Tuesday, 30 January 2018

Why I have never topped up my or my parents' CPF

This article is inspired by MR 15HWW's article on why he had never topped up his CPF yet. This article is full of very good rational reasons behind his motives. 

There are many articles that talk about the pros, and the benefits one have gotten from topping up their CPF or their parents'. For the sake of a balanced article, do a google search, and you'll get all the benefits. 

Why I have never topped up my CPF?

1. Automation in place
My current employer ensures that my CPF is "topped up" automatically monthly for all three accounts (OA, SA and MA) from both my salary and from my company (thanks Ms CEO's day job employer!). As long as I stay employed in such firms, this auto top- up stays.

2. Ideology
And this is my main reason.

Unlike Mr 15HWW, I may not be getting more returns than the CPF interest rate for now. 

Have you heard of the American dream? You can read more about it herehere,  or simply do a google search. In short, it's an ideology that is coined out during independence, where democracy, and equality, will allow Americans to lead a better life which they want through creativity and ambition.

I believe in the Singaporean dream. That if I were to try hard, one day I will succeed.

If I were to go for the safest option, and what many are doing, at the end of the day, I may just be average or at best slightly above average. And if that's the case, automation in place (see point 1) may put in the average position already. Why worry?

I may have started later in the investment journey, than many of the savvy personal financial folks. 

BUT, I still have 20 years before reaching 55. As long as I have the liquidity or option to cash out (abet with potential losses), I still have the chance to make my money work harder for me in many  other ways. 

For now, I will still keep trying. I may not be better off at the end of the day, but at least, if I try, I have a chance to be way better off. The counter argument may be to top up a bit, and not all your monies, as diversification and let the compounding effect do the magic, and in a very safe method. One day, when I have exhausted my methods, and decided that the CPF is still the best, I will. Not today.

3. Time value of money
In general, a longer term bond will give a better yield. For the monies in CPF, this doesn't really apply.You get similar interest rates whether you can draw if out in 40 years, or in 1 year. Of course, on the flip side, the longer you put in, the more the compounding magic.

Why I have never topped up my parents' CPF?

I give my parents allowances every month. And I trust my parents' are capable of coming up with their own decision based on some rational or basis. It's not up to me to decide that they don't need the money, or they are better off topping up the CPF. They can do what they like with it, and topping up their CPF is what they want, so be it. If they want me to enjoy the tax relief, they can let me know. It's an allowance for them. Once I have given the allowance, it's my parents' money. They decide. 


  1. You are determined to become one competent retail than stronger saver with CPF. We have to decide as early as possible which path to take.