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Friday, September 28, 2012

CPF - Accrued Interest

If you have a good understanding of CPF, you will know that CPF functions as "saving for old days". Some interprets CPF as "money locked by government" but it is a wrong understanding. Apparently Singapore government policy is to have its citizen/resident to take care of himself/herself when they grow old. This will saves budget for supporting old citizens/residents. In returns, the personal income tax is rather low here in Singapore. You can refer to Wikipedia if you are interested on this information.

In order for this policy to be effective, the government has to "force" its residents to save. You can blame it to those undisciplined residents if you are not happy with CPF.

Back to today's topic.

Do you know that the money you withdrew from CPF for housing is subjected to interest? No, it is not that the government is cruel but this policy is to prevent residents to spend unnecessarily (or abuse the system) because you only need to return the "accrued interest" if you sell your house before 55 yo by the % of the money you withdrew from CPF.

The calculation of accrued interest in rather complicated for laymen but the CPF portal has calculated for you. It is under My Statement >> Property > Accrued Interest.

Anyway, you probably can make some bucks if you invest smartly with such low interest rate period. However, it is advisable to calculate your risk of your property investment carefully. If you read about what I wrote somewhere here before, you know sometimes it is not good to speculate on property without calculated risk.

I hope you understand what is Accrued Interest and spend your CPF money wisely.
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