Is CPF-OA earning 2.5% p.a. interest good enough?

 Sharing: Would you invest in CPF OA for mere 2.5%?


1. From next year 2025, those aged 55 yo or above will have their SA account closed and their SA balance will be transferred to OA.

2. By age 55, unless you hack your SA previously to use your OA or Cash to meet the FRS limit for RA account, your SA balance (after zooped to form RA account upon aged 55), maybe left with $100k+- nett).

3. Of course, there will be peoples who are unable or not choose to even meet RA FRS limit.

4.  For me, this SA account closing is a good news for the "good mental":
* It stops SA hacking.
* It makes CPF OA/SA withdrawal easier.  No need to be bothered with order of withdrawal amount in order that the CPF SA balances are not reduced.
* It makes using OA investment easier.  Any dividend or OA interest made can be withdrawn as retirement passive income tap.
* It succumbs many to withdraw their OA balance to buy:
** Insurance annuity that:
- offers "capital guarantee upon death"
- offers much higher annual interest payout than mere OA 2.5%. Some even projected 4~10% interest payout.

I think there are 3 broad classes of insurance annuity (with capital guaranteed or appreciation) to choose:
- (indexed) Universal Life UL
- Leveraged or non-leveraged "pseudo annuity" product such as GE PLG/PLR, AIA Wealth Legacy or Pro-Achiever, Prud PVA.

** Stocks (local or foreign) or even cryptos that gain better returns, such as:
- Local or foreign banks or Reits that pays 4% ~ 10% p.a., with capital appreciation possibility, (depending on price entry.)

** Days of high interest T-bills or Bonds are over or not.

~~~

My takeaway:
1. With insurance companies, such as GE buying back by OCBC or Income selling to Allianz, speaks volume of the future head-wind. 

Surely one may say insurance company buy-sell is a common practice,  But it should not happen to local GE or INCOME.

2. I may be interested to "Time In Market" buy:
- those iUL which invest in S&P500 funds.  (Buy when S&P500 tanks or Depressionn or Recession).
- those local or foreign banks stocks
- local top-3 Reits or its ETFs.

3. For now, keeping in OA as standby funds to await "Time The Market" for good stock picks.

4. Of course, for the risk-aversed or contented, keeping in OA, max BHS or ERS is still a safe option.  Perhaps a working retired couple may enjoy $10k p.m. just from CPF alone. Possible or should be? .. allowing moderate retirement lifestyle.

5.  Just don't forget to topup our annual SRS for Tax relief & invest it.   This is a good Income Tap too for retirement days.

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