First up, I'm glad there is a group of knowledgeable and financially-savvy people in this forum whom we can all learn from. Vested in CPF or otherwise, I'm pretty much certain that so long you/your employer are contributing to it it's safe to say that we all want to the most efficient way to put our money work.
"Put all $$$ into Cpf special account, pay housing loan using cash." - To TS's topic, perhaps there is a little confusion as to whether this refers to monies in excess (voluntary) or monies already in the Accounts. Correct me if I am wrong but perhaps it's more skewed towards using OA or bank loan to be serving the housing loan. Then again, maybe it's just my perspective looking from outside in.
If it is, I am on the verge of stepping into the same shoes as TS as well.
Taking Up A Bank Loan
My initial take was to take up a bank loan and transfer my OA to SA in order to make my (well since we're at it) already-locked-up monies to take advantage of the higher interest rate. Of course factors such as the the price of the house matters as it shows how comfortable you are in setting aside your disposable income to finance the mortgage. This will then vary according to your needs and wants.
Since part of the disposable income is already set aside for housing purpose, I now have even lesser disposable income for investing purposes, assuming my income stays the same. If I am prudent enough, I will be able to still invest albeit the lower cash on hand.
SA's compounding rate of 4% will allow me to reach the (insert future Minimum Sum; currently $161k) comfortably with excess, of which I can then withdraw the excess at (insert future statutory age; currently 55). As I did not utilize my OA for mortgage, I am not required to pay the accrued interest at any time.
My SA balance will then be added together with my RA balance, which will then form my CPF Life and allow me to receive the monthly payout of (insert amount then) at (insert future draw-down age).
Can the amount I am able to withdraw at the statutory age allow me to fulfill my needs in that gap between the statutory age and my draw-down age? Working backwards, taking into account inflation rate of 3%, laying down my needs, logically, maybe.
Why maybe? Because while I am able to work backwards and reach my desired goal with somewhat a higher level of peace of mind, at least on paper, given the indicative assurance from the official numbers and policies in place, things may change in due course, right?
The downside is that I may not be as cash-rich.
Using OA
Now compare that to using my OA for mortgage, which then leaves me more disposable income for investment purposes.
While I will still transfer excess monies from my OA to SA, the amount will inevitably be lower.
Since I have more disposable income, I should then put the monies to work by investing. I think here lies the difference whether people will get burnt or emerge victorious, and are just wanting to know how one can beat the CPF interest rates, including accrued interests via the various instruments.
Aside from that everything else remains similar - my SA's compounding rate of 4% will still allow me to reach the MS but perhaps require a longer time frame. At the statutory age, I will also have lesser amounts in excess to be withdrawn (maybe just the minimum $5k at worst). My monthly payout upon the draw-down age will also be lesser as my pool of SA + RA is lower (since I did not capitalize on the time factor to compound my monies due to the lower transferred amount or maybe none at all towards my SA, after starting my mortgage repayments).
Can the amount I am able to withdraw at the statutory age allow me to fulfill my needs in that gap between the statutory age and my draw-down age? Working backwards, taking into account inflation rate of 3%, laying down my needs, logically, maybe.
Why? Because I have to be savvy and not greedy during my investing time frame. Perhaps the annualized returns can set the yardstick for me, but past performances are not an indication of future results, right?
Which brings to another operative word - discipline.
I have to be discipline enough to ensure that my returns at the statutory age matches the amount I am able to withdraw in excess if I had chosen the bank loan route.
The thing is that one can only look back on hindsight and give their take on it. Otherwise, we can only either continuously try to earn more disposable income and let CPF make our money work (bank route) or be constantly be learning on investing to get higher returns while we put our mortgage matters at east (OA route).
It'll be good if forum members who are currently paying mortgages can share your experience for everyone, if not me, to learn from.
What's your strategy like?
"Put all $$$ into Cpf special account, pay housing loan using cash." - To TS's topic, perhaps there is a little confusion as to whether this refers to monies in excess (voluntary) or monies already in the Accounts. Correct me if I am wrong but perhaps it's more skewed towards using OA or bank loan to be serving the housing loan. Then again, maybe it's just my perspective looking from outside in.
If it is, I am on the verge of stepping into the same shoes as TS as well.
Taking Up A Bank Loan
My initial take was to take up a bank loan and transfer my OA to SA in order to make my (well since we're at it) already-locked-up monies to take advantage of the higher interest rate. Of course factors such as the the price of the house matters as it shows how comfortable you are in setting aside your disposable income to finance the mortgage. This will then vary according to your needs and wants.
Since part of the disposable income is already set aside for housing purpose, I now have even lesser disposable income for investing purposes, assuming my income stays the same. If I am prudent enough, I will be able to still invest albeit the lower cash on hand.
SA's compounding rate of 4% will allow me to reach the (insert future Minimum Sum; currently $161k) comfortably with excess, of which I can then withdraw the excess at (insert future statutory age; currently 55). As I did not utilize my OA for mortgage, I am not required to pay the accrued interest at any time.
My SA balance will then be added together with my RA balance, which will then form my CPF Life and allow me to receive the monthly payout of (insert amount then) at (insert future draw-down age).
Can the amount I am able to withdraw at the statutory age allow me to fulfill my needs in that gap between the statutory age and my draw-down age? Working backwards, taking into account inflation rate of 3%, laying down my needs, logically, maybe.
Why maybe? Because while I am able to work backwards and reach my desired goal with somewhat a higher level of peace of mind, at least on paper, given the indicative assurance from the official numbers and policies in place, things may change in due course, right?
The downside is that I may not be as cash-rich.
Using OA
Now compare that to using my OA for mortgage, which then leaves me more disposable income for investment purposes.
While I will still transfer excess monies from my OA to SA, the amount will inevitably be lower.
Since I have more disposable income, I should then put the monies to work by investing. I think here lies the difference whether people will get burnt or emerge victorious, and are just wanting to know how one can beat the CPF interest rates, including accrued interests via the various instruments.
Aside from that everything else remains similar - my SA's compounding rate of 4% will still allow me to reach the MS but perhaps require a longer time frame. At the statutory age, I will also have lesser amounts in excess to be withdrawn (maybe just the minimum $5k at worst). My monthly payout upon the draw-down age will also be lesser as my pool of SA + RA is lower (since I did not capitalize on the time factor to compound my monies due to the lower transferred amount or maybe none at all towards my SA, after starting my mortgage repayments).
Can the amount I am able to withdraw at the statutory age allow me to fulfill my needs in that gap between the statutory age and my draw-down age? Working backwards, taking into account inflation rate of 3%, laying down my needs, logically, maybe.
Why? Because I have to be savvy and not greedy during my investing time frame. Perhaps the annualized returns can set the yardstick for me, but past performances are not an indication of future results, right?
Which brings to another operative word - discipline.
I have to be discipline enough to ensure that my returns at the statutory age matches the amount I am able to withdraw in excess if I had chosen the bank loan route.
The thing is that one can only look back on hindsight and give their take on it. Otherwise, we can only either continuously try to earn more disposable income and let CPF make our money work (bank route) or be constantly be learning on investing to get higher returns while we put our mortgage matters at east (OA route).
It'll be good if forum members who are currently paying mortgages can share your experience for everyone, if not me, to learn from.
What's your strategy like?
