Reviewing our Central Provident Fund (CPF) Strategy

30 Oct 2017 
SOURCE: Finance Smiths

​It's a rainy Saturday morning and afternoon here in the East side of Singapore. My wife and I just had lunch. Will walk around for a bit before heading home to rest and get ready for the wedding dinner tonight. Always nice to catch up with relatives we haven't seen for a while. Before that, I thought it would be good to write about a topic I haven't touched on in a while. To be fair, I have mentioned our Central Provident Fund (CPF) balances as retirement funds in passing in some of my recent posts.


But it's time I revisited how the CPF balances fit into our overall strategy. Maybe just a few key points first based on current rules and regulations. Note that these are expected to change over time.

  • My wife and I will turn 55 years old in about 25 years time. This is still a long time away and there is plenty for us to do in the meantime. Which is why we have always viewed our CPF balances as late retirement funds. Any withdrawals or payouts should be supplement income and not the main source of income in our old age.

  • At 55 years old, savings in our CPF – Ordinary Account (OA) and CPF – Special Account (SA) will be used to create a Retirement Account (RA). The plan is for us to have the Full Retirement Sum (FRS) – estimated at S$300,000 in each of our RAs.

  • At 65 years old, the estimated CPF Life monthly payout for each of us is S$2,500 with the FRS. These payouts are for life and the total of S$5,000 should be sufficient as supplement income.


Given that we are using our CPF-OA to pay for our current private property with plans to have kids and move to a bigger private property, it is not possible for either of us to reach the Enhanced Retirement Sum (ERS). Not without regular cash contributions into the CPF-SA, something that we are not planning to do for now.

The biggest factor is whether we can stay employed for the 25 years. This will be an achievement in itself with increasingly shorter industry lifecycles and accelerating pace of job displacement by technological advancements. Even if we could wind down and work in jobs we enjoy that are less stressful, the monthly pay would have to be above the wage ceiling for the employer and employee CPF contributions to be maxed out.

Currently, we have about S$80,000 each in our CPF-OA and CPF-SA combined balance i.e. total of S$160,000. We didn't work in Singapore for the first 4 years of our careers and only started the CPF contributions in Jan 2014 when we came back. We contributed cash into our CPF-SA the first few years after that to get the tax relief and accelerate its growth to bring us in line with our peers. Since we have already achieved that, we have stopped our cash contributions into the CPF-SA. We might restart this if we find the CPF-OA growing too slowly because of the monthly home loan withdrawals.

We like the interest rates earned on the CPF-OA and CPF-SA balances. Which is why we see no reason to take on more risk by investing those funds. We have enough problems to worry about with out investment portfolio and jobs. The other major consideration is what happens when we have kids. My wife plans to keep working because she doesn't think she can be a stay-at-home mum. My mother-in-law is a career mum who has done well for herself in the corporate world and still successfully built a family. It's easy to see where my wife gets her role model from.

It continues to amaze me how much influence a mother can have on her daughter. My wife believes in earning and having her own money so she doesn't have to depend on me financially. With our investment approach, she will now be growing her own money without having to constantly monitor her portfolio. This reduces the financial pressure we face and we end up fighting less over money issues. We still disagree on some items like spending levels but we don't cross into each other's jurisdiction and start dictating how the money earned should be spent. The question becomes whether things will change when we have kids.

We have both agreed and promised each other to step back in our careers when we have kids. We worked hard to put ourselves in this financial position to allow us to free up more time for the kids in the early years. We just need to maintain our career paths without chasing for the next promotion and pay rise. The time will come eventually for us to pick up the pace again but we will have to be patient. Understanding this will be critical and essential in ensuring our career longevity while being a dual-income family with kids.


I reckon the next phase of our lives will be the most challenging. It's probably why we have delayed having kids for so long despite having been together for almost a decade. We want to be sure we are ready to have kids and we have been building the foundation for a long time. With my wife turning 30 years old next year, we are starting to realise it's time and we are ready.

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