How to use your CPF as a bond in your asset allocation when you retire

Frequent readers would know that Mickey J doesn’t like to spend a lot of time making investment decisions and prefer to keep things simple. When I wrote my recent article on creating a multi-asset retirement portfolio with a decumulation investment strategy, I had to do a lot of research on the topic in the process. I found that it takes a lot of work to build a multi-asset portfolio and require a variety of expertises across the different asset classes in order to build a portfolio that is tailored to my needs.

It’s going to be too much work for little old me after I retire.

To keep things simple, I’m going to make use of my CPF account as the bond portion of my retirement portfolio.

Before you read on, you need to understand that I’m writing this article based on my current circumstances:

  1. I do not intend to sell my 3-room HDB flat, even after I retire.
  2. I did not receive any grants from HDB in my property purchase.
  3. I am paying my monthly mortgage with funds in my CPF Ordinary Account.
  4. I’ve planned my financial independence strategy and have been on this journey for a number of years.
  5. I am making retirement plans way ahead of time by reaching Full Retirement Sum within the next few years.

For those who are still making signs, intending to head to Hong Lim Park to protest for the return of their CPF monies, you can stop reading right now. Because for the rest of the article, I’m going to be telling you to put more money back into your CPF. 🙂

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How does the bond portion of an investment portfolio work?

Considered as a defensive asset class, bonds are typically less volatile than other asset classes such as stocks. They are included in an investor’s portfolio as a source of diversification to help reduce the portfolio’s overall volatility and risk.

Bonds are often used for portfolio rebalancing which realigns the weightings of the asset allocation. Portfolio rebalancing safeguards you from being overly exposed to undesirable risks, ensuring that the portfolio exposures remain within your risk appetite.

For example, let’s say your target asset allocation was 70% stocks and 30% bonds. In a bull market, the stocks performed well during the period, it could have increased the stock weighting of your portfolio to 90%. You may then decide to sell some stocks and purchase bonds to get your portfolio back to your original target allocation of 70/30. Essentially, you’re taking chips off the gambling table so that you don’t lose all your winnings.

In a bear market, the stocks tanked and caused the stock weighting of your portfolio to dip to 50%. You may sell off some of your bonds and purchase stocks to get your portfolio back to the 70/30 target allocation. You’re putting more money on the gambling table when the probability of winning is higher. Psychologically it can be challenging and that’s why following an asset allocation strategy could make the decision making process much easier.

Challenges of using CPF monies as bond portion in your asset allocation

For my CPF accounts to be utilised as the bond portion of my retirement portfolio, it needs to fulfil 3 criteria:

  • Remain low risk and provide decent yield to prevent inflation from eroding the value of my funds.
  • Ability to inject funds in a bull market where I’ll sell of my stocks to increase my bond portion as part of portfolio rebalancing.
  • Ability to withdraw funds in a bear market in order to purchase more stocks to increase my stock portion as part of portfolio rebalancing.

As our CPF accounts are not designed for the purpose that I’m trying to use them for in this article, there are some challenges that I need to workaround with.

We all know that the our CPF accounts are designed to move money in a single direction. When we are younger than 55, our CPF accounts are designed to allow us to move money into our CPF accounts. It could be through employment contributions, using the Retirement Sum Topping-Up Scheme (RSTU), or even voluntary contribution. While there are 3 ways to inject funds into my CPF account, there is no way to make any withdrawal at this point in time as the tap has been turned off.

From 55 onwards, although we could still move money into CPF through employment contributions and voluntary contribution, the ability to massively move money into my CPF account through RSTU has been switched off. The tap to withdraw funds is now turned on and we can withdraw surplus money from our CPF Ordinary and Special Accounts after setting aside the Full Retirement Sum.

In short, the problem I’m facing is that I am unable to withdraw funds before age 55, and unable to deposit funds easily after 55.

Since the headline of this article is focusing at retirement, let’s look at tackling the challenges of using CPF monies as bond portion of my retirement portfolio after 55 – how to deposit funds into my CPF accounts easily after 55.

My workaround to transform my CPF monies into the bond portion in my asset allocation

The big question – how do we deposit funds into our CPF accounts easily after 55?

From a mechanics standpoint, it looked like there’s no way to accomplish this. So we need to get creative (not the stock) here.

I looked through my CPF account and found that I currently have a ‘debt’ of around $150,000 with CPF. That’s the money from my CPF Ordinary Account that was used to pay for my monthly HDB mortgage, including the accrued interest through the Public Housing Scheme (PHS).

What is the Public Housing Scheme?

The Public Housing Scheme (PHS) enables CPF members to use their CPF Ordinary Account savings to buy new or resale Housing and Development Board (HDB) flats.

Your Ordinary Account savings can be used to:

  • pay all or part of the purchase price;
  • service monthly housing loan instalments taken to buy the HDB flat; and
  • pay the stamp duty, legal fees and other related costs such as flat upgrading cost.

This PHS ‘debt’ is something that debt-averse Singaporeans are trying to avoid by using cash to pay their property mortgage. Typically, everyone would preach to use cash instead of CPF monies to pay for their property mortgage so that they can let their money in their Ordinary Account compound at 2.5%. Or even better, transfer the money to their Special Account to compound at 4%.

But I see this ‘debt’ as a opportunity. By the end of the tenure of my mortgage loan, I should have more than $280,000 utilised through PHS and that’s not counting the accrued interest accumulated.

Sounds terrible right? But I’m taking advantage of this ‘debt’ to address the challenge of depositing funds into our CPF accounts, especially after 55.

According to the CPF website, we can make voluntary refund of any amount, capped at the full principal amount we have withdrawn for the property with the accrued interest. CPF has made it very easy for us to make voluntary refund to the housing amount withdrawn (source). You can even do it through the myCPF mobile app.

Using this voluntary refund mechanism, I will have a way to deposit funds into my CPF account (at least $280,000) when I need to rebalance my portfolio in a bull market. While there is a chance that I could deplete this $280,000 eventually, but it’ll probably take quite some time as the amount will continue to increase each year because of the accrued interest charged to it.

What do you think about my plan?

To be fair, things change all the time and I’m not delusional to think that CPF policies will remain unchanged for the next 30 years until I reach 65. But frankly, I’m quite doubtful that CPF would change its possible and not allow me to make any voluntary refunds for the money used for PHS.

The only change I foresee that CPF would make is that they may change which CPF account the refund would go into.

Therefore, I plan to stay on course, paying my monthly mortgage with money from my CPF Ordinary account and continue building this ‘debt’ in my CPF account.

Important information

By the way, if you’re considering to use the same strategy, here are some conditions from CPF that you should take note of:

  • If you have received more than $30,000 in housing grants, part of the housing grants may be credited to your Special Account/Retirement Account and Medisave Account (source).
  • When you make a voluntary refund, the refunded monies would first be used to meet your cohort’s Full Retirement Sum (FRS) to help meet your retirement needs. The FRS would provide you with monthly pay-outs during your retirement. Any refunds after meeting your FRS in your Retirement Account will remain in your CPF Ordinary and/or Special accounts (source).


  1. Hi Mickey J

    I just shared the below comment on Millennial SG Dad blog, and I thought I share it too.

    Yes, the CPF can be one source of income stream to sustain our retirement. In fact, if you build it up well, it can be the pillar of your passive income streams. Another point I would like to bring up is that as we get older, we would like to keep our investment simple. Our memory and mental agility will decline with age, remembering all the different investment and savings accounts and passwords will be increasingly challenging. To keep things simple for us, we have only three main sources of passive incomes.

    Below was what I shared with Millennial SG Dad.

    “I am also very much a cashflow guy, as I believe a healthy cashflow is what we need to live on comfortably now and in retirement. Our networth or assets (especially if they are invested) are at the mercy of the economy and Mr Market and thus frequently fluctuate in value. The question is how to ensure a steady stream of cashflow while our asset values are fluctuating, more so when we are already in retirement.

    To prepare for our eventual (impending) retirement, my wife and I have been striving to establish some passive income streams. As of today, we have three streams of passive income, namely;
    a) Interest from our CPF OA&SA, b) Dividends and c) Rental. We only started tracking their performance in 2011. I am close to 60 now and still working.

    We witnessed steady increases in our passive income over the last nine years and was happy that our effort was bearing fruit. That is, until the Covid pandemic struck. We saw how our dividend income got decimated (on top of the sizeable paper losses in the stock values), and our tenant quitting the tenancy abruptly. The only steady income stream was the interest from CPF. It not only held steady but grew, albeit by a little bit.

    This crisis reminded us once again to:
    1. Diversify our income streams and investment
    2. Have at least one stable income stream (can be private annuity or at least the CPF)
    3. Not to take things for granted. Here we were targeting to have such and such passive income by a certain date / age, only to have to come back to the drawing board in this crisis.

    Our desired passive income for our retirement is $120,000 annually (or $10,000 per month) and up to last year, we were quietly happy and confident that we were doing right. This year cannot be more different. The below compares how our passive income streams performed this year (year to date) and last year:

    Interest (OA&SA)….$53K………………$26K (Jan to Jun 20 interest)
    Dividend………………..$78.8K……………$38.3K (Jan to Jul 20)
    Rental……………………$36.6K……………$16.85K (Jan to Jul 20, no rental income for 1.5 month)

    We are not expecting the dividend income to grow much more from now (for remainder of this year) with more companies struggling to survive. And we are hoping our new tenant can complete the agreed tenancy period. We are also keeping our fingers crossed that the government do not reduce the CPF interest rates.

    All is not lost though. Thanks to the government schemes, we also have SRS savings and CPF Life /RA savings. And we planned to tap on them in the following period of our lives:

    SRS drawdown from 62 to 69 (over 8 years) at $42.5K annually
    CPF Life payout from 70 (for life) at $55K annually.

    If we start our CPF Life payout at 65, we would be getting $43k annually.

    So there, thats our cashflow plan to sustain our retirement.

    1. Thanks for sharing. I love your plan and I agree that this pandemic has taught us that we need at least 3 income streams or more to not have a single event wreak havoc during our retirement years.

  2. Fantastic ! I was struggling lately when I saw that there was a cap in the contribution rate per year as I was planning to top it up near retirement to let it be one stream of passive income as a safety net.
    Thanks for sharing !

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