CPF OA-SA Transfer for Millenial.. BTO How?!

The post today is inspired after sharing my last post on InvestingNote about my CPF transfer. 

Read: Peep into 20-year-old boy CPF Account - OA to SA transfer

This post has sparked off a certain level of controversy and a fair amount of input from wise seniors from InvestingNote regarding the OA account for first property.

All the comments are wise inputs which I acknowledged to and is learning from.  

Let's take a look at some of them:

For those that are curious, here's the link to the post which you guys may refer to. There's more comments that are added but I will likely not include everything here.

While I'm certain for now that the upcoming years will stay as per planned, I hold no crystal ball. 

Should god give me a beautiful princess to love and that I've decided to move on to Chapter 6 of my life directly, things will be changing. 

For those that are wondering what Chapter 6 is, please refer to the post below for more clue. 

Read: A letter to my 30-year-old self - 10 years ago

Having that said, I've decided to look into and write a little more about the BTO processes and what I thought about it. I'm not too sure about the exact procedure so readers that has experience in this, please feel free to drop by in the comment section below to add in more for me :)

Taking a look into HDB's official website, there's certain criteria for which one will have to look out for when the couple decides to go for a BTO application. Apologies for readers aboard as this will be a post more to Singaporean's context.

I've mentioned several times in many of my other posts that it is extremely important for one to consider their own profile before acting and numerous time I've repeated that it is important for us to know ourselves. 

As the topic of HDB is a really big one and there is too many different ways to work around with it, I will simplify it as much as I could and lean towards to most mainstream cases to tackle the debate between OA-SA transfer. 

Well, at least for my personal stand.

To make it simple, if you'd like to apply for a HDB flat in Singapore. Be it resale flat/BTO, here's the thing one should look at first


1. For singles that are unmarried/divorced you have to be 35 years old and above while those that are widowed/orphan could apply for one if they're 21 years old and above.

2. For those with a beautiful second half, both of you will have to be at least 21 years old.
For those that have yet to wed, you will have to ensure that you obtain a marriage certificate within 3 months of your completion date for your HDB.




There's a many different schemes available but the top two are the main criteria one should look at prior to selecting on the schemes.

Moving forward, I guess this is the area where most are curious in. 

I guess the main concern here today is the funds that you will require upfront as opposed to the mortgage that one will service when the flat arrives since the duration of wait should technically serves as a buffer for one to build more funds in their OA unless you're not working.

The financing part. 

There's 2 main types of financing means for you to choose from: 

1. Housing Loan from HDB
2. Housing Loan from Bank

Here's the downpayment you will need to fork out:

Read more on HDB website here.

So keeping things simple again, we will assuming we were to take up HDB housing loan, we will require 10% of the purchase price and 20% for those taking up a bank loan.

This downpayment can be paid using your CPF OA account/Cash.

Should you be able to use your CPF OA savings entirely for the downpayment, I believe one will probably smile as they do not require to fork out a cent from their own pocket.




Retrieving the records from HDB Feb 2018's BTO launch in Woodlands for a 66 sqf 3-room flat, this is what you'll need minimally:

Or slightly bigger if neccessary

Definitely you could pick a slightly better area and I'm sure it will cost more. But taking this example into consideration for BTO application.

A fair amount of S$15,500 - S$24,500 is needed for your BTO application for this particular launch. Meaning to say the combined OA balances between you and your honey will have to make up this amount for you to make the downpayment.

So how difficult is that?

Below the age of 35, one will receive 23% of their salary channeled to their Ordinary Accounts each time they draw their salary.

Meaning to say, if one is earning S$3,000, we're looking at S$690 into their OA monthly. To save up S$10,000 in their OA will require 14 months of employment with that salary.

If you're taking home S$6,000, you will then need 7 months of employment to build up this chest here.



Should you require a larger the deposit the time will then stretch longer.

See? Everyone has a different profile! 

And this is where it is important for you to consider on your own situation before acting! 

Read here for more details about Feb 2018's HDB Launch.

But let's not forget that there are other fees involved that will require cash from your pocket. But that is insignificant since our topic today is more on the bigger tickets and primarily addressing the issue towards the transfer of OA-SA.

Hence if we were to ever do any CPF OA-SA transfer we should be reminded that the transfer is irreversible.

For those millenial that are single today at my age, that is pretty much looking towards getting your own flat at 35, I'm very sure that the timeframe ahead is relatively long and you're actually on the safer end.

For millenials that are of my age today that has a beautiful wife waiting, the choice of OA-SA transfer will be largely dependent on how early you decide to get a HDB flat with your other half. 

If the thought of getting a HDB flat with your other half is within the next few years, it might not be a good choice to do the transfer since you'll be needing a fair amount of monies to be paid in time soon.


Like I always mention, I'm not a smart person. This is why I decided that I shall keep things simple for myself and should I ever want or think of getting a house, it's important to have choices and plan 
for the important decision.
 
What's more important is the peace of mind in doing so. I guess I'm being too simple minded and there's too many things to consider, this post today might probably end up as a hilarious one. But it's too much for my brain to process!

Ok.. let me not complicate myself again. 

So will I go for a BTO balloting next year?

I'm sure I won't!

The year after? 

Nope!

But I'm sure I would one day and right now I'm anticipating to see my CPF yearly statement that will be coming to me in 2 months time!

How about you?



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Peep into the 20 year old boy CPF Account - Transfer from OA to SA

It had been some time since I wrote anything about CPF.

It had also been close to a year since I shared my last "peep" into my CPF Accounts. 

Read: Peep into the 19-year-old student CPF Account - Transfer from OA to SA 

I've decided to make it more meaningful this time round aside from sharing the figures alone, and I will briefly write to myself about my feelings, experience, and thoughts towards the process. 

Source: CPF Board - BRS 2016~2020

The CPF scheme is designed and created to help working Singaporeans and PRs to primarily fund their retirement, health care and housing needs.

For every dollar we've earned from our employment, the government and our employer is helping us to contribute and "subsidize" on our costs towards funding for our retirement, healthcare and even getting a house. 

For what it matters, perspective is important. 

I'm sure there's many who view the CPF as a "stupid" system that is siphoning our hard-earned monies and locking them in for years with zero or no chances of recovering them. 




Instead, I'd like to take this opportunity to remind every reader that the monies in our CPF are still our hard-earned money! The CPF is, in fact, a benefit and privilege offered by our local government to help the citizens. 

There is several ways which we will be able to access to our monies, and we must clearly remember what the CPF is here for. 

I'm sure you would have an option to withdraw your monies from your CPF after you've hit 55 years old, should you be able to meet the FRS! 

Okay, I shall not be too talkative now and here are the numbers after 1 year:

When I share my ideas about the CPF system to my peers and colleagues weeks ago and told them about the transfer from my CPF OA-SA account, I was actually mocked and criticize for my stupidity to further lock the funds I have in my CPF account! 

After reading AK's post this morning, I realize that I'm not alone! 

Read: CPF SA time and income lost due to peer pressure

As a reminder, I hope that everyone will be able to clearly understand that the transfer from CPF OA-SA is irreversible. Having that said, please be mindful and not forget your current profile before doing so. 




Should you be needing the funds in your OA for housing needs or so, please do not follow whatever I've written here today.

I'm not trying to advocate for anyone to do what I've done, but to share about my thoughts and sentiments with regards to the CPF transfer. 




Having that said, this is my 3rd full transfer from OA-SA I've done.

The transfer is done in consideration to my current profile and following reasons:

1. I'm 20 years old today, and I'm very certain that I will not be needing the funds in my OA today or in the near upcoming years. 
2. The transfer from OA-SA is done to maximize the interest I'll earn from CPF. As the total figure I have in my SA is below S$40,000, I will be earning a 5% interest for the funds inside today.
3. The transfer is also done so that I will be able to reach FRS as early as possible.

As far as we know, the CPF OA is offering 2.5% interest and the SA is offering 4% interest.

Reaching FRS as early as possible?

The increase in Full Retirement Sum in the recent years from 2014-2020 ranges between 4.74% - 2.84%, with the increase stabilizing in the late 4 years. 

The growth rate on average since 2004-2020 of our FRS stands at 4.88% yearly. With our CPF SA account paying 4% interest to us, we do not need to work that hard to ensure that we will be able to withdraw our funds at 55 years old. 

Assuming that the CPF FRS is set to increase by 3% yearly from 2020 onwards and that I've already attained the Full Retirement Sum, I should be able to rest well with my pillows up high that I will be able to make a withdrawal of any amount I have on top of the FRS from my CPF account when I turn 55 years old. 




In short, the earlier we reach FRS, the lesser work is required on our end. 

The government will be helping us with the workload to ensure that we have enough for our retirement. 

So instead, to dwell on the fact that you've insufficient funds and you're not able to withdraw any monies from the CPF, you could always consider making good use of this scheme!


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My 19 Year Old CPF Account - For Millenials and Young Adults

Being a Singaporean, we're all exposed to CPF the very moment we commence work.
But once again, I believe many would have heard this from the senior Singaporeans and even to some millennial whom have just started out with their part time job.

Central Provident Funds - CPF (from CPF Official site)

"My hard-earned cash are all locked up in the CPF" 

A slight variation to the younger ones that I've heard many times personally:

"I want my 20% salary in cash, why did they take it away? I'm working hard for it!"

These are the many who felt that CPF is a Ponzi scheme and basically they would have no access to the funds that they worked hard for. It is made more "popular" when individuals like Roy Ngerng that protested at Hong Lim Park on the CPF funds earlier in 2014. Personally, I do have a number of relatives that hate the CPF system as well.



However, there is always two sides to a coin and these parts or hate come solely from the negative side.

It is true that the age or rather limitations to accessing the funds have been increasing. However, I would make a fair comment that this is due to the news that we've seen around like "Uncle being cheated by China wife off it's CPF funds" or "Auntie losing $XXX k from the stock market".

Perhaps by the time for me to truly access the funds, I might no longer be 55.

But we are not to only rely on our CPF monies for retirement, this is just another avenue we could look at.

The kick here for you to withdraw your CPF funds today is that you'll have to satisfy the BRS (Basic Retirement Sum) or FRS (Full Retirement Sum) with sufficient property pledge when you turn 55 years old (this is when the funds in OA and SA will be combined into the newly created Retirement Account).

What is a property pledge?
A property pledge is basically a pledge that you'll have to undertake and promise to return the funds that are utilize for your housing plus interest to the CPF board upon selling the property. 

But given the prices of property today, it's indeed much tougher for millennials to amass the amount in SA and OA to satisfy the retirement sum as most of them are using a big fraction of it for property. Hence, the property pledge is taken pretty much for the case when one is selling their property and this action will ensure that Singaporeans will have sufficient funds for their retirement and not sleep on the streets.

One good measure is to reduce on the amount of mortgage paid using CPF.
This can be done by injecting more cash into the repayment or better, downpayment.
It does restricts your cash flow more, but again, this is also a good measure to ensure that you'll have adequate and even promising funds in your CPF account when you're older. 

Many pioneers of Singapore having exposed to this windfall at the age of 55 previously, where there is lesser restrictions on the funds earlier, did not know how to manage this funds and indirectly caused such events. Hence, after numerous cases and news of "Uncle being cheated by China wife off his CPF funds", this had forced the government to increase the age and limitations towards accessing the funds in CPF.

Nonetheless, being a Singaporean, we're entitled to certain privileges and CPF is one of them. Instead of looking at the dull side, we should look at some brighter side to this coin.

While I'm not an advocate for CPF nor is this post an advertorial for CPF, I felt that this is a good measure and instrument that we, as a Singaporean could use to improve on our financial situation. At this very moment of writing it, assuming if I'm to make any withdrawals at 55 years old (provided this does not change till I reach 55 and that I've satisfy the BRS/FRS requirement), CPF will work out to be a 35 years bond that guarantees you at least 2.5% interest annually.



It is true that the BHS/FRS have been increasing and adjusted every year so as the MA ceiling. However, if we're able to make full use of the privileges and take this system as a risk free investment, the coin will not appear as dull as it is, only unless we're buying into the bet that Singapore collapse.

Why would I hate CPF for the risk-free interest and being a Singapore Citizen, this is what we're entitled to. Instead of whining about how this system might be flaw to you, why not think of how to make good use of this system! This indirectly also allow many Singaporeans to not sleep on the streets when they're old like what we see in many other countries!

CPF Interest earned in 2017!

For younger people starting out, you're in fact getting a little more to kick start your journey by having an additional 1% interest (3.5% on OA and 5% on SA, MA) for the first $20,000 on OA and $40,000 on SA.


Why not? I love freebies and we must remember the our CPF monies are ours after all.

In fact, recently, while I'm having some itch, I did another transfer from OA to SA, once again emptying my OA account to get that extra interest for the first $40,000 in SA as compared to leaving them in OA!

But we must bear in mind the transfer from OA to SA is irreversible. Only unless you do not need the funds in OA in short term housing, education or investment, else the transfer is pretty much going to be a burden to you in your mortgage payments etc.

While CPFIS is a considerable option, this will only come in handy after setting $20,000 aside in OA or $40,000 aside in SA. For now, it does not work really well with the equation and most importantly one must remember that the interest we get in our CPF account are risk-free and you're not exposed to the volatility of the market.

By using CPFIS, you're exposed to the risk of the investment. Definitely a better reward with greater risk. How about setting it for the stormy weather (ie. financial crisis) or for an opportunity funds where you'll be able to get some delicious blue chip companies on bargain?

After all, this is your retirement sum and it's better to play safe!

In fact, one can even consider doing VC to CPF account to build up the funds inside to get more of it from the government when you have too much of your spare cash lingering around.

Working Adults
The CPF Ordinary Wage ceiling is capped at $6000/month. Having that said, you'll only receive at most $2,220 into your CPF accounts from salary range >$6,000. Even if you're earning $10,000 or $15,000 or $50,000 each month, the maximum amount that will be deducted of your monthly paycheck would only be $1,200 while the other $1,020 will come from your employer's contribution.

Getting paid another 17% from employer!! 



The CPF monies are then distributed according to your age into your various accounts (ie. OA, SA or MA) base on the table below:

Obtained from CPF Board official site

And yes, you're right. For those those >55, you're receiving lesser amount deducted off your paycheck to go into your CPF, which will provide you with a greater cash flow to equip you well and get you ready for your retirement.

The latest limit to CPF annual contribution is capped at $37,400. Assuming you're drawing $6,000 or more each month, you're still eligible for a Mandatory Contribution of $10,760. The amount that you can contribute voluntarily will be lesser when your bonuses are factored in.

On a side note, you're also entitled to receive tax relief for contribution to Special Account or MA. 

Students on Part-Time Job
For those earning peers around my age that are complaining about the CPF system, do remember that for each dollar you earn, your employer has to contribute another 17% into your CPF account.

In another words, we're paid more! 

Just that, we do not see the dollars in our wallet till we're over 55 year old and satisying the BRS in your combined account. While it might seem that you're getting a fraction taken off your pay check which you could be using for your holidays or the new fashion items. Why not earn more for that?

It's true that you will not look the same wearing the new fashion item when you're 55, but look. This is another way for you to increase your income if you really need or want to get it. 

I do know that all else aside, we are not to only rely on our CPF monies for retirement and this is just another avenue we could look at.

So, as a 19-year-old individual turning 20, am I pissed because my hard-earned monies are from part-time job or even full-time job are taken away for CPF? 

Beats me. But I'm loving it. What I know is - I'm working hard, and I sure know my money is too. 



Read:
Peep into the 19 year old student's CPF Account - Transfer from OA to SA
19 Year Old Student Receiving $403.41 Angbao From Government? 

19 Year Old Student receiving $403.41 angbao from Government?

It had been long since the last CPF post isn't it? It it especially strange when this post is coming from a 19-year-old kiddo.

While it is the time of the year again and many financial bloggers around have been blogging about CPF, I guess it's time to take a look at the angbao given by the government! 

A quick peep into my CPF portal while waiting for the pie chart letter, this is what I see from the interest segment..

Not that bad! I've received a $403.41 angbao from government! While I continue to work around, I did receive contributions for my work after my last couple of months. This had created a bigger amount than expected my latest CPF post. 

Take a look at the big part in the middle part (SA). That is right. The big chunk there is due to the additional interest received when I did the transfer from OA to SA earlier on. This event had created an additional 1.5% of interest than it is while it is still in the OA.  

The transfer from OA to SA is an irreversible act and to those who are contemplating to do so, here's a few thing that you will need to look out on. 

1. The 5% interest on SA only applies for the first 40k, subsequent amount will only get you 4%. While interest account will get you 3.5% for the first 20k. Subsequent amount will get you 2.5%.

2. As this action is irreversible, please do not do the transfer just because you want a higher interest IF you're looking to purchase a house soon, paying mortgage, insurance, investment or for your kids education. Be sure that there is sufficient funds in your OA when you do so. 

3. The earliest you will be able to access to the funds in SA is 55 year old (as of today). This policy might be subjected to changes along the year and the age to gain access to funds in SA might change. Should to policy timeframe change and raised in the future, you will need to wait longer for the funds inside to be utilized. 

The CPFIS-OA is also not to be left out as this money could be doing work for you when a market crash come and it could be used as an additional war-chest. 

I've mentioned in my earlier blog post that the OA to SA transfer is done as I clearly do not need to funds there in anytime soon for property. This is done to obtain a higher interest for my retirement which will come 35 years later (based on CPF's minimum age to access SA funds)

The SA now serve as a high yielding risk-free account for me and is doing the work now. For that transfer, I've received 1.5% higher interest or $67.76 in additional to the normal 3.5% interest. 

As the letter from CPF comes in due time, I shall take a deeper look into it and write more about this.

P.S: I did not receive any inheritance for my CPF funds and they're acquired through years of part time job. 

Read:

Peep into the 19 year old student's CPF Account - Transfer from OA to SA

Peep into the 19 year old student's CPF Account - Transfer from OA to SA

Years ago, I used to hate the concept of CPF deduction from my part time job, as I felt that it is eating 20% of my salary away which I could channel it into buying things I love. However, I do realize that after 3 or 4 years of working in part time jobs that has taken my CPF, lately I've fallen in to love with what it is able to do for me. Also the sweet 17% additional contribution from my employers is doing great inside too.

Let's have a look at the various types of CPF Account:
There's 3 different type of CPF Accounts:

1.  Ordinary Account (OA)
2.  Medisave Account (MA)
3.  Special Account (SA) 

Adopted from CPF Website

 Now let's take a look at the different interests each account is able to offer you.

Adopted from CPF Website

Now, knowing that the OA offers 3.5% interest per year for the first 20,000 (2.5% for balances above 20,000) and MA & SA offering up to 5% interest for the first 40,000 (4% for subsequent balances). My OA to SA transfer will gets me 1.5% more of interests!! CPF Accounts are just like a "high-yielding bank account" and no risks is involved.

Earlier on yesterday, I've just done a CPF OA to SA transfer. Presently, I do not have any mortgages to be worried about that will require my CPF OA account. This is done to maximize the interest gain and allowing my money inside to work harder for me, while I do not need any funds from the Ordinary Account.


I've also stolen an excel from KPO to play around with the numbers. A strange coincidence that we've done the SA transfer on the same day! LOL. Here's a look at my forecast from the excel if I were to stop working and officially "retire", this is how much I'd have when I'm 47 in 2045.

Meanwhile to me, this account represents a high yielding retirement tap.

Using CPF to invest in shares??
To participate in CPF Investment Scheme (CPFIS), a minimum sum that is required in the OA (CPFIS-OA) is $20,000. Likewise for SA (CPFIS-SA), you will need to set aside $40,000 in your SA. Currently, I'm do not have the sum in the accounts, as such, the best way to maximize it is to transfer into my SA account.

At the same time, I'd also wish to express that, should I have enough money in these accounts, nothing beats the word "risk-free" and the ability to sleep everyday in peace without having to worry and do homework about your investments you've made with CPFIS. Nonetheless, should opportunities present themselves and due-diligence is done, CPFIS is a considerable option.

Now after so much words.. let's have a peep into my CPF account after I've done the full transfer of OA to SA.

Read: CPF Milestone ($40k in Special Account) and The Power of Compound Interest
Do note that OA to SA transfers are irreversible. 
More details can be found here from CPF's Website.



Edited 18/09/17: 
Wondering if the transfer of OA/SA suits you? 
Read: The Dilemma of Young Personal Financial Investment Influencer