Learn from Singapore government on how to use your CPF monies

The recent article by Dollar And Sense on how you can build one million dollar wealth using CPF by 65 certainly created a storm among netizens. While I do not dispute that this feat is definitely achievable, such an article does not paint a holistic picture and probably created plenty of false hopes to those who just started their financial journey. Let me share my insights in this article and how you should learn from Singapore government on how to use your CPF monies.

To put things into perspective, the author, Timothy Ho, is the founder of Dollar And Sense. Being an entrepreneur, it is unlikely that he contributes to his Ordinary Account. I may be wrong on this point and if so, I stand corrected. Therefore, when he encouraged readers not to use CPF monies to finance properties, he is probably speaking from his own experiences.

Okay fair enough, there are thousands of self-employees like Timothy who don’t have much CPF savings. Just think of taxi drivers, entrepreneurs and hawkers. But hey, the article was on how to build one million wealth with CPF right? Thus, what I am advocating now is managing your CPF monies to build a sustainable wealth.



In his article, Timothy claimed that there is a heavy opportunity cost when you use your OA to pay for your home because you “no longer earn the interest of 2.5% to 4% on the money”. Well this is only the half-truth because you actually still earn the interest of 2.5% to 4%. Yes, I am serious. You think you can get away with it by using CPF monies to finance your house? Not a chance. The CPF Board tracks every penny you take out from your CPF accounts. Everything is computerized and there is no way you can beat the system.

The amount will be accrued on daily basis until the day you sell your house, upon which you need to refund all the CPF monies used to finance your house, along with all the accrued CPF interests. Henceforth, there is no lost love or lost opportunity or whatsoever.

Of course, the perennial argument is that you should not touch your CPF OA for housing, investment or education purposes because it is meant to fund your retirement needs. Well, indeed this is the policy intent.

In reality, if you play the game right, property and stock investments can enable you to build up your CPF monies to a whole new level. But to achieve this, you must adopt a growth mindset and refrain from having a fixed mindset that you should leave your CPF monies untouched and let it accumulates to one million dollars. With property and stock investments, you can possibly build more than one million in your CPF OA before 65.

Growth mindset

To grow wealth, it is important to have a growth mindset. CPF monies belongs to you and is meant to fund your retirement needs. But how you managed your CPF monies in the course of your journey would impact the kind of lifestyle you can lead in your twilight age. Fundamentally, one should be realistic enough to expect that their CPF OA would be used to fund property purchases and children’s tertiary education. This is called forward thinking, and not regressive.

Having a growth mindset means that you learn new ways of building wealth. The process does not guarantee success, but along the way, you learn how to buy property and pick the winning stocks. It is true that the CPF interest rate is risk-free and you may accumulate one million if you don’t use it for housing purposes. But if you have such fixed mentality, you don’t gain new skill or knowledge.

At the national level, learn from Singapore government on how it manages and grows the country’s reserves. After all, the government has a battalion of brilliant scholars, so if you adopt the best practices, you are unlikely to fail. Remember, if you cannot beat the system, learn from the system.

Learn how to manage CPF monies

Do you know how much national reserves we have? Nobody, except the key political holders know the answer. But one thing that everybody should know is that the rules are rigorous enough to make it extremely difficult for the government to drawdown from past reserves. The intention is to preserve our reserves. After all, being a small nation with no natural reserves, our reserves constitute a very strategic pool of resource that we can fall back on during good times and bad times.

Many of us would imagine our reserves is that of a traditional vault with a mountain of cash piles. However, Singapore government actively manage our past reserves through four main approaches.


Firstly, Temasek Holdings, which is a sovereign wealth fund with focus on equity, is formed to generate sustainable returns on our reserves. Temasek Holdings’ investment style is value-oriented. This means that it invests in companies whose value is overlooked by market, or those distressed entities with potential to recover. This is the type of investment style that I favour and has been advocating. In fact, through the years, Temasek Holdings had invested in many stocks like Olam which turned out to be very shrewd investments.

Secondly, the government places deposits with Monetary Authority of Singapore (MAS), a statutory board that set policies and also owns the assets on its balance sheet. Being a central bank, MAS is very conservative in its investment approach, with a significant proportion of its portfolio invested in liquid financial market instruments.

Thirdly, another sovereign wealth fund, GIC, is formed to have a globally diversified asset portfolio. GIC is known to focus its investment in various real estate projects like Sheraton Grande Tokyo Bay Hotel, Shinjuku Maynds Tower and many more in other countries.

Last but not least, the government is smart enough to know that fiat currency has decreasing purchasing power. Therefore, it has transformed part of our Past Reserves from one form (financial assets) to another (State land) through land-related projects such as land reclamation as well as land acquisition projects like Selective En-bloc Redevelopment Scheme (SERS). As a small country, land is sacred to our economic survival. In using some of our Past Reserves to expand our land, we are actually preserving the value of our reserves. When such land or space is subsequently sold, the proceeds accrue fully to Past Reserves.

Learn to strategize

Now that you have learned how our government manages our country’s reserves, there are a few important lessons to be learned. Although you would not have multi-billion dollars to manage, nobody says you cannot start small and grow your CPF to multi-million level. What you can aspire to do is to build a diversified portfolio spanning across different asset classes like what Singapore government does.

GIC invests heavily in physical assets like real estate in global cities while SERS renews aging HDB flats to new ones. Likewise, you should convert part of your CPF monies to hard assets like properties. Over the long run, due to land scarcity in Singapore, the value of real estate will likely to rise. This has been the case for the past 30 years. In view of this, real estate is considered to be an appreciating asset in the long run. However, the same cannot be said for your CPF monies.

For many of you, one million is a lot of money. However, in 30 years, this amount may not be significant because of inflation. Due to the decreasing purchasing power of money, the one million in your CPF account may not be sufficient for you to lead the kind of retirement lifestyle you desired. This is the fundamental truth of fiat currency and this could be the underlying reason for the diversification of our national reserves.

If you think I am spreading fear, just recall about the increased income tax, 30% hike in utility bill and the impending tax increase. Going forward, the cost of living will go up significantly, not down. Thus, you think one million is enough for you to retire comfortably in 30 years? Think again.

To grow your CPF monies, consider also to invest in shares that yield dividends above the CPF interest rate. Yes, although the 2.5% risk-free interest rate is indeed attractive, that are many blue chips that reward investors with dividends much higher than that. In addition to that, if the share price appreciated in value, your CPF monies will also increase significantly.

SG Wealth Builder Membership

In life, nobody owes you a living and you owe it to yourself to carve out your financial destiny. This is especially important when it comes to building wealth because if you made one mistake, it could potentially set you back for many years.

The article by Dollar And Sense may be written with good intentions but time has changed. To reach your retirement goals, you need to adopt risk-management in your approach. Indeed, there are many ways to skin a cat but you must have a mentality that there are trade-offs to be made. There are, of course, no easy paths when it comes to building wealth. In this blog, I have shared numerous strategies on how to build wealth. Below is a list of articles that is protected. To access them, you need to sign up as members of SG Wealth Builder.

The Dark Side of CPF Withdrawal Limit

Devastating HDB Loan and CPF Accrued Interest

99-to-1 Tenancy-in-Common

Managing your CPF proceeds from the sale of HDB flat to build your wealth

There is nothing wrong with the CPF rules but most Singaporeans fumble in their wealth journey because they don’t strategize enough. Having a good cash flow is important for wealth builders, especially during downturns. It is always good to have cash on hand because you never know when you may be retrenched. Don’t be so anxious to use up all your CPF savings to settle your housing loans nor should you use any cash to finance your housing loan. There are ways to finance your house and at the same time build up your liquid cash. These ideas have been shared in my blog for several years.

I hope readers find the above article useful. Over in SG Wealth Builder, I have been trying to build a community of investors. It is in this spirit that I recently launched a beta version of SG Wealth Builder Membership. My aim is to share knowledge on the proper way to build wealth.

Thus far, responses from readers had been very encouraging. Going forward, I will be locking up articles in this blog and make them exclusive for members only. Henceforth, I hope readers can continue to show support for this project by subscribing as members through the following plans:

Monthly Payment, Recurring Plan For less than $1.00 a day, members get to access all the articles by paying monthly fee of $19.99.

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Magically yours,

SG Wealth Builder


2 thoughts on “Learn from Singapore government on how to use your CPF monies

  • December 22, 2017 at 12:39 pm

    I read articles and even saw a video by a CPF member on using CPF to grow a million by 65. Highly possible, mathematically.

    I’m not trying to defend Timothy Ho’s position. It has its merits. It is actually about choices and comfort level( can sleep well or not) and other reasons. Say one moves the bulk of his CPF money from OA to SA regulars to acquire the guaranteed 4-5% from a Triple A institution as against investing and acquiring 5-7% from ETF, 6-9% from REITs or even more than 10% from growth stocks. It’s all about risk management.

    Tell me how confident can anyone get such consistent returns for 40years ( from age 25 to 65)? Markets moves up and down?. Sure, generally upward trending. If one is unlucky enough, a major downtrend happens close to your 65y.o, you are done for. Poor timing? Wrong Sector?Most retail investors may not have the temperament even they may be knowledgeable, to deal with the market volatility. CPF has published figures that majority of CPF investors are better off if they leave their money in CPF instead of investing. Everyone of them think they can beat the market!

    If one has great knowledge of the market, why then not all economic professors are millionaires? And you? But if one stays with CPF 4-5%, I’m guaranteed my million. It’s a matter of choice.

  • December 23, 2017 at 12:29 am

    I agree with Fred. Just have at least a roof over your head, if possible, invest in a property for inflation hedge (or legacy to your children if your retirement plans are smooth). Leave equity portion as proxied by your CPF. I would not touch alternative assets unless i have spare cash.

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