Doing investment using CPF Ordinary Account and Special Account

Hi Folks! I believe you have heard or went for seminars in teaching you on how to make use of your CPF money? As you may have know, we can do some investment using our ordinary account and special account but it has some restriction in using the money in it. It does make sense for the government to impose some limitation to prevent the CPF members from gambling their money to invest on all sorts of investment. All form of investment has risk and government do not want to bear the full responsibility if things went ugly. The subprime mortgage that happened in 2008 is a good example of how the investors reaction when their investment collapse and they could not take the loss. Therefore, certain level of control is needed. After all, we are not welfare state country. We have to do something extra to get more funding for ourselves. Having those restriction, it helps to meet the purpose of CPF, to fund for purchasing hdb flats and have money at retirement age.

Restriction:
1) Ordinary Account - As you all know, this account is more flexible to be use for your house, education or even transfer the funds to special account or to family members account. First $20k cannot be use to do any form of investment. The amount from then on can be used to purchase any stocks, unit trust, singapore bond and etc. Please take note that not all investment product can be purchased even though you can purchase almost all type of product. Most of the investment product will have a label to indicate it can be use with CPF money.

2) Special Account - Since this account is less flexible in their usage in the early stage of our life, it has higher amount that is mandatory to be kept in the account. For the first 40k, it cannot be use for any form of investment. It has also some limitation in the investment product that you can purchase.

For more comprehensive details, please click here.

When or Why use it?

Many of us may not be so lucky to earn a high income that literally capped on their ordinary account each month. If you are one of them, it may not bring any impact to you as you are able to fund almost anything. This is more applicable for those low or middle income earner who wish to enhance their CPF money through achieving more than the interest given every year. It is also can be use as a "emergency fund" since it is quite flexible to sell off the unit you own. Ordinary account is given at 2.5% each year and if you follow up with the economy, it may not in favor to us at all. Similar to you putting your money in the bank that give a very small interest every year.

If you are currently or aiming to purchase your first house in three years time, it would be good if you can consider placing some of your CPF money through an investment that provides you a good dividend. It could help you to supplement the monthly payment of your house. You would know that once you are able to stay in your new house, they would wipe out the money inside your CPF Ordinary Account. But please before you do any form of investment, seek advise once again from your insurance agent or your personal banker. They are one of the best people to give you advice on it. Putting some of the money in an investment is like setting aside some money for future use. This money would be use to fund for future needs. It really can help you in a long run. Trust me.

For those that have pass this stage, you can still consider doing this. You just need to do some homework with your partner or yourself to see if you can do so. Check your CPF account and do some calculation. You cannot depend too much on one source of income, SALARY. You need to constantly and strategically find an alternative way of how you can earn more income other than getting promoted in your organisation. This is very important so that you can keep up with the changes. Investment seems to be apart of our life now if we want to have a little bit of comfort in our life. Unless, you own a business and able to sustain the operation. I am sure you will be better off than the average people. To add on, investment using your CPF could also help to meet the retirement sum. If you look at the list, it is constantly increase to be able to meet up with the current standard of living. Based on the amount of $161,000. The payout would be roughly around $1,300. This amount may no longer be the same in the future. Below is an extraction from the CPF website:

5th birthday on or after	Full Retirement Sum
1 July 2003	$80,000
1 July 2004	$84,500
1 July 2005	$90,000
1 July 2006	$94,600
1 July 2007	$99,600
1 July 2008	$106,000
1 July 2009	$117,000
1 July 2010	$123,000
1 July 2011	$131,​000
1 July 2012	$139,000
1 July 2013	$148,000
1 July 2014	$155,000
1 July 2015	$161,000

credit: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme

It is time for you to do some consideration and restructure your finances so that you will take more ownership of your life. Remember, do not depend heavily on the government to supplement you till old age. You got to make it happen. There is a reason why skillsfuture is being created. To get yourself equip with new skills set or be updated with the latest technology that are related to your current career path.

So stay hungry always people! Always think positive and you will see the reward thereafter! Cheers!