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AK: Aim to Pay off Home Loan and Hit the Minimum Sum ASAP
Aspire, Thought Leaders | 28 September 2015
Articles (41) Profile

The title of the reader’s email was “CPF Haywire“. So, imagine my trepidation as I clicked on the email.

Hi AK!

I have just bought my first HDB and my Ordinary Account (OA) starts from scratch. I calculated I’d have about 10k in a year.

In order to meet the Minimum Sum (MS) when I turn 55 in 15 years’ time (about $244k if it’s at 3% yearly right?), would you suggest that I transfer a bit (about 10k) from OA to Special Account (SA) every few years for the compounding effect to be greater and still leave some in OA for financing the 30 year loan?

I have about 4 years worth of monthly deductions from the CPF Investment Scheme (principal amount), and this is my backup plan to tap on in case I lose my job.

Like you, I choose to be conservative with my CPF and not take any chances in the stock market. My aim is to finish my loan ASAP and be able to hit the MS for retirement payout.

Would you suggest that I make partial payments every few years to lessen the years of loan or to stretch it out to 30 years?

I am aware of tax reliefs or incentives doing Voluntary Contributions (VC), MS top-up, and contribute to Supplementary Retirement Scheme (SRS), but I am not considering these because I have limited cash on hand.

I have 6 months emergency fund and every month I save some (for holidays, etc) and invest some for dividends (Spore ETF, REITS, etc). It is not much because I started late in life (wish can turn back time to tell my bochap younger years to buck up!) and I’m hoping that I can still ‘fix things’ to ensure I have an okay retirement.

Do you have any advice on what else can I do to improve my financial situation?

Many thanks,


AK’s Reply:


Welcome to my blog. :)

I hope you did not buy an Investment-linked Plan (ILP) from your insurance agent. There is no way to guarantee that you will get back the same amount you put in if you need the money.

I say this because you are looking at it as a backup plan in case you lose your job.

Money in an investment should not be looked upon as money in your emergency fund.

Of course, I will have some other stuff to say about ILPs but you can do a search for these blog posts in my blog.

I shall talk about myself now:

1. Say I have just bought a HDB flat. I want to make sure that I have enough in my OA to service 12 months of mortgage. If I am 40 or older, 24 months would be prudent because it could be more difficult to find a job. The rest of the money I have in my OA, I can transfer to my SA.

2. I bought some investments with my OA money. The money invested could have serviced 48 months of mortgage payment. I should look at possibly liquidating the investment if there is a gain or if it breaks even as my motivation was never to invest with my CPF-OA money. Then, I would have more money to transfer to my SA.

3. If the interest rate on my housing loan is less than 2.5%, it makes sense not to pay down the loan with CPF-OA money as the CPF-OA pays 2.5% in interest. I might want to consider the POSB HDB Home Loan.

4. I might want to contribute to SRS and use the money to invest for income. I will save on income tax and still be able to invest. Have my cake and eat it? Sure.

Best wishes,


AK is a Singaporean stock market investor and a popular blogger. His blog was created with the intention of educating investors and sharing his investing journey with the target of having a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields.

Please click here for more information about this author.

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