Last week, Dave and I managed to spend sometime together after work. It has been a while since we had these date nights moments, and we had dinner together before attending a seminar.
The seminar we attended was about “Optimising your CPF“. It was organised by BigScribe, a group of personal finance bloggers in Singapore. For that particular session, it was hosted by 3 prominent finance bloggers in Singapore, namely Jacob of Createwealth888, Christopher of Treeofproperity and Dawn of Budgetbabe. I thought this was quite a good mix as they have a millennial, a generation X, and a babyboomer so you can certainly expect quite a wide spectrum of perspectives being shared during the session.
I shall not delve into the gist of the talk as there are many other blogs out there who have covered the content of what was been discussed. (Check out the recap by Investment Moats here.)
Overall, it was an extremely beneficial session and despite attending after a long day at work, Dave and I were all ears and it helps that it was an extremely engaging and interactive session.
However, I thought I would share some of my thoughts about the talk here.
CPF OA-SA transfer
One of the key points which was discussed by all 3 speakers were the OA-SA transfer, which is something that I understand that quite a big pool of Singaporeans have undertaken (including people I know) so as to take advantage of the higher interest rate. However, there’s always that perennial debate of the allocation of funds – how much should I transfer? On one hand, it would be good if we could take advantage of the high interest rate offered in the SA account, but at the same time, that might risk reducing my OA account which can be used for quite a few useful purposes like the housing loan, or if you have kids, perhaps using the money to pay for their education in future. Obviously we have different needs at different segments of our lives and that will also affect our choices.
Cash flow
This part of the talk really sunk into me. Jacob discussed about the various asset classes, whether they do generate cashflow (very similar to what Robert Kiyosaki advocates in Rich Dad, Poor Dad). Basically, Jacob argues that unless that particular asset class is generating cash flow, that’s not a good asset. Case in point, if you have a car, that’s a liability from the start but if you are able to generate money out of it, such as by becoming an uber driver etc. then that’s a cash cow. Similarly, if you have a property that’s worth a million dollars but if it is not generating income for you, it’s pretty useless anyway because it doesn’t generate cash flow. Basically, we want to be in a situation where we are cash rich rather than asset rich.
Housing loan
This was a core part which generated quite a bit of discussion with the audience as well. Should we pay off our housing loan all in one shot, or should we leverage it by putting part of our money in the SA to generate that 4% interest? Pretty similar to the first part on the OA-SA transfer. I guess everyone has differing views on this. It’s good to be debt free. But if you are a savvy investor and know how to leverage, perhaps diversifying your portfolio might be a better option.
CPF as a retirement tool
This is probably the most important takeaway. CPF forms part of our “retirement war chest”. It however, should not be the only mode of retirement. Yes, the CPF is quite a robust system overall but we should never rely on the CPF entirely for our retirement. It should consist of a mixed portfolio, and for many, including Jacob, forms a huge chunk of our retirement funds. Individuals who solely rely on the CPF for retirement will surely find inadequacies in the system.
Conclusion
All in all, the CPF is a system set up to function similar to a pension system in other countries (to a certain extent), although it has its own limitations. Like many, I used to think that the CPF is a terrible system that simply locks up our funds with little flexibility. However, like the old adage goes, if the system seems to be against you, be flexible about it and work out a system such that it works for you instead.
And that certainly seems to be the strategies employed by the bloggers.
After thoughts
This was certainly a very beneficial talk and it definitely sparked some food for thought. After all it’s not everyday that we get to be engaged in smart financial conversations like this and personally, I do not have that many friends interested in the personal finance space (or maybe I didn’t try hard enough). Apparently, Bigscribe does organise other investment talks as well and I’ll be looking forward to attend their future workshops.