Does HDB wipe the minimum OA amount?

[BBCWatcher]

We get additional 1% for 20K in our OA.

No, that's not necessarily how it works. You receive 1% extra interest on the first $60K of combined balance (OA+MA+SA), but that's subject to a separate cap of $20K on your OA.

Suppose, for example, you have (or can have) $60K or more in MA+SA. If that's the case, you earn all the bonus interest. (You also earn higher base interest on your MA and SA.) You won't get any extra bonus interest for having $20K in your OA. (You will get standard 2.5% interest on your OA balance, of course.)

A LOT of people are confused about this, I'm afraid.

 

[BBCWatcher]

With OA:85k, SA: 26k, MA: 26k, is it better just to transfer 10k over to SA before OA wipe, so as to ensure that i still have 60k in my combined interest for the additional 1% interest?

It's better in terms of earning more interest, sure. But if earning more interest is better, then better yet would be transferring more or all of your OA to SA.

If one percentage point more interest on $8K sounds great (and it is), then how does 1.5 percentage points more interest on the entire sum sound? It should sound a whole lot more great.

How much more interest do you want to earn?

....I dont have any liabilities and have cash reserve as warchest....

Cash reserves are much more liquid than OA, which are highly restricted reserves. If you have enough cash (and other liquid reserves), then you might as well make your OA work harder, as SA. And you don't have to wait until March. If you want February's higher SA interest, you've got a few more days to convert.

For some reason this idea is "radical," but it's not. If you're never going to tap some or all of your OA as OA, then why is it still OA?

 

[boiboi86]

TS better don't let HDB wipe out ALL your OA (we donno in future whether we will be out of the current Job, keep some for the rainy days) ....if u have CDP account can try to buy in some blue-chip...

hmm blue chip... worth considering..

 

[ceciltan]

No diff cos the OA get wipe out anyway. Why not transferred to SA (4% vs 2.6% hdb loan) to get more interest for retirement?

I think if for whatever reason, in the future, you do not contribute anymore money into your OA and you do not have enough for your HDB loan, you cannot use your SA to pay for it. then you will have problem.

 

[Mecisteus]

To recap, if you don't like the CPF OA "sweep" then, before buying your HDB unit, you can:

(a) Take a bank loan instead of a HDB loan; or
(b) Convert your OA to SA (as long as your SA has not reached the Full Retirement Sum yet); and/or
(c) Invest your OA funds through the CPF Investment Scheme, preferably in something extremely safe and affordable such as a Singapore Government Security purchased at initial auction.

Option (b) is the easiest. You can do it online, and the conversion occurs within seconds. Even if you're picking up the keys tomorrow, you can still choose option (b) today. The conversion is irrevocable, but your SA earns better interest.

Option (c) is the best option. Don't need to be greedy to earn higher interests. Lose a little bit of interests. Treat it is as an insurance cost to buffer for any potential loss of future income.

Option (a) is a good option for those with bigger balances in cash or OA. Take advantage of the lower interest rate loan. If interest rate shoots higher, pay them off earlier.