Why getting a cheaper home will help grow CPF nest egg

 31 Aug 2014

From PropertyGuru on Yahoo News

Thanks to housing curbs introduced by the government to prevent the housing market from overheating, property prices in Singapore are on a decline. With proper planning, it might just be the right time to get that dream home and still have enough for your CPF retirement nest egg.

We all know that having enough for retirement is a hot button topic these days, what with the increase in the CPF minimum sum and online chatter about how some are disgruntled about the change. But lets face it, everyone wants to retire comfortably. Without adequate funds in ones retirement account, it would be very difficult to achieve that. And because our CPF funds can be used for many other purposes like housing and children's educational needs, it is essential that one plans the use of the funds to accommodate all these.

A great piece of advice for this came from Labour Chief Lim Swee Say, who said that the best way for Singaporeans to prepare for retirement is to use less of the CPF monies prior to retirement. To further elaborate on that point, he said in June this year: So, for every dollar, if you can defer the use of the dollar, it is better to defer the use of the dollar when you are still young. For example, instead of thinking of whether you can spend your CPF savings at the age of 55, I think we should think about how we should help our Singaporeans remain employed, to continue to earn a good living, a good job and at the same time, to continue to contribute to the CPF. So one way to boost the CPF savings is to get a flat on the cheap, leaving more for retirement.

Location is key 

Flats near an MRT station are usually in high demand and they usually come with a higher price tag but there are ways to get the less pricey options and still be accessible to a train station.

Explore the neighbourhood that you want to live in. Check out if the location of the flat that you have in mind is accessible to the station via feeder bus or if there are buses that link that part of the estate to the rest of Singapore. Discover how far it is on foot to the station and if it is an option to incorporate a walk to the station before the commute to work. It is a small way to include some exercise into your daily routine. Sometimes, living too close the MRT station might not be all that advantageous, even if it is more expensive. Residents living too close to MRT viaducts experience train noise from the comings and goings of trains, so as a potential home buyer, you have to consider if that is something you can live with.

Get a smaller flat Most of us grew up in older flats that are generally more spacious, so there might be expectations that we need to have flats that are equivalent or bigger to the ones we have lived in. But with the size of newer flats shrinking, getting a smaller flat might feel like a downgrade, especially for young home buyers. But look at it this way. A smaller flat is always cheaper. Getting a smaller flat, even if home buyers can afford a bigger one in the same area, will ensure a larger retirement fund in the future.

Apply a shorter CPF loan period Take a 25-year loan rather than a 30-year loan on your CPF and make sure you pay it off during the stated loan period. The remaining years that home buyers do not have to service their housing loan, can then be used to build up retirement savings instead.

The writer A. Tan is interested in property as shes currently looking to purchase her first HDB flat.