Still Using CPF for T-Bills? Here’s What I’m Doing Instead

Summary

In this video, the speaker discusses strategies for managing CPF OA funds amidst declining interest rates. With T-Bill rates dropping to as low as 3.13%, the speaker advises caution when investing in T-Bills, as the additional interest may not offset the loss of CPF OA's 2.5% interest for several months. Alternatives include upgrading property, transferring to the CPF SA for higher interest, or investing in long-term options like the newly approved CPF Investment Scheme funds for global diversification. The speaker emphasizes the importance of considering personal financial goals and risk tolerance before making decisions.

Takeaways

• 📉 The speaker discusses the diminishing attractiveness of CPF OA funds due to declining T-Bill (TB) interest rates.
• 🔔 The speaker emphasizes the importance of staying updated with timely financial news, suggesting subscribing to a Telegram channel for notifications.
• 💡 For new investments from CPF OA into T-Bills, the speaker advises to consider the loss of CPF interest for the month of withdrawal and the month of crediting back.
• 🏠 The speaker considers using CPF OA funds for property upgrades, given lower interest rates and the potential for increased property value.
• 💼 The speaker works at Provident and shares information about new investment funds approved for CPF, which can be used for long-term investments.
• 💰 The speaker explains the concept of ACR (Additional CPF Interest) and clarifies that it is not a disadvantage as some might think.
• 🏦 The speaker suggests that CPF OA funds can serve as a backup reserve for mortgage payments, providing a safety net in case of financial difficulties.
• 🔄 The speaker discusses the option of transferring CPF OA funds to the Special Account (SA) for higher interest rates, but cautions that this is not reversible and is meant for retirement.
• 💵 The speaker mentions the tax relief benefits of cash top-ups to the CPF SA and how it might be a preferred option over transferring CPF OA funds to SA.
• ✅ The speaker outlines personal financial strategies, including using CPF OA for property purchases and considering long-term investments for excess funds.

Q & A

What is the current trend in TBS rates mentioned in the script?

The TBS rates are currently dipping, with the latest TB rate at 3.13% per annum, and it is expected to continue sliding further.

Why is it important to subscribe to the telegram and turn on notifications according to the script?

Subscribing to the telegram and turning on notifications ensures that one does not miss time-sensitive updates regarding financial matters, like the closure of SSBs.

How does withdrawing money from CPF OA affect the interest earned in that month?

Withdrawing money from CPF OA means that the withdrawn amount will not earn interest for the entire month of withdrawal.

What is the impact of investing in a six-month TB for the first time on CPF OA interest?

Investing in a six-month TB for the first time results in the loss of 7 months of CPF OA's 2.5% per annum interest due to the timing of fund deduction and crediting back.

What is the minimum TB rate needed to make sense of investing in a TB that matures in April, considering the interest loss?

The TB needs to have a cut-off view of at least 3.33% per annum to compensate for the 8 months of CPF interest lost when the funds are deducted and matured across September to April.

What are the additional costs to consider when investing in T-bills?

There are bank charges such as a $2.50 transaction cost and a $2 quarterly charge to consider when investing in T-bills.

How does rolling over a maturing TB affect the interest from CPF OA funds?

Rolling over a maturing TB does not significantly affect the interest from CPF OA funds if the funds are invested into a new TB within the same month.

What is the advantage of using CPF OA to pay for property?

Using CPF OA to pay for property allows one to earn ACR (Central Provident Fund interest), which is considered a good thing despite some misconceptions.

Why might someone choose to transfer their CPF OA funds to their Special Account?

Transferring CPF OA funds to the Special Account can earn higher interest rates, as the Special Account typically has a higher interest rate compared to the Ordinary Account.

What are the potential long-term investment options for CPF OA funds mentioned in the script?

CPF OA funds can be invested in the CPF Investment Scheme, which allows for investment in unit trusts, exchange-traded funds, certain insurance policies, shares, corporate bonds, and other approved investments.

What is the speaker's personal preference for managing CPF OA funds given the current low TBS rates?

The speaker prefers not to use CPF OA funds for TBS due to the low rates and plans to use the funds for a new apartment and as a backup for mortgage payments. Any excess funds may be invested for the long term.