UPDATED. FROM CPF BOARD (NOVEMBER 2016):
One of the things I have blogged about is how in using our CPF-OA money to purchase a property, we must be aware of the opportunity cost that comes with the decision.
CPF money is meant to help fund our retirement. Our CPF money also enjoys relatively attractive interest rates from the government.
In the event that we use our CPF-OA money to purchase a property, we are losing out on interest payments by the government. Also, in line with the idea that our CPF money should grow for it to be a more meaningful source of retirement funding, we would have to pay ourselves interest for the CPF money we have utilised in the event that we sell the property with a capital gain.
Having understood this, a reader wrote and asked if we could voluntarily return the money we used from our CPF-OA in the purchase of our homes and here is the reply from the CPF Board:
However, the credited monies in your Ordinary Account can be used under the various CPF Schemes.
(Monday to Friday 8.00 am - 5.30 pm).
Please note that I am not suggesting that everyone does this but I feel that for people who are in their 40s or early 50s, who might have excess cash and who are somewhat risk averse could consider doing this to build bigger retirement nest eggs.
In fact, they could also consider doing an OA to SA transfer if they should do this in order to enjoy a higher interest rate on their CPF savings if their CPF-SA has yet to hit the Minimum Sum (now called the Full Retirement Sum).
Why did I mention people in their 40s or early 50s? Well, apart from the fact that they are more likely to have some excess cash than people in their 20s or 30s, they are also closer to the number 55.
At age 55, that is when we are allowed to withdraw a lump sum payment from our CPF in excess of the prevailing minimum sum. So, it would be like getting a short to medium term investment grade bond with an attractive coupon for people in their 40s and early 50s. Good deal.
1. How AK amassed money in his OA?
2. Retirement: AK buys a 12 year bond.