In this previous article below about CPF accrued interest – I go in detail on the financial impact of using your CPF monies to pay for your property.

By using CPF monies to pay for your property – you forgo a guaranteed 2.5% returns on your retirement monies that can be used for your future retirement.

Not everyone is able to use cash for their monthly housing installments.

At the same time, using cash might also not be the best idea.

If you have the cash – wouldn’t you want to channel it towards another investment that could generate better returns?

And there lies the crux of using your CPF monies.

If you were to borrow from your CPF monies and park it into your property – your best course of action is to figure out an investment vehicle that can generate returns that are BETTER than 2.5% returns.

At the same time – do remember that your housing loan also comes with a cost.

If you are using the HDB loan at 2.6% interest rate – that means your total cost of borrowing is 5.1%.

If you are using a bank loan which is currently pegged at about 1.7% to 1.9% – your cost of borrowing is slightly smaller at about 4.2%.

Cost of Property Loans vs Returns on Property Investments

If you accept that living in your current property – be it HDB or private property – is a cost and expense – you can stop reading now.

But if you believe that your existing property should provide some reasonable returns since you already has significant chunk of your monies parked inside – then this article might be useful to you.

If your property does not appreciate in price or appreciates at less than 2.5% returns – you are essentially losing money. 🥺

If your property appreciates at about 2.5% – you are breaking even.

If your property appreciates at more than 2.5% – then yes – your property is making money for you.

Another Hidden Cost – Inflation

So there is another cost that you might have missed out – which is inflation.

Real inflation today is far higher than you think it is, and this is destroying your ability to get wealthy.

In our fiat world – inflation is unavoidable and has crumbled more retirement nest eggs than you can imagine.

Plus with the economic stimulus measures launched by governments around the world due to the pandemic – interest rates will be kept low to allow businesses to borrow money to pay wages and keep going.

And this means eventually inflation goes up.

If I were to sum up the costs of owning a property that includes the unseen and invisible costs – they are:

  • The 2.5% cost of borrowing from your CPF monies
  • The 2.6% cost of the HDB loan / The 1.9% cost of the bank loan
  • The average inflation rate of about 2% per year

These factors have to be part in your financial calculations if you were to make a decision in your next property choice.

The Annual Increase In the CPF Retirement Sum

The CPF Board has released this table earlier in 2020:

Source: CPF

If we were to observe the increase of the Full Retirement Sum – it increases by $5K in 2020 and 2021. It then increases by $6K in 2022.

That is an increase of about 2% – 3%.

From the CPF website, they explain why the increase is necessary:

Source: Are You Ready

All these are indicators that you must be aware of – as you continue to draw down your CPF monies for your monthly housing payments.

Can I share with you something?

You are a pre-retiree.

It doesn’t matter if you are in your 20s, 30s, 40s or 50s – you are essentially a pre-retiree who needs to figure out a way to secure that retirement nest egg as much as possible.

Your current employment or the business you are doing – is just a path that you walk on to prepare for that stage of your life where you can do whatever you want.

Achieving Returns Greater Than Inflation Is Possible

Below is the transaction data from Parc Riviera – a development which I purchased a unit myself back in 2016.

I am still holding on to my unit. But similar units have transacted at prices that has resulted in 5% annualized gains.

Those who bought bigger units have made even more returns – with one 2-bedder unit providing an annualized return as high as 7.9% within just 3 years.

This can be the power of property as an investment vehicle if you understand the impact of embracing the strategy of making your monies work hard for you.

The Importance of Financial Literacy

Learning – especially about financial education, can’t stop after school, but rather needs to be a lifelong journey.

In our case – it has become an obsession (and that’s why we write all these articles!)

This is why it is so critical to immerse yourself in this world in order to continuously improve your returns.

You are responsible to learn as much as you can about bettering your financial situation.


You must understand there are options outside of the typical market-based, risk-based retirement plans.

You need to hold yourself accountable for what you put into your mind, or you’ll end up settling for less or being left behind in life.

It’s up to you to learn how to set yourself up for retirement and how to invest in assets that are going to hedge against inflation.

It’s up to you to allocate towards safe and solid investments for your retirement income.

It is not an exaggeration to say that virtually every wealthy person in history has accrued far more money from their investments than from being paid for their work.

It is also worth noting that they have invariably spent far less time making money from their money than they have pursuing their career or passion.

As with most things, the knowledge is available but you must be willing to seek it out. There is a fair amount of ground that needs to be covered.

If you are open to the idea of securing your future retirement through property investments, I invite you to reach out for a no-obligation discussion session.