Four ways to optimise your CPF savings

https://str.sg/JU5p

Lorna Tan
Invest Editor/Senior Correspondent
Published 20 Oct 2019

Here's how you may better use the money in CPF if you opt not to take it out on turning 55

I turned 55 early last month.

It's a milestone that I have been planning for since my 30s.

Part of my financial planning revolves around optimising my retirement nest egg, a topic that I have written extensively and given talks on. This is because the foundation block of my retirement plan is my Central Provident Fund (CPF) savings.

Like some of you, I'm happy to leave my CPF money where it is instead of withdrawing it on turning 55. After all, it is difficult to find another vehicle whose returns match those offered by the CPF without incurring significant risk.

With my CPF savings as my financial safety net, I can take on more investment risks with the rest of my savings to generate other cash flows.

I would like to highlight four steps that I have taken to optimise my CPF savings. However, do bear in mind that while these tips work for me, it may not be suitable for all CPF members.

1. MAXIMISING CPF

Special Account savings I'd decided before I turned 55 that I would try to keep as much of my CPF Special Account (SA) savings in my SA, since they earn an attractive interest of 4 per cent a year.

This means I have to avoid the transfer of these savings to my CPF Retirement Account (RA) on my 55th birthday. On that day, a sum of up to the Full Retirement Sum of $176,000 from my Ordinary Account (OA) and SA would flow to my RA.

To achieve my objective, I had to withdraw my SA savings and invest them temporarily in a low cost and stable investment vehicle before my birthday, and have them transferred back to my SA after I turn 55 and my RA has been created.

Last month, I invested $230,000 of my CPF SA savings - after setting aside $40,000 in my SA (in line with CPF Board's requirement) - in Nikko AM Shenton Short Term Bond Fund. My buy-sell transaction was done on the FSMOne.com platform where there is zero sales charge.

During the few weeks that my SA savings were parked in the fund, I made a net profit of $662.

On my birthday, $40,000 from my SA and $136,000 from my OA flowed into my newly created RA. I subsequently sold my holdings in the fund and $230,662 flowed back to my CPF SA and remained there.

FSMOne recommended Nikko AM Shenton Short Term Bond Fund as a "parking facility fund" for CPF because of its high liquidity - which allows investors to get in and out of the investment quickly - and its quality, so there should not be adverse impact to the fund's net asset value over a short time frame.

The fund comprises a diversified portfolio of short-term corporate bonds and money market instruments. Its overall portfolio credit rating is A minus and it also hedges non-Singdollar bonds to reduce the impact of currency volatility on the bond fund.

FSMOne added that when you put these attributes together, you get a stable investment product that pays you dividends while you wait for the next investment opportunity.

2. TOPPING UP TO ENHANCED RETIREMENT

Sum On the day my RA was created, I used the CPF app on my mobile phone and transferred $88,000 from my OA to my RA. By doing so, I topped up my RA savings to the prevailing Enhanced Retirement Sum (ERS), which is $264,000.

I plan to continue to do a cash or CPF top-up to each year's prevailing ERS in my RA until I turn 65, and enjoy a higher monthly payout of about $2,300 when my CPF Life monthly payouts commence at age 65. Without the annual top-ups that I plan to do, my CPF Life monthly payouts from age 65 would be in the lower range of between $1,960 and $2,110.

3. DAD'S CPF RA AS AN INVESTMENT TOOL

Not long ago, I realised that my dad, who is now 84, had depleted his RA savings.

It is a pity not to maximise his RA that can yield 6 per cent interest rate for the first $30,000, 5 per cent for the next $30,000 and 4 per cent for the remaining balance.

I spoke with my brother and said that I would use my dad's RA as my investment vehicle, and parked some money there.

My dad belongs to the cohort of CPF members where it is not compulsory to receive monthly CPF payouts from his RA. That way, my savings can remain in his RA and enjoy the power of compounding - the process of earning interest on your interest - over the years.

By performing the cash top-up, I also enjoyed tax relief in the following tax assessment year, subject to the $80,000 personal tax relief cap.

Should my dad need the savings parked in his RA, he can ask the CPF Board to start monthly CPF payouts to him.

4. VOLUNTARY PROPERTY REFUNDS TO CPF ACCOUNTS

As I had used my CPF savings to buy my home, I decided to do a voluntary housing refund. This meant that I made a cash refund on the principal amount which I had used from my OA to pay for my property.

When doing so, the cash I refunded will earn the 2.5 per cent in the OA as compared to having the extra cash in the bank not earning much interest. The amount to refund is entirely up to you as long as it is no more than the full principal amount and accrued interest.

Members can find out these amounts by logging on to the CPF account with their SingPass.

Do note that the full accrued interest can be refunded into the CPF accounts only if you have refunded the full principal amount.

FINANCIAL LITERACY

I am able to help raise awareness of financial literacy and can be an advocate for consumer protection in my articles, books and talks.

Responding to readers' demand, my articles have been compiled in four books.

Launched last year, my third book Retire Smart: Financial Planning Made Easy has sold more than 12,000 copies.

My latest book, Money Smart: Own Your Financial Destiny, is available at stbooks.sg and major bookstores.

My two earlier books are Talk Money and More Talk Money.

While we are chasing our financial goals, let us not forget the other things that matter, like our spiritual growth, health, family and friends.

Let me end with a quote from Mr George Lorimer, an American writer and former editor of The Saturday Evening Post: "It is good to have money and the things that money can buy, but it's good too, to check up once in a while and make sure you haven't lost the things money can't buy."

Move over, Mao Shan Wang: Durian fans also love S17, Black Gold and Golden Phoenix

Move over, Mao Shan Wang: Durian fans also love S17, Black Gold and Golden Phoenix http://str.sg/o9dj

By: Hedy Khoo
PUBLISHED JUN 8, 2019, 4:00 AM SGT

SINGAPORE - It was love at first bite for durian lover Adeline Siow when she first tasted the S17 durian last December.

After waiting half a year for the current durian season, the 44-year-old operations manager was at fruit and vegetable seller The Durian Tree in Bukit Batok East Avenue 3 last Tuesday (June 4) to buy five S17 durians.

Madam Siow, who paid $96, says: "For seasoned durian lovers like myself who like very bitter-tasting durians, the S17 is a value-for-money alternative to Mao Shan Wang."

S17 was priced at $12 a kg at The Durian Tree that day, while Mao Shan Wang cost $17 a kg.

Black Gold - a type of Mao Shan Wang grown at high altitudes - offers even more complexity and alcoholic pungency for those who love bitter durians. ST PHOTO: HEDY KHOO

Cultivars such as the Golden Phoenix (pictured) are not as widely cultivated as Mao Shan Wang and are seasonal, so the durian season is a good time to try them.ST PHOTO: HEDY KHOO

Known for its pronounced bitterness, the S17 durian is not a new cultivar but has risen in popularity among durian lovers in the last three years. ST PHOTO: HEDY KHOO

Madam Siow, who spent $202 on eight Mao Shan Wang durians just a few days earlier, adds: "I love Mao Shan Wang, but it is too costly to eat it all the time ."

Known for its pronounced bitterness, the S17 durian is not a new cultivar but has risen in popularity among durian lovers in the last three years.

The Durian Tree's owner, Mr Andy Kwang, 50, says the S17 he sells is from Bekok in Johor and there, S17 is more popular than Mao Shan Wang among the locals.

While Mao Shan Wang remains the undisputed top choice among durian fans this season, other popular cultivars are the S17, Golden Phoenix and Black Gold - all bitter breeds.

Mr Collin Chee, 52, founder of Spikes of Love, which organises durian appreciation events and is on a mission to build a community of durian lovers, observes that these cultivars became popular in the last three to four years.

He says: "Everyone wants Mao Shan Wang, but the more discerning durian lovers are moving beyond Mao Shan Wang and looking for other cultivars such as Golden Phoenix. There are people who find that they prefer these cultivars to Mao Shan Wang."

Mr Chee notes that the Golden Phoenix is popular among female durian lovers.

The price is on a par with Mao Shan Wang so it is not cheap, but it offers a different experience, he says.

"The seeds are small and a compact durian of about 1kg in size can render up to 20 seeds."

Like Mao Shan Wang, it is also creamy and bitter.

Mr Chee says his sister, aunt and mother always request for Golden Phoenix durians each time the season comes round.

Cultivars such as the Golden Phoenix are not as widely cultivated as Mao Shan Wang and are seasonal, so the durian season is a good time to try them.

Black Gold - a type of Mao Shan Wang grown at high altitudes - offers even more complexity and alcoholic pungency for those who love bitter durians. The prices for Black Gold are currently $21 a kg.

Durian prices can change day to day.

In Thailand, a treasured durian fruit of the kanyao variety - the most expensive in the world - sold for a staggering 1.5 million baht at an auction.

Mr Chee advises customers to try a variety of breeds.

"Eating durians is also about having an open mind. Think of eating durians like wine-tasting. When you have a variety, you can draw comparisons and find out more about what you like."

Durian retailer 99 Old Trees in Owen Road has launched durian-tasting sessions, which are available until Aug 31. The sessions are priced at $48 a person until June 20 and $60 a person after that.

There is only one session a day, which lasts up to an hour and features six types of durians.

The director of 99 Old Trees, Mr Kelvin Tan, 34, says the tasting sessions are aimed at helping consumers understand the unique characteristics of the featured durian cultivars.

Where possible, his sessions may feature unusual cultivars that are not easily available on the market here such as the D135, a creamy sweet durian which he tasted for the first time at the preview of his tasting session.

"Some of these durians that we feature are from the backyards of durian plantation owners and not available for sale," he says.

"There are over 200 durian cultivars from Malaysia. It is interesting to taste different durians and decide for yourself if you like them."

Another durian cultivar that may show up in his tastings, depending on availablity, is the Black Thorn, which is native to Penang and currently enjoying much hype in Malaysia.

Mr Tan says it takes more than 20 hours for durians from Penang to reach Singapore, and the Black Thorn is in such demand in Malaysia that it is difficult to get a regular supply.

He says from now to next week, there will be more Mao Shan Wang durians from Pahang and D13 and D101, which are sweeter varieties, from Johor.

From mid-June to early July, consumers can expect to see more of Golden Phoenix from Johor and D24 from Pahang, while the Mao Shan Wang supply from both states are expected to dip slightly.

Mr Tan reckons that from late July to mid-August, there will be more Mao Shan Wang and D24 from Pahang.

He says: "With the durian season in full swing, this is really the time to taste a variety of durians."

Mr Kelvin Tan, director of durian retailer 99 Old Trees in Owen Road, and Mr Collin Chee, founder of Spikes of Love, which organises durian appreciation events, share tips on how to buy durians:

1. Tell the durian seller your preferences in flavour, texture and size of durian. Do you prefer durians with small seeds or large seeds? Tell him if you want to eat bitter, sweet or bittersweet durians. Or do you prefer a more runny or creamy texture? Let him know if you want a small, medium or large fruit. Small seeds do not necessarily mean the durian is of higher quality.

2 . To sound like a seasoned durian lover, ask where they are from. Generally, durians from Pahang are pricier than those from Johor. Those grown at higher altitudes in Pahang cost more. Durians from old trees of more than 20 to 30 years old are also more expensive.

3 . Check the fruit before buying. Ask the seller to open it up so that you can see the flesh. Some durians may be worm-infested or they may not be evenly ripe. If the durian is tasteless, unripe or worm-infested, ask the seller to change the fruit. Ripe durians should have a knocking sound when you shake it. If you want to check out the aroma, smell the side of the durian, not its base.

4. Check the weight of the durian. This prevents any misunderstanding or argument over the price.

5. Eat durians in sequence. Start with milder-tasting durians like D101 and D13 and save the more intense-tasting ones like Mao Shan Wang for the last. If you start off with the more intense-tasting ones, other durians you taste subsequently will seem bland in comparison.