CPF SA

[Trader11]

ok, i assume the installment is correct.

lets look at 10 vs 15 years

for 10 years if you pay an installment of 4736, you would have cleared up the loan after 10 years

if you choose of pay 3357 a month,you will have an outstanding loan of 189k if interest is 2.6%
but your savings of 1379 a month at 3% for 10 years gives you 193k
193>189. so it is better not to pay your loan? 10 years only earn 4k? this is because your 3% is slightly better than 2.6% . then again. this is free money, why not just pick it up

Maybe you are free to take different risks when you have no mortgage?

 

[dork32]

Trader11: As I pointed out in the other thread you’re double counting mortgage interest. The monthly mortgage payments already include principal plus interest — otherwise the loan wouldn’t be paid off. So it looks like you’re about $100K richer paying your mortgage at standard pace versus the 10 year accelerated case, assuming 3.0%/year net returns. And you have better liquidity the whole way through at standard pace.

This shouldn’t be hard to understand. If you can take a dollar and earn 3% on it or pay off 2.6% (never mind 1.4%) debt, which is the better deal? The 3%, obviously. At every point in time your investment runs ahead of the money used to make it. You win. That’s exactly how banks make their money: accept deposits at X% and loan out at X+Y%. They keep the spread between these two rates. You should do the same!

maybe i was wrong about you. you can count a bit. most of the sinky here cant even tell wat is wrong with the calculations

 

[dork32]

Maybe you are free to take different risks when you have no mortgage?

having a mortgage or not does not affect my risk appetite.

eg i have 500k in my oa and 500k of home loan. it is equivalent to me having 0 oa and 0 home loan. like i said before, why pay up my home loan? "peace of mind" again?

 

[reddevil0728]

maybe i was wrong about you. you can count a bit. most of the sinky here cant even tell wat is wrong with the calculations

BBCW is sinky?

 

[Value.Matrix]

Maybe you are free to take different risks when you have no mortgage?

Now you are running on subjective instead of quantitative measures.

Like that i bring in my ability to take risk. When you are young (below 45), you are able to take more risk (or to be exact, not so concern with the volatility of your investment), simply because there is no sequence of risk of decumulation. (basically, you are not worried of your investment going south now, because you can be confident if you invest in an index, it will go up eventually when you reach 55 when you exit your investment).

Your willingness to take risk is even more easily settled. IF you are so worried, have an emergency fund of 2 years, and you should be pretty much secured, because that fund will be able to help you continue your lifestyle for 2 years with no need for additional funds. So if your pay drops, you can still adjust your spending, while still paying for the important expenses in your life.

There is no "free to take different risk". What's that 24k growing at 8-10% when your whole mortgage is 500k (And the amount of money you save beats investing 24k) is growing at 1.4%? 500k is 20 times bigger than your emergency fund of 1 year (24k).

Try doing this exercise instead of going into some subjective term first.

 

[dork32]

BBCW is sinky?

bbc confirm not sinky. i used to think people from their country not very good at maths

look at their sat test. their maths is probably at our sec 2 level. sat test is for gaining entry to uni

for sg, h1 maths or a maths seems to the min for you to go uni. a maths is 3 levels above sec 2 maths.

during my time, most of us have maths c and f maths before going to uni. f maths is 5 levels above sat maths

 

[dork32]

Now you are running on subjective instead of quantitative measures.

Like that i bring in my ability to take risk. When you are young (below 45), you are able to take more risk (or to be exact, not so concern with the volatility of your investment), simply because there is no sequence of risk of decumulation. (basically, you are not worried of your investment going south now, because you can be confident if you invest in an index, it will go up eventually when you reach 55 when you exit your investment).

Your willingness to take risk is even more easily settled. IF you are so worried, have an emergency fund of 2 years, and you should be pretty much secured, because that fund will be able to help you continue your lifestyle for 2 years with no need for additional funds. So if your pay drops, you can still adjust your spending, while still paying for the important expenses in your life.

There is no "free to take different risk". What's that 24k growing at 8-10% when your whole mortgage is 500k (And the amount of money you save beats investing 24k) is growing at 1.4%? 500k is 20 times bigger than your emergency fund of 1 year (24k).

Try doing this exercise instead of going into some subjective term first.

actually for myself, my risk appetite depends on net assets rather than outstanding home loan.

lets say i have 500k cash and 200k home loan, i will be more willing to invest than 0 cash and 0 homeloan.

using my 200k to paydown my loan does not increase my willingness to take risk. it definitely does not improve my peace of mind

 

[Trader11]

bbc confirm not sinky. i used to think people from their country not very good at maths

look at their sat test. their maths is probably at our sec 2 level. sat test is for gaining entry to uni

for sg, h1 maths or a maths seems to the min for you to go uni. a maths is 3 levels above sec 2 maths.

during my time, most of us have maths c and f maths before going to uni. f maths is 5 levels above sat maths

I did the calculation late at night while having a long day at work and studying at night. Don't need to generalise that Singaporean are bad at math please.

Once I code it out, then don't need to worry about excel error

 

[dork32]

I did the calculation late at night while having a long day at work and studying at night. Don't need to generalise that Singaporean are bad at math please.

Once I code it out, then don't need to worry about excel error

i did not say sinky bad in maths. l say people in bbcland bad in maths

thmaking mistakes in calculation does not mean lousy in maths. i made many careless mistakes in my calculations. but not able to wake up when people point out your mistake, that is bad in maths.

the fact that you are able to calculate future values means your maths is not too bad. it is just that you are thinking too much. this makes your calculations very complex. this is where mistakes creep in

 

[Value.Matrix]

actually for myself, my risk appetite depends on net assets rather than outstanding home loan.

lets say i have 500k cash and 200k home loan, i will be more willing to invest than 0 cash and 0 homeloan.

using my 200k to paydown my loan does not increase my willingness to take risk. it definitely does not improve my peace of mind

Sure. That's also a valid point.

If i change it to 100k cash and 200k home loan, 20k in CPF OA, 80k in CPF SA, that's also like 0 cash and 0 homeloan.

But it changes because some of the money is gauranteed to earn interest, and that changes a lot of things.

 

[BBCWatcher]

Are you more or less likely to take greater (prudent, long-term) investment risks if you have less liquidity? You definitely have less liquidity if you accelerate loan repayment on an illiquid asset (HDB leasehold equity).

 

[SBC]

Side track a bit.
is Housing refund to cpf part of the $37,740 cap?

 

[zoneguard]

Side track a bit.
is Housing refund to cpf part of the $37,740 cap?

No. https://www.cpf.gov.sg/members/FAQ/...ousing Scheme&folderid=11762&ajfaqid=11492198

Q	What are the differences among the Retirement Sum Topping-Up (RSTU) Scheme, top up as Voluntary Contributions and Voluntary Housing Refund?

A	Please refer to the table below for more information on how you can contribute to your CPF Account. You can make: Top-ups under the Retirement Sum Topping-Up (RSTU) Scheme; and/or Voluntary Contributions (VC); and/or Voluntary Housing Refund

In general, the maximum amount you can top up is the difference between the CPF Annual Limit of $37,740 and the mandatory contributions (MC) made for the calendar year. Hence, the MC and VC made in a year cannot exceed the current CPF Annual Limit.

How much voluntary housing refund can I make?
You can refund any amount, capped at the full principal amount you have withdrawn for the property with the accrued interest.

 

[dork32]

Are you more or less likely to take greater (prudent, long-term) investment risks if you have less liquidity? You definitely have less liquidity if you accelerate loan repayment on an illiquid asset (HDB leasehold equity).

liquidity is not one of the consideration. it is like taking other people's money to go gamble. if i lose, use wat to pay?

but i must admit that with liquidity, i can choose whether to bet or not.
eg if i have 100k cash and 100k home loan. i can choose to use this 100k to buy 8 lots of ocbc or let it rot in dbs savings
but it i have 0 cash and 0 home loan, then no choice

 

[duhduhduh]

Aside from this, anyone knows or thinks CPF is still able to sustain the 4% interest?

 

[reddevil0728]

Aside from this, anyone knows or thinks CPF is still able to sustain the 4% interest?

This 1 can only speculate. By formula it wouldn't be 4% and government is sustaining it.

If you want speculation, I opine that if market interest is going to remain very low in the long term, then they might reduce it. as it is always relative.

 

[zoneguard]

Aside from this, anyone knows or thinks CPF is still able to sustain the 4% interest?

https://www.mof.gov.sg/policies/res...n-the-government-pay-all-its-debt-obligations
Q27. How are CPF interest rates determined?
Q28. Why are the SSGS monies invested by Government as part of a combined pool of funds managed by GIC, rather than managed in a separate, dedicated fund?

 

[Cobra!]

This 1 can only speculate. By formula it wouldn't be 4% and government is sustaining it.

If you want speculation, I opine that if market interest is going to remain very low in the long term, then they might reduce it. as it is always relative.

Just increase min sum/cpf life premiums etc. Its the withdrawable balance which they need to worry.

 

[highsulphur]

my bet is that 4% will be sustained for the foreseeable period (at least next 10 years). As it is, many Singaporeans are struggling to meet their retirement needs using their CPF balance. It does not make sense for them to promote CPF by encouraging people to top up for example and at the same time reduce the interest on it to make it harder for people to build up their CPF nest. It would be a political suicide.

My advise is don't worry about the 4% too much.

 

[zoneguard]

https://www.cpf.gov.sg/Members/AboutUs/about-us-info/cpf-statistics/section-a-members-accounts
Blended rate lower than 4% around 3.65%. OA balances higher than SA balances. So long the long-term returns are higher than blended rate.