TURNING 55 SOON? HERE ARE 3 SIMPLE WAYS TO TURN YOUR CPF INTO A CASH MACHINE
What if your CPF money continues to compound at 4-5% every year and you can withdraw the interests anytime you choose? Yes it is possible using my step by step guide! Hurry, do this before you turn 55!
INTRODUCTION
If you are turning 55 year old soon, congratulations!
It’s time to enjoy the fruit of your labor and years of accumulating wealth in your CPF.
If you have met the Minimum retirement sum in the two CPF accounts - OA and SA, you will be happy to know there are more ways to maximise your CPF.
CPF is a flexible tool and can be a cash generating machine when used properly.
WHAT HAPPENS WHEN YOU TURN 55
You gotta start planning before you turn 55. Remember to follow these steps before this milestone, otherwise it would be too late. And I mean it literally!
On your 55th birthday CPF will create a new account called the Retirement Account (RA) by taking out money from your OA and SA. This is the order it will be done. It will first take all the money from SA. If there is any shortfall, then it will draw from the OA.
Why is it important to know this. Because our GOAL is to ensure it happens the other way! We want CPF to take out most of the money from OA for the RA, even though there is the mandatory $40,000 that must come from SA. But our plan is to only allow the $40,000 from SA and nothing beyond that.
MAGIC OF COMPOUNDING
SA enjoys 4-5% interest per year compared to the 2.5% in OA. Set up SA as a high interest yielding account, hence it makes sense to keep as much money in this account as possible.
You can withdraw the interests from SA any time you choose after turning 55. This is akin to having your own CPF ATM machine.
This is money working harder for you in the SA account instead of the OA.
Remember, always push for that little extra more and this could add up significantly over time!
You can leave the interests in your SA untouched to attract even more interests and allow magic of compounding to work for you!
Step by Step Guide
2. Pledge your property. So that you only need to meet the Basic Retirement Sum in your RA. For eg. if the minimum sum for your cohort is $180,000 then the Basic retirement sum is half of that = $90,000.
This means CPF will withdraw an additional $50,000 from your OA plus the $40,000 from SA to form your Retirement account. You do not need to sell your property to do so, and you can pledge your HDB or private property.
The extra $90,000 remaining in your SA can work harder for you and generate more cash flow for your from 55 onwards. RA money cannot be used and will only start distributing monthly cash flow 10 years later or when you turn 70 years old.
I prefer to have the cash flow start at 55 and decide if I want to use it or not. Flexibility is priceless.
3. Sell your SA investments after you turn 55 so the money flows back into SA to continue to earn the 4-5% interest. Do this as soon as possible before the end of your birthday month as CPF calculate the interest based on the lowest balance at the end of the month.
CONCLUSION
No One Cares About Your Money More Than You.
This step by step guide allows you to keep most of your money in a high interest account and the best part is the flexibility to withdraw the interests from both your SA and OA account any time after 55.
If you are in your 40s or turning 55 soon and struggling to meet your minimum sum or want more strategies to make your CPF work harder for you, subscribe here to be notified of more posts like these.
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