For Singaporeans, having part of their paychecks deducted from their CPF accounts is an ubiquitous part of their lives. However, these deductions can be used to pay for a wide variety of things, from buying a home to medical care to retirement.
However, you can use your CPF accounts to pay more than just your HDB down payment and retirement needs. You can also use your CPF Ordinary and MediSave accounts to cover other smaller but equally important purchases, including various home purchase fees, vaccinations, and investments.
1. Use CPF Ordinary to pay stamp duty and legal fees
While everyone knows that you can use your CPF Ordinary Account to fund your HDB home purchase, did you know that you can use your CPF OA to cover the other costs of buying your home?
Stamp taxes and legal fees (such as transportation fees) are two additional expenses that your CPF funds can cover. The stamp duty and legal fees are due when the rental agreement is signed. The stamp duty will be a percentage of the sale price of the apartment as shown below:
- The first $ 180,000: 1 percent
- Next $ 180,000: 2 percent
- Next $ 640,000: 3 percent
- Remainder: 4 percent
The agency fee is also based on the purchase price of the apartment:
- First $ 30,000: $ 0.90 / $ 1,000
- Next $ 30,000: $ 0.72 / $ 1,000
- Remaining: $ 0.60 / $ 1000
This means that a couple who buys their first 4-bedroom HDB resale apartment for an average of $ 450,000 will have to pay $ 8,100 in stamp tax and $ 282.60 in agency fees. These fees can be a significant financial burden. So it can be helpful to use your CPF-OA to offset some of the closing costs, especially if you’ve only saved enough money to pay the down payment.
Note, however, that if you buy a completed home, you must first pay stamp duty in cash and then contact the CPF Board to have the amount withdrawn from your CPF account.
In addition, it is important to note that once you have used your CPF money to buy your home, even if you have not made a profit, you will have to repay the amount withdrawn when the home was sold plus interest.
2. Vaccinations for adults and children can be done with MediSave. to be covered
Part of your CPF is your MediSave account, which you can use to pay for various medical expenses, including hospital stays, day surgery, and certain types of outpatient medical expenses such as vaccinations, chronic disease treatment, and pregnancy expenses.
However, you can also use your Medisave for non-emergency and preventative treatments, including vaccinations for you and your child. For example, if you are between 18 and 26 years old, you can use your MediSave account to pay for flu and HPV vaccines when you go to a MediSave accredited provider.
If you are pregnant, you can use MediSave to pay for the Tdap vaccine (tetanus, reduced diphtheria and acellular whooping cough).
Although these vaccines cost quite a bit before subsidies, you don’t have to withdraw hundreds of dollars from your MediSave account. Depending on the grant for which you qualify (PG, MG / CHAS Blue / CHAS Orange or CHAS Green / Non-CHAS), your maximum OOP cost will be between $ 9 and $ 63.
3. Use your CPF funds for investments
If you are not satisfied with the interest rates on your regular and special CPF accounts, you can invest some of these funds. This is known as the CPF Investment Scheme (CPFIS) and you are eligible to invest your money if you have more than $ 20,000 in your OA and / or more than $ 40,000 in your SA and you are not a no-fault bankrupt.
You can put up to 35 percent of your investable funds (equal to the total of your OA balance and the amount withdrawn for investment and education) in stocks and 10 percent of your investable funds in gold. Some of the investment products that you can invest in with your CPF funds are:
- Investment funds
- Investment-Linked Insurance Products (ILPs)
- Singapore government bonds
- Treasury bills
Note that there are a few insurance policies that you can pay for with your CPF – endowment insurance and ILPs. Some of these policies may require a long term commitment, which means that you should be sure you want the coverage before purchasing the policy.
In addition, you should know that all investments involve risk, and you should make sure that you understand your risk tolerance and the length of time you want to invest. To learn more about what to invest in with the CPFIS program, it is recommended that you visit the CPF website.
Use your CPF wisely now for free future use
Since the funds in your CPF accounts are your hard earned cash, it is tempting to use them throughout your teenage years to fund necessary purchases. However, the more money you take out of your CPF, the less you may have to retire.
Because of this, it might be worth considering whether you really need to withdraw the funds before withdrawing from your OA or MediSave. Instead, you should contribute as much as you can and only take what you need with you in an emergency.
You should also be willing to put that money aside so you don’t lose the power of compound interest. With the cost of living and inflation rising all the time, your future self will thank you.
ALSO READ: Should You Pay Your HDB Deposit With Cash or CPF?
This article was first published in ValueChampion.