February 7, 2019 thefinlens

CPF Investment Scheme: When You Should Do It

using cpf to invest

In terms of concept, CPF is really helpful in making sure that elders in Singapore will have their own monthly payout once they reach the payout eligibility age. However, one thing just makes us so itchy. The monies in the CPF are untouchable until the members reach age 55 where they finally can withdraw the savings after setting aside the minimum sum for Retirement Account.

Surely, letting your monies stay in the CPF accounts has its own benefit. As a member of CPF, you are granted interest rates* as follows:

  • Ordinary Account up to 3.50% p.a.
  • Special & MediSave Accounts up to 5.00% p.a.
  • Retirement Account up to 5.00% p.a.

*applicable interest rates until 31 December 2018

Moreover, there will be an additional 1% extra interest on the first $30,000 of combined balances for those aged 55 and above, resulting those with RA earn up to 6% p.a.

Still,

What is CPF Investment Scheme?

CPF Investment Scheme or CPFIS is a way for CPF members to invest the money in their OA or SA savings instead. It gives a chance to grow the money instead of just relying on interest rates until withdrawal time.

From Unit Thrust to Gold ETF, a lot of investment instruments are available to pick, as stated on the CPF website. In order to choose which investment type is the best for you, we recommend discussing with a financial advisor.

Now that you know that your CPF monies can manifest into bigger amounts, you may be tempted to immediately invest your CPF. But hold on, are you really ready to be in the CPFIS?

When to Enter CPFIS?

We are going to discuss 4 major points that we think are crucial in deciding when you can invest your CPF savings.

  1. Eligibility

This one is a default price if you want to apply for CPFIS. The CPF Board sets these following rules to determine who can invest under CPFIS.

  • The member must be at least 18 years old
  • The member must not be an undischarged bankrupt
  • There should be more than $20,000 in OA for CPFIS-OA
  • There should be more than $40,000 in SA for CPFIS-SA

 

  1. Readiness to Take Risk

Being eligible is one thing, but being ready is another thing.

 

Just like the common investment, investing with CPFIS also involves getting returns as well as losing. Wise moves and strategy are required if you want to get high returns and become a successful investor. The vice versa, your portfolio performance might not work as well as you thought it would be. An investor should always be ready with all the risks.

 

Since 1 October 2018, the CPF Board has made it mandatory to take a Self-Awareness Questionnaire before investing with CPFIS. The aim is to see whether CPFIS is really suitable for the CPF member.

 

If you are deemed not eligible or if you are not ready with the risk, you can always choose not to invest and earn interest from the savings.

 

  1. Your Basic Needs are Safely Covered

OA is commonly used to pay for education tuition fee and housing loan. Paying for both is more important than growing your nest egg, especially if it still takes years or decades to pay off everything. Thus, if you still need OA savings for payment, you might want to reconsider investing under CPFIS.

 

  1. Good Market Price

Whichever instrument you choose, monitoring market price is important to know when to start or to stop an investment. There are a lot of investment tools (link to article about investment tools) that can help you see market prices and stock performance from a lot of companies in Singapore or global-wise.

 

If things are too unfamiliar for you, you can talk to us to help you figure out your own investment journey.

 

As an experienced financial consulting agency, The Finlens is always ready to help clients with various financial issues including CPF and investment. We believe that every client deserves a personalized financial plan that comes from a careful and thorough analysis based on each own financial condition.

 

Leave your contact detail at the comment section below, or contact us here to get started with your new page of better financial life.

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