CPF investing: Why aren't we growing our wealth?
Endowus Insights

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CPF investing: Why aren't we growing our wealth?

Jun 2022
Apr 2020

Imagine that your gross salary is $3,000. You contribute to CPF, give a portion to your parents, pay for the household expenses and other expenses. As a responsible adult, you try very hard to cut down on your expenses, work hard to bring home the dough, but you realise there is only so much you can save.

What if you have an additional $1,110, of which $690 can be invested in the equity and bond markets for your retirement, earning a higher return for your retirement?

This $690 that I am talking about is not imaginary: it is CPF, arguably the most neglected part of our net worth.

Why do we not think of investing our CPF?

chart of our salary and CPF contributions

Forget about CPF investing - as Singaporeans, we are conditioned to not treat CPF monies as part a of our wealth. From the very first paycheck we receive as an employee, 20% of our gross salary is automatically deducted. Along with the 17% employer contribution, 37% of our gross salary goes into our CPF. Within certain thresholds, any pay increment, any bonuses will be subjected to CPF contributions. We do not have the opt-out option for CPF monies. As such, we don't feel like we "own" our CPF monies.

Using CPF for housing vs investing our CPF

The first tangible use of our CPF OA balance is housing. As we deliberate purchasing our first home, we start to realise how much money we need, even if it's just for the downpayment - if you intend to get a bank loan, 5% of the purchase price has to be in cash, with another 20% of it to be made in either cash, CPF, or a mixture of both. A very modest $500,000 resale HDB will require at least $25,000 in cash for downpayment if you were to take a bank loan. We could also choose to take up a HDB loan.

Since most of us can't afford to pay off our first home using cash, we are forced to look at our CPF balances.Our CPF OA monies, a sum of monies that was previously distant, unaccessible and irrelevant to our daily life, can be used to pay for the brick and mortar that make our home.

Read more: A guide to using your CPF to buy a house (Endowus Insights)

However, if we do not or are not planning to use it for housing, then shouldn't we try to get higher returns for it through CPF investments?

Growing your CPF monies by investments

You can get $1.3 million in your CPF OA at the age of 55, just by investing your CPF OA monies, even with a starting salary of $3,000.

graph of Growing your CPF monies by investments

The above chart is based on the assumption that you start work at 25, with a monthly pay of $3,000 with 4% annual pay increment.

Even though our CPF OA account has grown by $230,000 compared to our OA contributions, we can still do more with the money, such as doing the CPF OA to SA transfer to maximise returns, or taking risk and investing in the equities market (7% returns assumed here).

As there is a limit to how much CPF monies we can transfer to our SA, the incremental benefit when we do the OA to SA transfer is limited, at an additional $100,000. This pales in comparison to what we can achieve when we investing our CPF, with risk.

Risk of CPF Investment Scheme

There is definitely risk with CPF investing through the CPF Investment Scheme (CFPIS). The short-term price volatility involved in CPF investing matters a lot less than that with cash investments. We can frame it like buying a house that we are staying in - as long as we are confident that long-term property prices will appreciate, and that we cannot use the money in the short term, then there is no point tracking and actively managing that money.

With cash investing, you have a hundred and one other things you can do with the cash if you don't invest; for CPF, you can only use a significant sum of the money for housing. In that sense, it is easier to hold and stay invested for the long-term to secure your retirement.

Final thoughts

Our CPF is ultimately a part of our wealth, even though we may not feel it. Every night we slog at work and every promotion and bonus we fight for, a sizeable chunk of it is passed on to CPF. What is in our CPF is our money, and we should evaluate how it should serve our lives better. As we can only withdraw CPF monies when we turn 55, inevitably CPF monies are best used for wealth accumulation and retirement purposes, even though there is an opportunity cost involved.

Now that we have established that investing CPF money has a meaningful impact to retirement, let us look at how best to maximise our chances of beating the 2.5% OA rates, or you can head on to our Youtube webinar as we speak to our viewers on how to maximise your CPF monies.


Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

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