CPF Accrued Interest Understand It To Better Grow Your Wealth Now

Updated : Nov 20, 2019 in Articles

CPF Accrued Interest Understand It To Better Grow Your Wealth Now


this video you’ll learn all about the
CPF accrued interest how it affects you and what you can do about it and before
we tackle the main issue of what is the CPF accrued interest we must first
find out how CPF works with our funds so when we are under employment
our employers and ourselves we contribute a portion of our income into
our CPF accounts which will be distributed into our ordinary account
special account and our medisave account of course we can choose to top
our CPF accounts voluntarily and an important tip if we choose to top-up
voluntarily it’s always best to top-up at the end of
the month because CPF will look at the account balance at the end of the month
and then they will granted the interest so our monies in our CPF accounts are
invested by the government into the special Singapore government securities
which is guaranteed by our government which in turn CPF will give us an
interest back into our CPF account so to sum it up in total as long as our CPF
monies are in the CPF account CPF will give us an interest on the account
balance on a month-to-month basis so what is the main key reason why the CPF give
us an interest on our account balance it is because the CPF main use is for
retirement and the government wants us to have a good and healthy retirement
balance at the end when we comes to our retirement age now that we have covered
what is the main use of CPF and how CPF works with our monies we can now cover
what is CPF accrued interest you see when we use CPF it’s mainly not for just
retirement in fact we can use our CPF monies for many other things such as
down payment for our housing and we can use it to get a investment linked fund or even education and many more so when we check out our CPF monies from our CPF
accounts for any other uses it starts to incur accrued interest so
this CPF accrued interest it is exactly the amount of interest that CPF
will give you if the monies are still kept in the account so let me give you a
simple case study right now for instance let’s say mr. tan has purchased a five
room HDB flat and he has used three hundred thousand of his CPF monies okay
to fund this house at the same time he has taken a eighty thousand housing grant so
this amount effectively is out of his CPF account so when it comes to the time
when he sells away the house this amount of money would have incurred an interest
over a period of time so for example if the money is out of his account for five
years there will be an accrued interest based on the five years it is more than
five years let’s say ten years or twenty years the accrued interest will be based
on the period of time the money is out of his account and it will be compounded and
when he sells his house this money CPF that he used on top of that there is an accrued interest will be added to subtract out from the sales proceeds and
as a result his cash proceeds will be lesser so let me give you a simple
analogy imagine you have many fishes you deposit these fishes into CPF. CPF will
feed your fishes over time and ensure that your fishes grow well so one day we
decide we want to take out the fishes what happens CPF stops feeding your
fishes and what happens the responsibility of feeding the fishes now
lies with us we have to ensure that we feed the fish so whatever investment
housing that we choose to use our CPF for we must ensure that it is enough to
cover the accrued interest because we are already losing out on the part where by
CPF is giving out the interest that are supposedly to be in our CPF account but the thing here is we are not talking about fishes we
are talking about your retirement money and how important that is so knowing all
this right now what can you do about it number one don’t be contented if you
have cleared your bank loan or HDB loan mainly using CPF because your
CPF accrued interest will continue to stack up what you can do is you can
slowly redeem the CPF money that you have taken off your account and start to
redeem it back into your account so that it starts to work hard for you so that
CPF starts to give you an interest on top of the balance that you have
redeemed back into your account number number two when you’re servicing your housing
loan use a mixture of cash and CPF so that the amount of CPF that you use
reduce and when that happens you will have a better CPF account balance so CPF
will give you a better interest because you have a better account balance and
when the time comes for your retirement because you have been working hard
servicing your loan using cash and some CPF you will have a stronger CPF
retirement account number three whatever you use our CPF moneys for
make sure the instrument housing be it housing be it investment linked funds make
sure it out performs the interest the CPF gives so let’s imagine now we are
holding a property or investment linked fund and the prices are stagnant over
the last 10 20 years the question now is will the accrued interest remain
stagnant or will it continue to compound and compound of course the accrued
interest will continue to increase and increase so if I have a question for you
now do you want more cash proceeds or do you want more CPF proceeds so if your
answer is cash proceeds you are only half correct
because a Singaporeans the correct answer will be I want more cash proceeds as well as CPF proceeds so the key here is how do we make our CPF monies work hard for
us so that we have a strong cash proceeds and a CPF proceeds but that will be in
the video for another time so I hope this video is helpful to you if you want
more of tthis type of stuff content like subscribe and turn on notifications of course if
you want to find out more about whether your property prices is stagnant and how
to free up your CPF and what you can do next look in the description box and
contact me see you

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