5 ways to optimise your CPF literacy (and learn to grow your money)

Feel like you’ll have sufficient funds in your bank account when you retire? Probably not, if the Endowus Singapore Retirement Report 2021 is anything to go by.

The survey not only found that 39 per cent of respondents aren’t confident about retirement adequacy, but that women are half as likely to be confident about having enough in their golden years as compared to men.

So how can you better grow your nest egg? On top of adding another income stream like a side hustle, you should consider investing your money, whether in stocks, bonds or even your CPF fund, the latter of which is possible to do via Endowus.

Don’t know much about CPF apart from the fact that you can use it to pay off housing? Wei Mei Tan, its Chief Advisory Officer, shares five ways you can optimise your CPF literacy.

Appreciate that CPF is a huge part of your wealth and financial goals

You first need to understand the sheer size that your CPF account can be. We contribute up to 37 per cent of our monthly salary and bonuses into our CPF–this adds up to a huge amount of money over a long period of time.

As a total social security programme, your CPF can be used for housing, retirement, medical, education and investment needs. You should plot out your immediate and long term financial goals and see how the different CPF accounts can help with your finances.

Keep abreast with the latest CPF information

Singaporeans are now more aware of different CPF schemes and are happy to utilise these schemes. For example, 141,130 CPF members made top-ups under the Retirement Sum Topping-Up Scheme in 2020, compared to just 103,800 members in 2019.

There is a lot of bite-sized information and calculator tools developed by CPF available on its social media pages. There may also be updates from CPF that could require action on your part for you to make better full use of these schemes and policies. Be proactive in learning about these changes.

Top up your own CPF Accounts with cash for tax relief

You can do a cash top-up into your CPF Special Account (SA) and Medisave Account (MA). By doing so, you will be able to enjoy the higher interest rates (4 per cent, and up to 5 per cent with additional interest) which will help build your retirement nest egg and your medical funds faster. Also, the amount topped up may reduce your taxable income for the year by up to $7,000.

ALSO READ: 3 things you didn't know you could pay for with your CPF

Top up or transfer the CPF Accounts for your loved ones

You can also do a cash top-up into the CPF SA or Retirement Account of your loved ones (including dependants like parents, grandparents and in-laws). You may also get tax relief of up to $7,000.

This is especially attractive as the government has announced the Matched Retirement Savings Scheme, where the government will match cash top-ups into the RA for up to $600 as long as the recipient of the top-up has less than the prevailing Basic Retirement Sum (BRS) $93,000 in their CPF account.

Alternatively, you can also transfer from your OA into your loved ones SA/RA so that they can enjoy the higher interest rates.

Invest your CPF

Investing your CPF allows you to have the potential to get higher returns from the financial markets. With a diversified equities portfolio, you can get anywhere between 7-10 per cent returns per annum over a long period of time. You would be able to invest any amount in excess of $20,000 of your CPF OA balance.

If you are not intending to use CPF for housing purposes, you should consider investing your CPF as your CPF OA balance cannot be withdrawn as cash until you reach 55. You should invest in a low-cost portfolio of funds that are globally diversified so that you have the best chance of success for your investment.

ALSO READ: The ultimate CPF guide 2021: Contributions, interest rates, minimum sums & calculators

This article was first published in Her World Online.