For Singaporeans, getting part of their paycheck deducted into their CPF accounts is a ubiquitous part of life. However, these deductions can be used to pay for a variety of things, ranging from home purchases to medical care and ultimately, your retirement.
However, you can use your CPF accounts to pay for 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 for stamp duty and legal fees
While it's common knowledge that you can use your CPF Ordinary Account to fund your HDB flat purchase, did you know that you can also use your CPF OA to cover the miscellaneous costs of home purchasing?
Stamp duties and legal fees (e.g. conveyancing fees) are two additional expenses you'll be able to cover using your CPF monies. The stamp duty and legal fees will be due when you sign the lease agreement. The stamp duty will be a percentage of the sale price of the flat as seen below:
- First $180,000: 1 per cent
- Next $180,000: 2 per cent
- Next $640,000: 3 per cent
- Remaining: 4 per cent
The conveyancing fee is also based on the purchase price of the flat:
- First $30,000: $0.90/$1,000
- Next $30,000: $0.72/$1,000
- Remaining: $0.60/$1,000
This means that a married couple buying their first 4-room HDB resale flat for the average cost of $450,000 will pay $8,100 in stamp duty fees and $282.60 in conveyancing fees. These fees can be a significant financial burden, so being able to use your CPF OA to offset some of the closing costs can be helpful, especially if you only saved enough funds for the down payment.
However, you should note that if you're buying a completed flat, you will need to pay the stamp duty in cash first and contact the CPF board afterwards to claim the amount from your CPF account.
Furthermore, it's important to note that if you used your CPF money to purchase your flat, you will need to repay what you took out plus interest upon the sale of the house, even if you didn't make a profit.
2. Adult & child vaccinations can be covered using MediSave
Part of your CPF is your MediSave account, which aims to help you pay for various medical expenses including hospitalisation, day surgery and certain types of outpatient medical expenses like vaccinations, chronic disease management and pregnancy costs.
However, you can also use your Medisave for non-emergency and preventative treatments as well, including vaccinations for yourself and your child. For instance, if you are between the ages of 18 and 26, you will be able to use your MediSave account to pay for the flu and HPV vaccines if you go to a MediSave-accredited provider.
If you're pregnant, you'll be able to use MediSave to pay for the Tdap vaccine (Tetanus, reduced diphtheria and acellular pertussis.
While these vaccines cost quite a bit before subsidies, you don't actually have to take hundreds of dollars out of your MediSave account. Depending on the subsidy you qualify for (PG, MG/CHAS Blue/CHAS Orange or CHAS Green/Non-CHAS), your maximum OOP cost will range between $9 to $63.
3. Use your CPF funds for investing
If you are not happy with the interest rates in your CPF Ordinary and Special accounts, you can invest a portion of those funds. This is called the CPF Investment Scheme (CPFIS) and you'll be eligible to invest your funds if you have more than $20,000 in your OA and/or have more than $40,000 in your SA and are not an undischarged bankrupt.
You'll be able to invest up to 35 per cent of your investible funds (equivalent to the sum of your OA balance and the amount you withdrew for investment and education) in stocks and 10 per cent of your investible funds in gold. Some of the investment products you can invest in with your CPF monies are:
- Unit trusts
- Investment-linked insurance products (ILPs)
- Singapore Government Bonds
- Treasury Bills
Note that there are a couple of insurance policies you can pay for using your CPF— endowment policies and ILPs. Some of these policies may require long-term commitment, which means you should know for sure if you want the coverage before purchasing the policy.
Furthermore, you should know that all investments come with risks and you should make sure you understand your risk tolerance and know the length of time you want to invest. To learn more about what you can invest in with the CPFIS scheme, it's recommended to check out the CPF website .
Use your CPF wisely now, to use it freely in the future
Because the funds in your CPF accounts are your hard-earned money, it's tempting to use them throughout your youth to fund necessary purchases. However, the more money you take out of your CPF, the less you may have for retirement.
Because of this, it could be worth considering whether or not you really need to take out the funds before drawing from your OA or MediSave. Instead, you should contribute as much as you can and take out only what you need during emergencies.
You should also be prepared to put that money back so you don't lose on the power of compounding interest. With the continual increase in the cost of living and inflation, your future self will thank you for it.
This article was first published in ValueChampion.