Tuesday, May 15, 2018

How to cope with the CPF mess

Here are some solutions to solve the CPF mess.

1. Not happy with the low interest rate? Use our ordinary and special account to invest in the STI ETF under the CPF Investment scheme. The long term rate of return was 9% p.a. in the past 20 years. Moving forward, you should be able to earn 6% p.a. (my guess).

2. Cannot buy HDB flat with less than 60 years lease? Wait for the government to change the policy. When they relax the current restriction, you can buy the old HDB flats at a much lower price than new flats (also called BTO). You will also enjoy a grant for buying the old flats (also called resale flat). Just wait, OK?

3. You want to take out cash at 55? Yes, you can provided that you have sufficient money in the special account for CPF Life. When you are young, do not spend too much on your property. This will leave you with cash that you can take out at 55. If you invest your money properly, in the STI ETF that I have recommended, you should be able to get out a good sum.

4. Do not spend too much on health insurance. Just stay with Medishield Life. Avoid the integrated plan, which is too costly. If you need medical treatment, you can go to B2 ward (it's okay) and pay the co-payments using Medisave. Do not take out too much money from Medisave - it is really your own money. If you don't spend it, you can withdraw the excess, above the minimum sum, at 55 or later years.

5. Inadequate savings due to fluctuating contribution rates? Never mind. Just have additional savings on your own and invest them in the STI ETF also.

6. What to do with the confusing CPF insurance scheme - namely, the X, Y and Z Life schemes? Never mind. Just buy them if they are compulsory. Choose the cheapest option. If not, treat it as a tax. One day, maybe, the government will stop these schemes or make them give better value.
I hope that you like my tips.

Tan Kin Lian

1 comment:

Anonymous said...

Good suggestions!

Most important is to be very careful & smart with property. If you stick to 4rm BTO and remain employed till 55, you will have a big nest egg even without investing in STI etf.

I know some 60+ yr old uncles ... some of them have $1+ million in their CPF. They were typical office workers, last drawn pay maybe $5k, $6k. They did some astute and patient investing, mainly during recessions and in blue chips like banks & GLCs. But they told me that the biggest factor is keeping their property cost down.

Blog Archive