terms of 0:18:58.165 --> 0:19:01.084 liquidity as well as not wiping out the CPF. I 0:19:01.094 --> 0:19:05.255 think also it applies to people in their forties or, 0:19:05.265 --> 0:19:07.185 and depending on the age of the house as well. 0:19:07.194 --> 0:19:11.614 If you've bought a pretty old decaying resale flat, you're 0:19:11.625 --> 0:19:13.515 not going to be able to use your full o 0:19:13.525 --> 0:19:15.494 a up to a certain point. 0:19:15.900 --> 0:19:18.619 I mean, that's wise, in fact, if you have got 0:19:18.630 --> 0:19:21.479 cash and you have got money in your oa I 0:19:21.489 --> 0:19:24.699 would say use both also for the purpose of bringing 0:19:24.709 --> 0:19:28.209 down the loan amount, right? So that's a wise thing 0:19:28.219 --> 0:19:31.579 to do, right? So yeah, bring it down because the 0:19:31.589 --> 0:19:32.489 lower your debt, 0:19:32.770 --> 0:19:36.188 the lesser total interest you have to pay. Right? And 0:19:36.199 --> 0:19:40.719 sometimes it's not just a financial decision, right? Because the 0:19:40.729 --> 0:19:44.170 investment people like me will tell you that no, don't 0:19:44.180 --> 0:19:47.109 pay down so much. I mean, the loan rates are 0:19:47.119 --> 0:19:50.040