I’ve been doing yearly voluntary contributions (VC) to my CPF account though I retired from work 8 years in the past.
I merely took among the passive revenue I bought from my investments and maxed out the yearly VC.
Nonetheless, I didn’t do VC this yr and I will not be doing VC subsequent yr both though the unique plan was to do that till I hit 55 years of age.
Why?
I deal with the CPF as the danger free and volatility free funding grade bond element of my portfolio.
So, I do not use it to put money into equities or to purchase properties, for that matter.
That is my final security web for if the whole lot else goes horribly flawed.
Nonetheless, I did use the CPF OA funds to purchase T-bills as they belong to the identical basket of investments.
Danger free and volatility free.
So, I purchased T-bills which paid greater than the two.5% p.a. paid by CPF OA within the final one yr or so.
In reality, I’ve a T-bill purchased with CPF OA funds maturing this week.
Should keep in mind to switch the cash from CPF IA again into the CPF OA.
The Singapore Financial savings Bond (SSB) is one other threat free and volatility free funding obtainable to me.
In an earlier weblog, I mentioned that if the SSB is ready to supply a better than 3% p.a. coupon, I’d purchase SSB as an alternative of doing VC to my CPF account.
It’s because the typical yield for VC I do is about 3% every year.
Take be aware that that is for my age bracket and likewise the truth that my MA has already hit the Fundamental Healthcare Sum which implies my VC goes solely to my OA and SA.
I’ve already purchased SSBs utilizing funds which might in any other case have been used to do VC to my CPF account this yr and within the subsequent yr.
Which means no VC to my CPF account in my 52nd and 53rd yr on planet Earth.
Now, with the most recent SSB providing a 3.16% p.a ten yr common yield, I’m considering of “borrowing” cash to purchase some.
Borrowing?
Has AK gone to the darkish aspect?
Effectively, if I have been to purchase this SSB, I’d be utilizing funds which might in any other case have been used to do VC to my CPF account in 2025!
That’s 2 years away!
That will be the yr I flip 54 years outdated.
As I’ve locked up fairly a bit of money in 8 months fastened deposits again in January when OCBC was providing 4.08% p.a. curiosity, I’ll have the funds to do that.
Some would possibly assume that persevering with to do VC to my CPF account is a greater thought as I may use the CPF OA funds to purchase T-bills within the meantime.
Effectively, if rates of interest are actually happening someday in 2024 or 2025, reinvestment threat may be very actual for brief time period fastened revenue devices like T-bills and glued deposits.
So, locking in a better 10 yr common yield now would not look like a horrible thought.
Shopping for $38,000 of SSBs yearly might sound extreme to some however, for me, it truly is simply transferring cash meant for my CPF account.
It’s one thing in my yearly funds.
What is perhaps thought of “extreme” is “borrowing” funds from subsequent yr which might have been earmarked for CPF VC in 2025 to purchase the SSB now.
I’d simply do it.
Reference:
CPF or SSB?
