Here are 6 strategies to maximise your CPF account

For almost all Singaporean employees, you contribute 20% every month to your CPF account for every dollar you earn. Your employer contributes an additional 17%, which makes the total CPF contribution rate a whopping 37% (subject to the CPF contribution cap of $6,000 of your monthly salary). This is a significant amount of forced savings every month that goes into your CPF accounts, and it's important to know what you can do with it.

While CPF contributions are primarily meant for you to accumulate enough money to enjoy your retirement, there are a few ways to withdraw your CPF monies and use them prior to retirement if you need the extra money.

However, before using these balances, you also need to consider that the funds sitting in your CPF accounts earn an annual interest of anywhere between 2.5% per annum (p.a.) for your Ordinary Account ("OA"), to 4.08% p.a. for your Special Account ("SA"), and up to 6.08% p.a. for your Retirement Account ("RA"). Note that from 1 April to 30 June 2024, the interest rates for the OA, SA, and RA will be 4.05% p.a..

1. Buy a home

The most common use of CPF monies is to buy a home. Your CPF OA monies can be used to pay for the downpayment of a HDB or private property, as well as your monthly mortgage payments.

One interesting "trade-off" is that when you sell your property, you'll need to return the amount taken from your CPF with the accrued interest. The accrued interest will be the 2.5% interest, or whatever was the prevailing interest rate when you used your CPF, that would have been earned if you didn't use the CPF monies to pay off the loan or property. This is to ensure that you have enough money squirrelled away in your CPF for your retirement.

2. Pay for medical bills

With your CPF MediSave Account (CPF M), you can also pay for medical bills for yourself and your immediate family members at all public healthcare institutions, and approved private hospitals and medical institutions.

You can use your MA balances to pay for bills including inpatient hospitalisation, approved day surgeries, rehabilitative care, approved chronic conditions, and so on (see the full list here).

There are withdrawal limits for each type of treatment, which are typically able to cover for treatment in B2 or C class wards. If you opt for higher-class wards or private hospitals, you will need to fork out a portion of the bill in cash.

3. Pay for insurance premiums

You can also use your CPF accounts to pay for certain insurance plans.

Your OA balances can be used to pay for insurance premiums on your Dependant's Protection Scheme (DPS) and Home Protection Scheme (HPS).

The DPS is an opt-out low cost term insurance covering CPF members for a maximum sum assured of $70,000 up to age 65. Payouts will be made to insured members and their families should the insured member pass away, suffer from terminal illness or total permanent disability.

The HPS is a mortgage-reducing insurance protecting CPF members and their families against losing their HDB flat in the event of death, terminal illness or total permanent disability, up to age 65 or when the housing loans are paid up (whichever is earlier). You have to be insured under HPS if you are using your CPF savings to pay for your monthly mortgage. Do note that this insurance only applies to HDB flats, and not for private properties.

You can also use your MA balances to pay MediShield Life premiums, as well as a portion of your Integrated Shield Plan (IP) premiums, up to $300 (for those 40 and younger), $600 (for those between 41 and 70) or $900 (for those 71 and above). You can also use your MA balances to pay for the current ElderShield (and future CareShield Life) premiums.

MediShield Life is a basic national health insurance plan, which helps to pay for large hospital bills and selected costly outpatient treatments. ISPs are additional private insurance coverage allowing you to opt for treatment in higher class wards or private hospitals.

ElderShield and CareShield Life are severe disability insurance schemes which provide basic financial protection for those who require long-term care.

4. Invest and grow your assets

Under the CPF Investment Scheme (CPFIS), you can invest your OA balances (above the first $20,000) and SA balances (above the first $40,000) in shares, bonds, mutual funds, investment-linked policies, annuities and gold. There is a 35% and 10% cap on your investible savings that can be invested into shares and gold respectively.

5. Pay for education

Under the CPF Education Scheme, you can use your OA savings to pay for your own, children's or spouse's educational needs via a loan scheme. Only full-time subsidised courses at Approved Educational Institutions (AEIs) are covered under this scheme.

This means you would need to start repaying the principal amount withdrawn and accrued interest in cash to your CPF account, one year after graduation or termination of studies whichever is earlier.

6. Transfer your CPF balances to your loved ones' Special or Retirement Account

Finally, you can also choose to transfer your CPF savings to your loved ones' CPF accounts.

Under the Retirement Sum Topping-Up Scheme, you can transfer your OA balances to your own or your loved ones' Special Account (SA) or Retirement Account (RA). You can transfer, up to the Full Retirement Sum (FRS), to your own or your loved ones' SA (for those under 55) and, up to the Enhanced Retirement Sum (ERS), to your own or your loved ones' RA (for those 55 and above).

You can make CPF transfers to yourself, your spouse, parents, parents-in-law, grandparents, grandparents-in-law and siblings. But you will not be able to transfer your CPF savings to your children. This can help build up retirement savings, given the interest rates of 4.08% p.a. for SA and RA savings, which will drop to 4.05% from April to June 2024.

There is also an extra 1% interest on the first $60,000 of combined CPF balances, so if your loved ones have CPF savings below this limit, the top-ups would compound at an even higher interest rate.

Do note that CPF top-ups are irreversible, and cannot be refunded.

Ready to get your CPF working for you? Invest your CPF by getting started with Endowus today.

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