Saturday, March 15, 2008

16 more days. Invest or not to Invest???

You have only 16 more days to invest your initial $20,000 from your CPF Ordinary Account and $20,000 from Special Account.

Coming 1st April, to invest under CPFIS-OA, you will have to set aside $20,000 in your Ordinary Account before the remaining savings in your Ordinary Account can be used for investments. Similarly, to invest under CPFIS-SA, you will have to set aside $20,000 in your Special Account before the remaining savings in your Special Account can be used for investments.

With the amount being locked in, an extra 1% interest will be paid on this initial $60,000 inclusive of $20,000 from Medisave. The extra interest from the OA will go into your Special or Retirement Account to enhance your retirement savings.

Many advisers might be taking this chance to encourage you to invest. So should you or should you not invest???

Ask yourself following question before you decide:

a) What is the short term needs of my Ordinary Account monies? Downpayment for housing? Children Education?
b) Have I left sufficient Liquidity for my mortgage loan in event I sack my boss?
c) Will there be a decrease in my CPF contribution due to job change or age in the near future?
d) Will my investment perform more than 5% if I want to invest my Special Account?
e) The other factors will depend on the 3 principles of Needs, Ability and Willingness.

Most importantly, understand the plan that your adviser recommends and not be pressured by them. Just a few tips for you.
a) Do not take excessive risk as if you're gambling although its your CPF monies
b) Not recommended to invest in a plan such that the returns are not guaranteed and yet only possibly gives you slightly above the CPF guaranteed rate.
c) Not recommended in a plan if the returns are described at (b) and requires you to lock up the monies for long period.

As for myself, I had ensured 12 months liquidity for my mortgage repayment. I had also invested the rest, including my Special Account.


Anonymous said...

As the deadline gets nearer ntuc agents also get more desperate that they throw all ethics out of the window. They are offering guaranteed 4% for growth at one roadshow.
This is cheating and immoral.

Khiat Han Hwee Adrian said...

You should report to expose them it if its true.
But I don't think they will be daring enough to tell the whole world that 4% is guaranteed. There might be misunderstanding.

Anonymous said...

Special account interest rate is not 5% starting April:

It is now pegged to the 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1%.

And according to CPF link above, "the average yield of the 10YSGS over one year, from 1 March 2007 to 29 February 2008, plus 1% works out to be 3.75%."

Less than the current 4%. Although government will maintain floor rate of 4% for two years.

Thus, Special Account interest rate is no longer guaranteed at even 4%, not to mention 5%.

This really makes it so much harder to gauge our retirement fund in SA. In this case, is leaving money in SA much different then investing it?

Khiat Han Hwee Adrian said...

The special account interest was already changed from 1st Jan 08.

I mentioned 5% for Special Account because I believe the expected returns will fluctuate around this figure even after the 2 years guaranteed rate is over.

5% guaranteed or almost guaranteed rate is relatively good. Moreover, its only the first $20k, I think its quite ok to leave the money in SA.