Whats your net worth

Hi,
My husband and I are 28, 26 respectively with a combined income of 9k. We have no debt and a cash/asset position of $140k ($100k currently in OCBC 365 account earning 3.05%), $40k in low / medium risk equity.
We would be getting our BTO flat in 2016 and would need to start servicing a $500k loan.
We intend to save up $300k in cash position by 2021, by which our flat would have reach MOP and we could use that cash as a downpayment for our investment property. We budgeted $50k for renovation and furnishing, and does not have any debts currently.
We intend to take a 25 years HDB loan, and dump all our CPF OA into SA so that HDB cannot wipe out our OA for downpayment of the flat, and let our SA earn 4% interest. This effectively negates the 2.6% HDB loan interest. Our monthly OA contribution would be more than sufficient to pay for the monthly instalment. Whatever residue OA will go into SA. By doing so, we would build up quite a substantial SA, purely for retirement. Our salary goes towards household expenses, parents and savings towards the $300k goal. After 2021, we would purchase an investment property and use the rental yield to support the instalment on that property.
Please share your views on our strategy, especially the dumping of the entire OA into SA, as it is a irreversible process

Originally Posted by Unregistered

Hi,
My husband and I are 28, 26 respectively with a combined income of 9k. We have no debt and a cash/asset position of $140k ($100k currently in OCBC 365 account earning 3.05%), $40k in low / medium risk equity.
We would be getting our BTO flat in 2016 and would need to start servicing a $500k loan.
We intend to save up $300k in cash position by 2021, by which our flat would have reach MOP and we could use that cash as a downpayment for our investment property. We budgeted $50k for renovation and furnishing, and does not have any debts currently.
We intend to take a 25 years HDB loan, and dump all our CPF OA into SA so that HDB cannot wipe out our OA for downpayment of the flat, and let our SA earn 4% interest. This effectively negates the 2.6% HDB loan interest. Our monthly OA contribution would be more than sufficient to pay for the monthly instalment. Whatever residue OA will go into SA. By doing so, we would build up quite a substantial SA, purely for retirement. Our salary goes towards household expenses, parents and savings towards the $300k goal. After 2021, we would purchase an investment property and use the rental yield to support the instalment on that property.
Please share your views on our strategy, especially the dumping of the entire OA into SA, as it is a irreversible process

You can't touch SA for the most part of your life, so I suggest that you do not do the transfer from OA to SA. Money that you can control is worth much more than money you can't control. The money in OA is much more "liquid" relative to SA's money.

Btw, when does OCBC usually credit the 3% bonus interest? I have not received the bonus interest for May yet. Have you?

Originally Posted by Unregistered

You can't touch SA for the most part of your life, so I suggest that you do not do the transfer from OA to SA. Money that you can control is worth much more than money you can't control. The money in OA is much more "liquid" relative to SA's money.

Btw, when does OCBC usually credit the 3% bonus interest? I have not received the bonus interest for May yet. Have you?

thanks for your sharing. i understand that SA money cannot be touched, but won't one be better off (since it builds up your retirement nest faster) vs allowing hdb to wipe out your cpf, and you are effectively loaning from your own cpf at 2.5%?

We got our bonus interest in mid Apr

Originally Posted by Unregistered

thanks for your sharing. i understand that SA money cannot be touched, but won't one be better off (since it builds up your retirement nest faster) vs allowing hdb to wipe out your cpf, and you are effectively loaning from your own cpf at 2.5%?

We got our bonus interest in mid Apr

Hello, can you explain this theory of moving OA to SA?

what about the hdb interest rate??

thank you.

57, retired.
owns 5 properties, all paid up.
net worth, S$10m.

[lazyplane]

Originally Posted by Unregistered

thanks for your sharing. i understand that SA money cannot be touched, but won't one be better off (since it builds up your retirement nest faster) vs allowing hdb to wipe out your cpf, and you are effectively loaning from your own cpf at 2.5%?

We got our bonus interest in mid Apr

This is an interesting point. Thought i will chime in a bit.

Moving from OA to SA is good as mentioned in the post that it can build your retirement egg faster ie 2.5% vs 4%. But the main catch I feel is this :

1. If you still have a housing loan (outstanding) that is not paid off (and assuming u r not going to use cash and plan to own fund it via CPF contributions and all excess OA is transferred to SA), you have limited your borrowing capacity in the future.

This is especially so with the new rules that was launched.
And as mentioned by others earlier, u cant reverse this decision ie transfer back from SA to OA.

With low OA (below 20k), you cant touch your CPF for investment eg stock shares, etc as well. SA is super restrictive and i think that is right as it is not meant to be interest arbitrage tool.

Personally, i wont transfer my OA to SA now because i am already contributing to it annually for tax reasons and will want use my excess OA for my next property.

Finally, on your point- you are effectively loaning from your own cpf at 2.5%,

I think the way i will say it is you are loaning your OA CPF and receiving a cost expense of 0.1% for this money (the difference between HDB/CPF).....

I am for topping up your SA especially if you have "spare" money lying in your OA. This was what I did way back in 2003. You will see the compounding effect of the 4% interest working wonders for your SA. Because of the compounding effect, my SA amount always was ahead of the minimum sum, and now stands at $200K currently, way above the new minimum sum of $155K. On my retirement next year, they will transfer out the excess out to my retirement account - money which I could withdraw immediately if I so desire.

As a matter of fact, I wanted to top up for my children SA but was not allowed to do so. You just have to do the maths to see the compounding effect of 4% interest on $155K over 42 to 45 years. (My elder child is 23, while my younger is 20).

Here's what they will get when they reached 65 starting with $155k now: $804,882 after 42 years and $905,382 after 45 years! They would probably not need to worry about catching up with the rising SA amount!

Originally Posted by Unregistered

Hi,
My husband and I are 28, 26 respectively with a combined income of 9k. We have no debt and a cash/asset position of $140k ($100k currently in OCBC 365 account earning 3.05%), $40k in low / medium risk equity.
We would be getting our BTO flat in 2016 and would need to start servicing a $500k loan.
We intend to save up $300k in cash position by 2021, by which our flat would have reach MOP and we could use that cash as a downpayment for our investment property. We budgeted $50k for renovation and furnishing, and does not have any debts currently.
We intend to take a 25 years HDB loan, and dump all our CPF OA into SA so that HDB cannot wipe out our OA for downpayment of the flat, and let our SA earn 4% interest. This effectively negates the 2.6% HDB loan interest. Our monthly OA contribution would be more than sufficient to pay for the monthly instalment. Whatever residue OA will go into SA. By doing so, we would build up quite a substantial SA, purely for retirement. Our salary goes towards household expenses, parents and savings towards the $300k goal. After 2021, we would purchase an investment property and use the rental yield to support the instalment on that property.
Please share your views on our strategy, especially the dumping of the entire OA into SA, as it is a irreversible process

[lazyplane]

Originally Posted by Unregistered

As a matter of fact, I wanted to top up for my children SA but was not allowed to do so. You just have to do the maths to see the compounding effect of 4% interest on $155K over 42 to 45 years. (My elder child is 23, while my younger is 20).

I am puzzled . Are you saying you are you not allowed to top up your child CPF using your own OA or cash ?

I just topped up my kids CPF using cash. No restriction as far as i know. tks

We are talking about Singapore CPF system not some other country's.

Below are from the CPF website:

"The CPF Minimum Sum (MS) Topping-Up Scheme allows you to give top-ups to yourself and/or your loved ones’ Special Accounts (for recipients below age 55) or Retirement Accounts (for recipients age 55 and above). Such gifts help build up the MS and can come from your CPF or in cash.

To make a top-up using your CPF for your loved ones*, the net balances in your Ordinary and Special Accounts, including amount withdrawn for investments, must be more than the prevailing Minimum Sum. Only Ordinary Account balances can be used for the top-up.

* "Loved ones" include only your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings."

Just like they told me, topping up for children's CPF not allowed.

Originally Posted by lazyplane

I am puzzled . Are you saying you are you not allowed to top up your child CPF using your own OA or cash ?

I just topped up my kids CPF using cash. No restriction as far as i know. tks

[lazyplane]

Yes, i am talking about Singapore CPF system.

I believe this paragraph is specifically to address topping up of loved ones CPF using your own CPF monies. It did not say you cannot do a outright cash voluntary contribution.

For details, see thread :

What is the best option to save our kids Ang Bao $$$ (Page 2) | KiasuParents

Originally Posted by Unregistered

We are talking about Singapore CPF system not some other country's.

Below are from the CPF website:

"The CPF Minimum Sum (MS) Topping-Up Scheme allows you to give top-ups to yourself and/or your loved ones’ Special Accounts (for recipients below age 55) or Retirement Accounts (for recipients age 55 and above). Such gifts help build up the MS and can come from your CPF or in cash.

To make a top-up using your CPF for your loved ones*, the net balances in your Ordinary and Special Accounts, including amount withdrawn for investments, must be more than the prevailing Minimum Sum. Only Ordinary Account balances can be used for the top-up.

* "Loved ones" include only your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings."

Just like they told me, topping up for children's CPF not allowed.