Why Not Give Us Access to Our Own CPF Special Account in these Special Times?

One day, when my colleague and I were taking the train back after work, my colleague suggested that the CPF should be flexible enough for people to withdraw their money to fund their sabbatical or mini-retirement.

I think that is forward looking.

But I do not think the government will go that far to allow such dynamism in the CPF.

On a very high level, the purpose of CPF is to fund the traditional retirement of those folks in the 2nd quartile of Singapore.

If you have the means, fund the sabbatical or mini-retirement with your surplus from work.

The CPF is probably not ready for such flexibility. It would be ready if the private pension portion is ready. This would allow Singaporeans to voluntarily contribute more of their money into private pension for some tax incentives.

But I wonder why it is not a good idea for the government to let the citizens tap their CPF during this time.

Commerce has come to a standstill. Consumer spending has dropped drastically and investments are probably put on hold. In this year’s National Budget, stimulus aid was announced to help families.

After the National Budget, two more support packages were announced to help businesses and individuals in different areas.

The Singapore reserves have been activated.

We Spend Our Working Lives Building Up Our Own Reserves

Singaporeans have put away about 37% of our gross lifetime salary into our CPF as a form of forced savings.

A lot of us use our CPF Ordinary account to repay our residential mortgages. But our Special account is untouchable and meant for our traditional retirement.

For those who are employed but taking no pay leave, perhaps the government can allow controlled distributions to be made.

1. Maybe allow the disbursement from CPF SA equivalent to one month’s salary for a start.
2. If the lockdown is extended for one more month, let us tap one more month.
3. If you have worked for about 2 years, you should have an equivalent of one month’s salary in your CPF SA.

I think this will be more useful than giving Singaporeans $300 to $900 here and there.

We have a Good Taxation and Payment Infrastructure in Place

Unlike other countries, our government has built up a system where they can make money from us, but also disburse money to us, so process-wise it is not a problem.

In exceptional times like this, you got to ask yourself whether it makes sense that you have saved a bunch of money (in your CPF), and you have no means to get access to it.

The money is for a long term financial goal, but if you cannot live past today, who would have the time to worry about the long term goals?

I think we can all agree that the rules to build wealth is to delay gratify, forgo spending today so that we can meet our goals in the future. This means that giving access to the CPF SA should not be a very frequent thing.

As a general cohort, we might not always make the soundest financial decisions. In times of stress, we make even poorer financial decisions. This is the role of the government.

If you use it strategically, it will also quell the murmurs that our CPF money is not there.

But Access to Funds in CPF Special Account do not Solve The Problem for Everyone

Unfortunately, one of the biggest group affected is self-employed. There is a fairly large group of them who needed to be physically out and about to work. They cannot do that now and this creates a big problem for their cash flow.

They are also the ones who have the option not to contribute to their CPF Ordinary Account and Special Account. So even if the government allows the disbursement from CPF Special Account, they might not have this buffer to use.

For those who are against contributing to the CPF, they could look upon this episode and think there is another valid reason for topping up their CPF SA.

There are a number of people who commented that the CPF is a shifting goal post. It remains to be seen whether they want such a shift in the goal post this way.

Giving to Those Who Do Not Have the Means

Locked down is a strange event for me.

I think it forces some of our habits to change. It is likely when lockdown ends, some of us would do shopping in a different way. A lot of people will be more comfortable ordering from a supermarket online.

For myself, I still prefer the old fashion way by going to the supermarket to buy what I need. It is quite hard to teach an old dog new tricks. And this might be my Achilles heel. For all other things, I am perfectly comfortable doing things online.

Being cooped up at home, I do observe that I am more willing to spend on little online purchases. These purchases are a want and not a need.

It feels that when you are trap at home, you fall into a routine of waking up, eating, working, exercising, you want something to surprise yourself.

Buying something online, and seeing someone dropping things off, not sure what time they will come creates that surprise effect.

We cannot go out and enjoy something that we like to do, so we fill that void with online purchases. At least I think I am in control of my spending but I can envision some of you will only realize what you have done when it is too late.

One online purchase is to donate to those who are in need.

I have a friend on my Facebook who asked for help.

So I donated to Beyond Social Services. Beyond Social Services is a charity dedicated to helping children and youths from less privileged backgrounds break away from the poverty cycle.

The parents in a lot of low-income families worked in jobs that cannot be done remotely. With all these locked down, they lose income. They do not have much cash on the sides (since every dollar is put to use immediately).

The government support seems to have omitted those who are already on ComCare assistance. As they cannot send their kids to school, all these just increases their stress levels.

You can read this Channel News Asia article to get a better picture.

As a recovering saver, donating is not something that comes easily to me.

I can donate my time into coming up with posts to improve peoples financial situation but I realize those posts are not going to reach the people who most needs it.

You could argue that I make an impact to people’s lives at work, but honestly, I spend a large part of my life writing to people with means not without means.

A recovering saver first needs to learn to give money to help without much judgement. So this is helping them as well as helping myself.

But if you ask me, I find it quite difficult to look at the situation of the family in the video above with my rational brain and not judge at all.

One of my former colleague stayed in estates where a lot of families are in need of such help (in pre-COVID-19 times). At one point, his family needed such help as well. He shared that when you are in an environment where you cannot break out of that social cycle, you get consumed in it.

This means that what some will do is to put their family in such a situation that they qualify for these government help.

This is like a programming While Loop where the exit condition is seldom triggered.

This is no different then the difficulty of the sandwich generation to escape the rat race, or move up the social ladder.

They have got more life levers to pull. (A lot probably can be found in my Wealth Foundations series)

But because their friends around them mostly do the same things as them, they do not hit that exit condition from that While Loop as well.

I slowly come round to the idea that the real way to help if you are financially independent is to commit the time I free up to work directly with these people. Whatever I write probably hits the upper 2 quartiles of Singapore.

If you can, do help to donate as well.

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