Sunday, December 16, 2012

Investing with your CPF - Part 1

With rising costs and high inflation rates, one may start to wonder if it is worthwhile to invest using your CPF. As there are too much information regarding investing with your CPF, I will be breaking down this topic to a few parts.

Some quick numbers:
Interest earned on CPF ordinary account (OA): 2.5%
Interest earned on CPF special account (SA): 4%
** An additional 1% interest will continue to be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA).

Inflation rate is about 4.8% year-on-year for the 1st 9 months of year 2012

Some quick facts:
1) What can you invest in?


2) How much can you invest from your OA and SA?
Only monies in excess of $20,000 in your Ordinary Account and $40,000 in your Special Account can be invested. In addition to this, do take note of the additional limits if you want to invest in shares or gold. For shares, up to 35% of investible savings can be invested. For gold, up to 10% of investible savings can be invested.

This investible savings will take into account of amount already withdrawn for investments. For example, if you have 40k in your CPF-OA and have withdrawn 10k for investments earlier, your total investible savings is 50k. 35% of this is $17500. This is less than the 30k which is "in excess of the $20k in your OA". Thus, you will only be able to invest another $7500 since 10k is already invested.

You can check your shares and gold limit in your CPF statement via the CPF website. The amount are updated on the 11th of every month, based on the balances at the end of the previous month. The update will be on the 12th if 10th is a Sunday/Public Holiday.

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