CPF Special Account Balance | Benefits of Increasing CPF Special Account Balance

Investment | Loans
by Priyadarshini 10 November 2022

The Benefits of Increasing CPF Special Account Balance. There are several advantages to relying on your SA to reach your first million dollars. They are as follows:

  • Earn a higher interest rate than inflation.
  • Enjoy a consistent absolute return.
  • Creditor protection CPF Special Account can be used to invest.

Benefits of Increasing CPF Special Account Balance

Earn a higher interest rate than inflation

A retirement fund must outperform inflation in order to be viable. This is usually 3% for Singapore and most developed countries (for reasons we won’t go into here, central banks work hard to keep inflation in this range). This means that your retirement fund, like your SA, should receive at least 5% per year. There are plenty of other investment options available, but an insurance policy averaging four percent or Singapore Savings Bonds averaging two to three percent don’t cut it.

Enjoy a consistent absolute return

If you use mutual funds or Exchange Traded Funds (ETFs), your returns will fluctuate depending on the index to which they are linked.
All of this should balance out in the long run. However, there’s always the possibility that you’ll be one of the unlucky investors who have more bad years than good. It is unlikely, but it is possible.

The CPF has the advantage of providing absolute returns. If the SA interest rate is 5%, you will receive 5% regardless of how well or poorly Singapore performs.

Creditor protection – Benefits of Increasing CPF Special Account Balance

Even if you declare bankruptcy, your creditors will not be able to take money from your CPF. For most people, this isn’t a big deal (most of us never reach that stage). This is critical if you are a stay-at-home Forex trader or a business or start-up owner.

CPF Special Accounts can be used to make investments

Savings in your CPF SA, above the minimum balance of S$40,000, can be used to invest in any of the approved investment schemes listed below through the CPF Investment Scheme (CPFIS). But, before you do, make sure you can get the same or better returns on your SA account than the maximum 5% interest rate. Also, any profits are reinvested in your SA account, which you can only withdraw at the age of 55.

Insurance | Credit Cards | Loans | Banking |

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