Transfer CPF Money from Ordinary to Medisave Account

Correction: we made a mistake in our earlier article, and we have thus made the edits. We like to thank our readers for pointing out to us when we make mistake in our research.

Today's topic was suggested by one of our readers.

If you got any questions/topics you would like us to talk about, let us know via the comments below or via this form.

You asked us what are some of the pros and cons of transferring money from your CPF Ordinary Account (OA) to your CPF Medisave Account (MA).

Here is the result of our research.

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Background

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If would like to know what is your Medisave Account for, click HERE.

But, long story short:

Source: CPF

You can use it to pay for your medical bills, family members' medical bills, as well as pay for medical insurance schemes like MediShield Life.

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Can it be done?

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Long story short: NO

You cannot transfer funds from your CPF OA to your CPF MA.

But, you can top up your CPF MA in 2 other ways.

• Voluntary contribution to all 3 CPF accounts (non-tax deductible)
• Medisave Account only (tax deductible)

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Recommended Read: Why We Still Need Insurance Agent

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The Pros of topping up CPF MA

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Why would anyone want to top up to their CPF MA?

So why would anyone want to transfer money from your CPF OA to CPF MA, here are some of the reasons.

1. Extra interest

CPF OA pays 2.5%+ interest per year

If you are saving money for your medical bills, you are probably stashing it away in some low-risk portfolio that gives less than 1% interest per year.

If that's that case, why not allocate a portion of it into CPF MA, which pays 4%+ interest per year.

Of course, you would still need to keep a portion of it in cash because there's a portion of your medical bills that still requires cash payment.

Just moving money from your OA to your MA gives you an extra 1.5% interest per year.

2. Has a cap

Your MA savings is subjected to a cap, known as the Basic Healthcare Sum (BHS).

As of 2021, the BHS is set at $63,000 for those 65 years old and below.

Any amount that is in excess of your BHS will flow over to your

• CPF Special Account (SA) - if you are below 55 years old
• CPF Retirement Account (RA) - if you are 55 years old and above

Source: CPF

So, technically, your CPF MA money is not a bottomless pit where money keeps going in without any way to take out unless you are hospitalised

Your CPF MA will reach a cap, after which money will flow into your CPF SA or CPF RA, where it can be withdrawn (if other conditions are met of course 😉)

For more information on the BHS, click HERE.

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Recommended Read: Which Chinese Zodiac Has the Best Financial Outlook for 2021?

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The Cons of topping up CPF MA

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Here are the cons of topping up your CPF MA.

While you will get higher interest by making the transfer, there are also cons associated with it.

Here are the cons of transferring money from your CPF OA to CPF MA.

1. One-way street

You cannot un-do the top-up.

Once the money is in your CPF, it's going to be very hard for you to withdraw it out (except if you meet the various T&Cs).

Once you transfer from your CPF OA to your CPF MA, you cannot transfer it back from your CPF MA to your CPF OA.

2. Potentially no tax benefits

If you do a top-up via the Voluntary Contribution (VC), then there is no tax benefit.

However, if you do a voluntary CPF MA-only top-up using cash, the amount that you top up is tax-deductible. But, it will be subject to your maximum personal income tax relief cap.

However, if you transferred it from your CPF OA to CPF MA, there is no tax benefit.

3. Less cash

If you kept cash in your pocket, you can use it any way you like. 

Pay for a mortgage, pay for a holiday trip, pay for medical bills, anything!

But once you put it into CPF, the things you can use it for will be subjected to limits and restrictions.

Topping up cash into your CPF MA, while will earn you higher interest, will restrict you to using it only for medical purposes and nothing else.

Some day down the road if you realised you need extra cash to pay for a home downpayment, you cannot withdraw it from your CPF MA to pay for the downpayment.

3. Less ways to use your funds in CPF

If you kept the money in your CPF OA, you can use it for housing, education, insurance premiums, and other purposes.

But if you transfer the money to your CPF MA, you can only use it for medical purposes or to pay for medical insurance premiums.

If you are currently paying your home loan using CPF, if you make a transfer to your CPF MA and cause your CPF OA to have insufficient funds to pay your monthly mortgage, then you might have to pay your mortgage in cash.

In which case, it might be better if you just top up cash into your CPF MA (since this is tax-deductible) while paying your mortgage is not.

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Recommended Read: Closing my Standard Chartered JumpStart Account

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Conclusion

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There is no one-size-fits-all solution.

For example, if you got sufficient funds in your CPF OA to pay your mortgage, and would like to grow your CPF MA faster and maximise the interest you are earning from CPF, then you can consider making the top-up.

But, there is no hard-and-fast rule. 

Whether or not to top-up cash into your CPF MA depends heavily on your circumstances.

Whether or not to transfer the money from your CPF OA to your CPF MA, depends heavily on your circumstances.

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Recommended Read: What I Learnt 6 Months into My SGUnited Traineeship

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New Product Launch (Beta)

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We are building a new platform to help you find people to share your family plan subscriptions with. 

We help you find, match, subscribe and collect payment so that you don’t have to.

Convenience for you:

• You don't have to find people to share with you. We do it for you.
• You don't have to chase people to transfer you their share of the subscription fee. We do it for you.
• You don't have to remember to transfer your share of the subscription to that 1 person. We do it for you.
• You don't have to find it difficult to drop out of a family subscription plan because you shared it with your family/friends. We cover your share for you.

We like to know what you think about this service.
Let us know in the survey below what you think, and to be notified once we officially launch the product. 😉

SURVEY

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Promos & Referrals
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Click here to view the full list of Promos and Referrals we have. 

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Why We Still Need Insurance Agent

This is probably another one of our controversial articles, where instead of being our usual self and bash insurance agents, we are going to write about why we genuinely think they are important and should still exist. 

It is a common perception that insurance agents have a bad reputation - mostly because of their pushy, aggressive, and questionable sales practice.

Most of us would probably rather go to a dentist than meet an insurance agent.

And as much as we want to think they are not what we want or need, they definitely play an important role in our financial roadmap!

Today, we are going to be unconventional and write about the people we often mock about: Insurance Agents.

We will be explaining why we think we need insurance agents in our lives.

PS: we will be using 'insurance agent' and 'financial consultant' interchangeably in this article. In this article, both will mean the same, although there might be some difference in the real world.

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Importance of Insurance

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Insurance is one of the things that are important in ensuring that you can reach your financial goal and security.

It acts as the "protection" layer, protecting you and your family against expensive events like death, sickness, hospitalisation etc.

You will need it to cover these basic things like death, TPD, and hospitalisation, everything else can be "optional".

Optional include things like endowment, ILPs, etc, which are generally the higher income-generating products for the insurance agents.

There's nothing wrong with trying to sell higher-margin insurance to customers IF the customers need it.

Also, insurance agents have families to feed as well.

It is only wrong if they are not suitable for the customers, or if the customers are conned into buying them.

Kind of like buying the 256gb iPhone instead of 128gb.

It's a higher margin for Apple to sell the 256gb model but it really depends at the end of the day if the customer really needs it.

The problem with insurance is, we do not buy them automatically, because they are not life-threatening or required on a frequent basis.

If you starve, you will die; hence your stomach gives you the signal to go buy food and eat.

The problem with insurance is there is no such mechanism at play, and by the time you realise you need insurance, it's already too late.

If you realised you haven't left any money for your family to take care of themselves in the event of your early death, you cannot reverse and buy insurance to get the payout. 

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Recommended Read: 9 Things I Learnt from my Internship at GIC

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Importance of Insurance Agent

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That's where the importance of an insurance agent comes in.

Because they exist, and because they contact ("force", in a good way) you to go through your financial roadmap, they are able to help you identify the gaps and give you the appropriate advice on how to get your financials on track (or at least ensure sufficient protection for you and your family). 

I studied finance and investment to know the importance of getting insured.

But for people who are teachers, engineers, doctors, or other professions that are not in the "money business", this is not an intuitive thing for them.

And so the most realistic way for them to get their financial roadmap on track is to get advice from an insurance agent.

I don't think people would wake up one day, suddenly realise they need to get $X amount of life insurance and proceed to buy one themselves. This just does not happen in real life.

Hence the importance of an agent is they literally force you to sit down, walk you through the whole roadmap, and plan your finances.

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Recommended Read: Corporate Strategy 1: Rundle, Recurring Revenue Bundle

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Dilemma of an Insurance Agent

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Of course, insurance agents only make money if you buy policies from them.

And the money they earn from your premiums tends to drop after the first few years.

So for example, after you buy insurance from your agent, maybe they get 

• First-year 10% of the premium as their commission
• Second-year 5% of the premium as their commission
• Third-year 1% of the premium as their commission
• Fourth-year 0% of the premium as their commission

And since they have to do an annual review of your financial health, it makes sense for them to take that opportunity to either sell you a bigger plan (up-size) or sell you some other plans.

If they don't do that, how do they feed their families?

Furthermore, it's been proven that it's easier to up-sell and cross-sell to existing customers than to new customers.

So if not you, then who? 🤷‍♂️

But, there's only so much insurance one person need. Eventually, as a customer, you will no longer need any additional insurance.

However, to make ends meet, sometimes, some agents, would have to sell more despite already having enough, just like what Christopher said in his video below. 

Christopher went from being an insurance agent to starting a fee-based wealth advisor after a client told him "surely there must come a time whereby I have enough insurance."

Not saying that all insurance agents are like that, but you as a customer will eventually reach a point where you just have enough insurance. Then what?

Do you continue to buy more insurance to support your agent? Or do you stop buying what your agent suggests?

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Recommended Read: Closing my Standard Chartered JumpStart Account

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Conclusion

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We think we still need insurance agents going forward (says the guy who was thinking of becoming one).

But there's only so much insurance one needs to get.

Eventually, we all just need to be able to say 'No' when asked to get more insurance.

What do you think?

---

Recommended Read: What I Learnt 6 Months into My SGUnited Traineeship

---

New Product Launch (Beta)

---

We are building a new platform to help you find people to share your family plan subscriptions with. 

We help you find, match, subscribe and collect payment so that you don’t have to.

Convenience for you:

• You don't have to find people to share with you. We do it for you.
• You don't have to chase people to transfer you their share of the subscription fee. We do it for you.
• You don't have to remember to transfer your share of the subscription to that 1 person. We do it for you.
• You don't have to find it difficult to drop out of a family subscription plan because you shared it with your family/friends. We cover your share for you.

We like to know what you think about this service.
Let us know in the survey below what you think, and to be notified once we officially launch the product. 😉

SURVEY

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Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

---

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

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Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

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Corporate Strategy 1: Rundle, Recurring Revenue Bundle

 

We are starting a new segment in our articles.

We are now going to talk about corporate strategies and business models, something we picked up when learning about investing.

Today, more than ever, business models and strategies are playing an increasing weight in how we invest our money, and we think it's only appropriate that we also dive into it when talking about investing.

And in our first-ever dive into this topic, we are going to be talking about "Rundle".

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What's a "Rundle"?

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The Rundle, or recurring revenue bundle, was the term coined by NYU professor Scott Galloway, to explain how companies can mix 2 business models (recurring-revenue subscription and bundling) together as one to grow faster.

"Recurring-revenue subscription" was the in-thing a few years ago. Any startups that had "subscription" as part of its business model found no shortage of venture capital fund outbidding each other to invest in the startups.

"Bundling" on the other hand, is an old retail strategy of combining several products together to sell as a package. Think selling masks with hand sanitiser in 1 pack instead of as 2 separate items. Customers buy more because of the perceived discount, while businesses get a higher transaction size.

The "Rundle" is the combination of the 2, where businesses package several products together and sell them as a subscription, offering a better value proposition, better value, and make higher revenue.

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Recommended Read: 9 Things I Learnt from my Internship at GIC

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How It Is Being Used?

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While companies in the subscription business are working hard to find products to bundle into their subscription, companies in the bundle business are working hard to get into a subscription relationship with their customers.

Case in point: Apple and Walmart.

Apple & Apple One

Source: Apple

Even on their service website, the first sentence states that it's a subscription that bundles several of Apple's services.

Originally, you can subscribe to the different services (Apple Music, Apple TV+, Apple Arcade, and iCloud) on their own. 

Maybe you're already subscribed to Apple Music and iCloud, but now at just a couple dollars more, you can get TV+ and Arcade, instead of paying for the full price.

That "lower entry price" would entice customers who are on the edge to give the service a shot, and give Apple the slight revenue boost in its services segment.

This is the classic subscription model pushing for bundling to achieve the "Rundle".

Walmart & Walmart+

Source: Walmart

The sleeping giant has awakened and it's starting to face its toughest competitor (*cough cough Amazon) head on!

Walmart is a supermarket giant in the US, and while it has been growing over the years, the growth has not been spectacular and it has been gradually losing market share to Amazon.com.

Being a traditional supermarket, it is in the "bundle" business, that is, you get a slight discount if you bought 2 bottles of Pepsi instead of 1.

Businesses of such nature are one-off: customers buy where it is cheap and convenient, and have a low cost of switching to another provider.

Customers don't build an entrenched relationship with Walmart because if today another shop is selling cheaper than Walmart, customers are going to go to that other shop.

What Walmart has decided to do, is to start offering its customers a subscription service to entrench their customers into a relationship with Walmart (copying the strategy of Amazon Prime).

For a subscription fee, customers can get free shipping and many other perks, which attracts customers to do more of their shopping with Walmart because they have already paid a subscription fee (a sunk cost) and wants to utilise that fee to the max.

This is the classic bundling model pushing for subscription to achieve the "Rundle".

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How It Shouldn't Be Used

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Source: Inc.com

While most companies are innovating ways around how they can offer a "Rundle" service to their customers, not every company will be able to get it right.

To put it simply, a "Rundle" is only a value proposition.

It is a good way to accelerate growth IF there is a good Product-Market Fit (we'll explain product-market fit next time).

If there is no product-market fit, pushing out a "rundle" service is not going to grow your business.

Example 1: Bundling business pushing for subscription

You have a retail shop that uses the bundling business model currently, and you're pushing towards a "rundle".

However, the prices you charge before and after the subscription fees, are higher than your competitors.

In this case, what's the value proposition you bring to your customers to entice them to enter into a subscription relationship with you?

Why would a customer pay a $10 subscription per month to buy from a grocery store that charges higher prices than the supermarket across the street?

Is it fast delivery? Is it monthly promotions? Is it any other value proposition that can make customers find the whole "rundle" valuable?

If there is no strong value proposition, you might not have a product-market fit, in which case you should work on improving the product instead of pushing out a "rundle" hastily.

Example 2: Subscription business pushing for bundling

You have a software subscription business that has 3 software products. 1 of them sells really well while the other 2 barely sells.

You hope to bundle your 3 software products together as a "rundle" so that your customers will be enticed to get all of them instead of just the best selling one.

Of the 3 software you offer, only 1 is of value to your customers while the other 2 are crap.

You can offer a "rundle", but no one is going to continue that subscription because no customers will want to pay extra money for things that they don't use or are lousy.

After testing out your "rundle", customers will eventually drop back to just subscribing for just your best product if the other products suck.

A "Rundle" doesn't solve the problem of having a lousy product.

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Recommended Read: Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?

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Conclusion

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A "Rundle" is a great way to accelerate the growth of your business. and build loyalty.

However, it is only one part of the whole strategy, and it only works IF your business has a product-market fit.

---

Recommended Read: What I Learnt 6 Months into My SGUnited Traineeship

---

New Product Launch (Beta)

---

We are building a new platform to help you find people to share your family plan subscriptions with. 

We help you find, match, subscribe and collect payment so that you don’t have to.

Convenience for you:

• You don’t have to find people to share with you. We do it for you.
• You don’t have to chase people to transfer you their share of the subscription fee. We do it for you.
• You don’t have to remember to transfer your share of the subscription fee to that 1 person. We do it for you.
• You don’t have to find it difficult to drop out of a family subscription plan because you shared it with your family/friends. We cover your share for you.

We like to know what you think about this service.
Let us know in the survey below what you think, and to be notified once we officially launch the product. 😉

SURVEY

---

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

---

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

---

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Read More