Problem: too many overlapping bposts about cpf
tip: use sharp, memorable titles
tip: use alias bposts
Sugg: more tags and categories?
— category
except this one , most bposts should not show both “annuity” and “t_cpf”, though they “deserve” to.
Category: t_CPF
see https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=32094&action=edit
cash→housingRefund→SA
Next transfer is $5k OA -> SA, but no housing refund please.
For 10k (up to 150k) of my OA money parked outside cpf (parked in some bank acct or FSM ..), every year it may generate a return of, say, 1.1%.
However, for each year until you sell your flat, this 10k “should” accrue a nominal 2.5 ppa either in or outside CPF.
- if growing inside CPF, then the government pays me 2.5 ppa. Even 4 ppa is available if you are allowed to transfer that 10k to SA.
- if parked outside CPF, then I had better find someone to pay me that nominal 2.5 ppa, paying from investment return (if invested) or liquid cash (if parked in banks)
- so 30 years later when I sell the HDB flat, after the dust settles exactly the same compounded amount (10k * 1.025^30) would end up in OA. OA end balance after flat sale is an invariant. It would be unfortunate if you paid yourself 2.5%/Y from unproductive cash.
Note either government or you pay the 2.5 ppa to your cpf account. You never pay someone else 2.5 ppa
Q: by parking the 10k outside cpf accounts, you get to USE the money (liquidity) for investment, vacation etc but can you generate enough profit to beat the guaranteed compound rate of 4 ppa or 2.5 ppa ?
%%A: Beating 2.5% possible, but 4% is tough.
Now I feel the OA parking space is inferior to SA and MM-mufu, therefore to be avoided unless you have a mortgage.
Sharp Q (from Felicia): For your spare cash beside the contingency fund (100k, as I told her), what use do you have ?
Q: perhaps I should transfer 10k (up to 150k) from bank acct to OA then OA -> SA since I have no use for my spare cash?
Note you can’t really “park” the 10k in the HDB flat, which is not an account you can top up incrementally. The flat appreciates by itself, regardless of your 10k.
— What if (10% probability) we want to upgrade HDB home before 55? As discussed with Felicia,
- wife said price difference will be up to 100k only i.e. PriceTag – SP = 100k
- SP (sales proceeds, mostly cash) + wife’s CPF-OA can be deployed to reduce the mtg to under 50k, but my target mtg size is $100k,
- By the time we take up the mortgage, I would have some CPF-OA balance in addition to the SP fraction refunded to OA. I have the option to deploy it. We may be able to buy with cash + CPF
— cap on SA top-up .. Max amount you can “add” into SA or RA is computed and presented in MyMessages. Before you turn 55, the SA limit is up to FRS watermark. After 55, the RA limit is up to the ERS watermark.
As of Feb 2025, I have reached SA top-up limit. I have ended up with too much OA balance. OA is a kinda bad parking lot for my spare cash. See SA^OA^FSM_parking
Any housing refund will only go into OA.
[21]cpfRA for liquid parking@4% #green^red
Rule 1: After RA is created at 55, you can top up directly to cpfRA. Cpf dashboard will show your “cpfRA topUp each year” including OA->RA transfers. Supposed they add up to 99k over 9Y, then this portion (red portion) of your cpfRA is implicitly locked up, and never f4w (free for withdrawal from cpfRA).
Rule 2: By pledging your portion of your flat, you can incrementally withdraw from green_portion , defined as the age 55 snap55_FRS_minus_BRS.
The green_portion of cpfRA is freed up and becomes f4w when your pledge is approved. This portion starts at 50% of the cpfRA balance. As cpfRA grows, green portion will become a smaller portion, even if dollar amount remains.
Here’s an illustration. Suppose at 55 your cpfSA balance is 284k when FRS watermark is at 250k. This FRS amount will transfer to cpfRA, and the remainder to cpfOA. Now you can [Rule 2] incrementally withdraw the 125k green portion from cpfRA. Meanwhile, you can also top up cpfRA (see cpfRA top-up till 65). For example, you can top up 35k to the red portion, and subsequently withdraw 30k from green portion. Due to Rule 1, this 35k top-up amount is locked up in the red_portion, in some hidden tracking account. The green_portion is now 125k-30k.
After 55, cpfOA balance is also f4w. Only after (not before) you exhaust that, should you withdraw from the green_portion of cpfRA. Don’t touch the green_portion too early and lose the cpfRA interest.
It’s advisable for my wife to max out the snap55, by topping up to OA or SA before 55. If you top up 100k right [1] before 55, this amount becomes basically “free parking” in cpfRA earning 4% compound.
[1] If you top up 3Y before 55, then this amount is inaccessible for 3Y 🙁 However, if you have idle cash not needed for 2 years until age 55, then you can “deposit” that to cpf OA/SA and wait a short while to have it freed up.
Q: Pledging property…. Is my wife a 50% owner or 5% owner? What if she refunds all of her OA amount?
A: still she is considered a co-owner.
— conditions for withdraw from greenPortion
- RA balance is above FRS
- if $0 “housing usage”, then submit additional docs to prove that you have a usable Singapore property with enough cash value.
- .. It’s advisible to leave a bit of housing usage.
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For top-up decisions, see other blogposts…
Regulation 1): full balance of SA + OA up to the FRS watermark will be transferred to a newly created RA. I think excess balance is forever free for withdrawal except the SA cash top-up amount (by CASH) is locked in forever.
Top-up — a $1k housing refund into OA is probably free after 55.
Regulation 2): Some amount of SA or RA balance could be usable for housing, subject to approval, but probably won’t get approved.
Priority 1: minimize age 55 RA lock-in amount, perhaps minimize to the BRS level.
Q: any excess amount can be withdrawn any time after 55? Yes confirmed with CPF again.
Priority 2: When (and only when) I reach 65 I want to max out on ERS, as justified in y max out CPF-life #ERS . If I top to to ERS 10Y later, then …. not really maxed out.
— Target balance
At 55, after I pledge my property, my OA + SA target balance could drop to rather low, perhaps to BRS. Any “surplus” beyond BRS can be left in RA, available for withdrawal.
This is despite the rare 4% compound return available at CPF only .
Q: Pledging property…. Is my wife a 50% owner or 5% owner? What if she refunds all of her OA amount?
A: still she is considered a co-owner.
DBS seminar: CPI-inflation
Most reputable authors from U.S., China (and other countries) present CPI inflation risk as one of the most serious risks for retirees. SG CPI trec is much much better. (However, my friend TJ.Lin disagrees…)
Even U.S. CPI inflation is not so bad in the short term. https://www.cnbc.com/2021/06/08/gold-as-an-inflation-hedge-history-suggests-otherwise.html says that The Federal Reserve tries to keep CPI inflation around 2% per year.
— The DBS seminar
On 30 Jan 2021 After the presentation, I confronted the presenter “Your 3% inflation over-estimate (DBS official estimate) seems to discourage people from saving and encourage people to spend more”. I still believe it. The presenter (Adeline?) replied “We are encouraging people to save and invest.” Ok the difference is saving-n-investing vs saving.
Look at the average people without enough Earn/Save/Invest capabilities. If the average people believes inflation is well-controlled for the long term, to average 1%, then they would be motivated to save more. If they are led to believe inflation is fluctuating beyond control, and higher than they feel comfortable, then they would feel discouraged from saving.
The presenter’s answer seemed to imply “The ordinary Singaporean retiree will need a huge retirement nest egg, but even if you save like hell your savings will be decimated by inflation, so the ONLY solution is investment in growth assets.” I disagree on multiple fronts.
Key issue 1: 3% compound inflation rate is an overestimate in the Singapore context. I discussed in numerous blogposts. She used a refrigerator for illustration — $1000 fridge today will cost $2000+ in 25Y. Well, I would predict there will be smaller fridges mass-produced in cheaper locations, costing far less. This globalization effect (discussed in this blog) is visible in clothing, electronics, toys, bicycle etc. Instead of fancy merchandise, retirees need reliable, durable or low-cost designs. Retire-in-style is lifestyle creep, not necessary or admirable.
Key issue 2: the proposed nest egg size (around 1M, identical to Pauline’s) is too large for most people. It is not mandatory and it’s too hard to achieve, so most people would get by with less to spend, and it will be fine, not unacceptable.
Issue 3: CPF-life is a bedrock that DBS tends to downplay as insufficient due to inflation. All annuities have limitations, but I am convinced that CPF-life is the most reliable insurer with probably the highest payout rate.
Now if you ask ordinary folks to save like hell and invest large amounts, they would have no confidence, because all the investments “fast enough to beat inflation” are risky. That’s propaganda. I think even 2% compound return can beat the inflation I experienced. Therefore, if you lower the target return to 2%, then there are many safe-n-easy investments such as CPF and money-market funds.
So for most ordinary folks with up to 200k long-term risk capital[1], I agree with DBS that mufu is easier, but not really safer[2]. (Personally I would prefer stock-picking for 20k.) Mufu can cover equities and bonds. Obviously DBS wants to promote mufu since DBS makes money mostly from mufu and endowments.
[1] There is likely some other cash piles, but they could be earmarked for education, housing etc or they get depleted.
[2] equity mufu is subject to the same market risks as stock-picking. Liquidity is inferior due to management fee and longer trough.
[25]cpfRA top-up till 65
Every year, you can top up cpfRA_bookVal to the ERS watermark. All cpfRA accrued interest goes to your cpfRA not the pool, but excluded from cpfRA_bookVal.
After startOfPayout (age 65 to 70), under the Standard plan, your interest accrual would be redirected into the pool. (cpfRA emptied.)
— compare to cpfSA .. in Feb 2025, CPF hotline told me this bookVal rule is different from cpfSA top-up, where the engire cpfSA balance is compared to the FRS watermark. I think this is the rationale:
PAP government encourage citizens to top up cpfRA and cpfSA but there has to be a per-capita quota for top-up, not unlimited top-up. Government provides more encouragement to cpfRA than cpfSA top-up.
cpfLife strength against inflation@@ 2phase analysis
As of 2021, my default retirement destination is Singapore ( roaming_retirement as a viable 2nd option). So there’s a real, valid question, raised at the recent DBS seminar:
Q: is CPF-life payout sufficient against Singapore inflation
My fundamental stance — I’m betting on Singapore government to manage inflation and sustain CPF-life pay out.
— Phase 1: now till 65 — Government bumps up ERS amount by about 3% annually to match inflation.
I’m basically confident to meet ERS, perhaps by liquidating some property assets.
— Phase 2: from 65 to my twilight years — Vance Chhoa pointed out that monthly payout amount won’t increase year after year and will suffer from erosive inflation.
Given that I plan to live 30 years in Phase 2, this erosion will be significant.
Basically I choose to put it out of mind for now. I will surely think about it in the future. No hurry.
your deposit amount=bank’s risk capital #ownership
A physical gold transfer from BankA to BankB within the asme vault .. gold bars are physically relocated from one room to another room.
A 9b (or 100k FAST) transfer from SCB to BOC .. I feel there should be some physical movement. With both banks’ written agreement (persisted on immutable storage), some assets should be physically moved. The amount of assets controlled by SCB must reduce by 9b. Which system controls and enforces the amount of assets owned by SCB vs BOC vs other banks? We can’t let SCB control it, so a third-party is needed… how about the central bank?
Opening eg: If you are planning retirement, then ask yourself how soon you need to withdraw your deposit. If some amount might remain indefinitely in the bank, to be passed down the generation, then don’t worry about that amount. If a big amount (say, 700k) would be withdrawn in your lifetime, then you need to assess how soon you need it. If you need 100k fairly soon, then some of the institutions are unsuitable, including hedge funds. You would need something closer to a safe_deposit_box.
(I will use POSB or citibank as the stereotypical bank.)
— simple case: gold necklace stored in a bank’s safe_deposit_box. It’s not “usable” by POSB productively, so POSB pays you no interest.
— bank savings account.. the most common (and important) case.
For a bank, risk capital is any money to be lent out at some prime rate. In another simple example, risk capital can also be invested in stocks. Risk capital can also go into a FX inventory, which is required for a FX dealer desk.
Every 1k deposited in a simple savings account can be withdrawn any time, so by right POSB can’t invest it as risk capital. Based on statistics, most (like 90%) of the deposit amounts “stay” with the bank for a month or longer. Therefore, POSB does invest (bulk of) those deposit amounts as risk capital, but it really doesn’t matter, because there are many layers of buffers/contingencies whenever POSB receives a large withdrawal request — POSB can borrow in the overnight market; POSB can liquidate certain securities; Central bank could step in;;;
These well-developed “resources” basically mean that there’s zero chance that your withdrawal would fail. Given the high confidence everyone has in the system, we can safely assume that your 1k is as liquid as in a safe_deposit_box like gold coins, and available whenever you need it.
When you earn and deposit 1k to POSB, both POSB and you see a 1k increase in available asset. This is one example of how 1k multiplies to 2k
* Whether you add to time deposit or savings account, your net worth increases by 1k. This new 1k is ultimately owned by you but you let POSB use it productively [i.e. lending to people who need it].
* POSB has up to 1k additional risk capital for lending, so its balance sheet increases by (up to) 1k. If the 1k is in a 3Y time deposit, then POSB would be even more confident using this risk capital. This confidence is based on statistics.
Another important example of how 100k multiplies to 200k+… An investor/immigrant earns[1] and deposits 100k into citibank, to set up a company. Her immigration visa basically requires her to keep the money invested in a local business for a few years. Given this commitment, the local economy expands by (at least) 100k. The investor herself is obviously 100k richer due to [1]. citibank balance sheet also expands by 100k.
— CPF .. your “deposit” is held long term at the cpfBoard, similar to a time deposit. Therefore, your 1k is invested by cpfBoard as risk capital in risky assets. Thanks to similar “resources”, there’s zero chance your withdrawal would fail. Therefore, you can safely assume a time-restricted safe_deposit_box
Beside individuals, a family can be owner of an asset. A company can be owner of an asset. A government can be owner of an asset. Some may argue that the GIC or Temasek assets are ultimately owned by citizens, but I would say “not so simple”. There are constitutions governing the ownership and control of these collective assets.
— tenant deposit .. landlord is supposed to keep it in a safe_deposit_box, but I don’t think any country’s tenancy law has that requirement. Landlord can and do use the deposit as risk capital. At move-out, if the withdrawal amount is large, then this “bank” can fail.
“Ownership” is important concept here — the deposit is tenant’s asset.
— hedge fund .. as client, your money (not “deposit”) is risk capital, and there is a contractual understanding that you could lose most or all of your risk capital, esp. if you withdraw too early. If you commit for 5Y, then there is often contractual promise (not “guarantee”) of a minimum return. If there is a promise, then you can assume a safe_deposit_box, similar to the CPF scenario.
When you earn and invest 1M with a hedge fund, both you and the fund see a 1M increase in asset.
* your net worth increases by 1M. This 1M is ultimately owned by you, but you give control to the hedge fund for a few years.
* the hedge fund’s AUM increases by 1M
— Mufu .. your 1k buys, say, 88 units of the fund. Those 88 units are held in a digital safe_deposit_box bearing your name. However, the unit value fluctuates, so you can lose all your money.
every SGD dollar=backed by hard asset #ownership
As of 2020, the total currency in circulation was S$57 billion.[6] This figure was 29 billion in 2012. All issued Singapore currency in circulation (notes and coins) are fully backed by external assets in its Currency_Fund to maintain public confidence. Such external assets consists of all or any of the following:[9] (a) gold; (b) foreign exchange in the form of time deposits; Treasury Bills; (c) securities of (or guaranteed by) foreign governments or international financial institutions; (d) equities; (e) corporate bonds; (f) futures; (g) other asset.
As at 31 March 2017, MAS’s assets (S$395 billion) were more than seven times larger than the assets of the Currency_Fund (S$55 billion).
Official Foreign Reserves (mas.gov.sg) shows similar history levels for end of 2017. By the way, the end-2019 level was below end-2018, possibly due to covid19 preparation
As part of the MAS total assets, Singapore’s foreign reserves officially stood at over US$288.2 billion, as of July 2022 according to the MAS.[11] This is confirmed by the monthly query result on MAS Monthly Statistical Bulletin – IV.7 Official Foreign Reserves
2022 Q1 gold.org/IMF data shows similar numbers:
- SG total reserve [sum of the below] = USD 434.4 billion
- SG FX reserve = USD 424.8 billion
- SG gold reserve = 153.74 tonne = USD 9.6 billion, or 2.2% of total reserve
MAS assets including OFR+gold add up to S$580b as of Feb 2022, but excludes assets managed by GIC and Temasek. All of them are owned by the the SG gov, operated by the PAP administration. See “oil money” below. Comprable to the Nobel memorial fund, or the Harvard endowment fund, it is not owned by any SG citizen. The private money held by SG citizens would add up to a separate amount. In contrast, the assets in CPF is 100% owned by individual citizens (simplest case), not owned by SG gov; the assets of IBM is 100% owned by shareholders. One shareholder could be Intel, another could be SG MAS.
Each (portion) of the SGD 29b was created exclusively by MAS, either physically or (presumably) electronically. Electronically means deposite into a bank account. Every physical note has a serial number. Either physical or electronic, a new SGD 1 represents a kind of “claim” on the $55b CurrencyFund.
— owernship of CPF money
Backgrounder: In general, every amount has an owner. (A central bank and a government is also a kind of owner.) MLP managed 40b but each dollar has a known owner. When Intel invests $100m free cash, that 100m is “owned” by Intel, but Intel stocks are owned by millions of investors including institutional investors. Ownership is complicated by holding companies and investment trusts.
1. CPF money belongs to individual Singaporeans, and not government’s money. This ownership difference must be understood first. If $200m CPF money (including my money) is managed by GIC, then this $200m is not “government’s money”. See MOF | Is our CPF money safe? Can the Government pay all its debt obligations?
2. CPF money is invested with a fund manager — GIC. GIC also invests “government’s money.” The dual mandate of GIC is extremely confusing until you understand the ownership. Similar to GIC,
- GSAM, was managing client’s money, employee’s money and Goldman’s house money.
- MLP was managing client’s money and founder Izzy’s family money
— oil money .. when oil appreciates, many gulf countries became richer. Basically, the central banks and treasuries became richer with a bigger OFR.
Q: Who have the ultimate ownership of the oil assets (+ the derived cash)? Some say the king, some say the citizens, but I would say “not so simple”. The government is the proper owner, as stipulated in the constitution.
CPF-IS: FSM,agent bank #2merge with other post
Selected FSM-stocks and FSM-funds can use OA under the CPF-IS, but biggest problem is agent bank fees.
For FSM-funds, there’s no upfront no trailer. Essentially free service by FSM.
For FSM-stocks, there’s no trailer but there’s a $10 minimum upfront (transaction fee).
For both, there’s an upfront and a trailer fee by charged by agent bank 🙁