When it comes to personal finance in Singapore, conventional wisdom often pushes investors to maximize returns by deploying every available dollar. For the Ordinary Account (OA) under the Central Provident Fund (CPF), which earns a baseline 2.5% per annum, many assume that leaving funds untouched is an unnecessary opportunity cost compared to what a diversified equity portfolio can achieve over decades.
However, despite managing an active portfolio of stocks, REITs, ETFs, and options, one content creator known as The Dividend Uncle makes a deliberate choice to leave the vast majority of his CPF-OA untouched.
Here is a comprehensive look at why he chooses not to invest his CPF-OA monies, how his family’s circumstances shaped that decision, and why a strategy that works for him might not be right for everyone.
1. Servicing Housing Loans and Managing Single-Income Pressures
The primary driver behind leaving his CPF-OA alone in earlier years wasn’t about beating the stock market—it was about securing household stability. Because his wife is not working, the household has historically depended primarily on a single employment income.
Rather than chasing higher yields through the CPF Investment Scheme (CPFIS), he utilized his CPF-OA to service the monthly housing mortgage and steadily chip away at his family’s biggest liability. While financial theory suggests that keeping a low-interest mortgage while investing cash in equities could yield a higher net worth on paper, maximizing raw net worth wasn’t his sole objective.
Removing a major recurring monthly expense provided immense peace of mind. After roughly 15 years, the mortgage was fully paid off, completely insulating the household from rising interest rates, refinancing stress, and floating-rate volatility.
2. Prioritizing Stability and High-Quality Fixed Income Alternatives
Once the mortgage was cleared, the question naturally shifted: Why not invest the remaining OA money then?
While broad equities are expected to outperform 2.5% over a 20- to 30-year horizon, he argues that equities are not a fair comparison for CPF-OA if the primary objective of that money is safety and capital preservation. Backed by the Singapore government, the OA’s 2.5% floor rate behaves more like high-quality fixed income or Singapore Government Securities.
He wasn’t entirely opposed to improving yields when low-risk opportunities arose—notably participating enthusiastically in Singapore Treasury bill (T-bill) auctions when yields spiked above the OA rate. However, moving funds into T-bills still meant keeping money safely within government-backed credit rather than subjecting it to the sharp market volatility of equities.
3. Factoring in Age, Timeline, and Existing Portfolio Risk
As he approaches age 50, the opportunity cost calculation looks fundamentally different than it did in his 20s or 30s:
- The Long Runway Factor: For a young investor with 30-plus years until retirement, compounding at 2.5% versus capturing higher long-term equity returns represents a massive gap, and there is plenty of time to recover from market downturns.
- Sequence-of-Returns Risk: As retirement draws closer, a sharp market correction right after leaving the workforce poses a severe threat—especially if one is forced to liquidate assets while prices are depressed.
- Already Wealth-Generating Elsewhere: Because he already maintains substantial exposure to equities, REITs, global ETFs, and dividend stocks outside of CPF, he sees no requirement for his CPF-OA to mimic that exact same risk-on behavior. Keeping the OA stable balances his overall net worth.
4. Planning for Spouse Retirement and CPF LIFE
Looking forward to age 55, he also views his CPF-OA as a strategic tool to support his wife’s retirement. Because her CPF balances are lower due to not working, he intends to use excess OA savings (subject to prevailing rules and limits) to top up her Retirement Account. This helps build a stronger, more resilient monthly payout for her under CPF LIFE from age 65.
Why This Approach Might Not Make Sense for You
While this philosophy provides incredible peace of mind for a single-income household nearing mid-life, the creator readily admits that his strategy may be entirely wrong for other investors:
- Your Age: If you are much younger with decades ahead of you, the long-term compounding cost of leaving money at 2.5% is significantly higher.
- Your External Portfolio: If most of your total wealth sits inside CPF with little to no exposure to external growth assets, keeping your OA uninvested leaves your overall financial position overly conservative.
- Your Life Goals and Housing Needs: If you have no housing loans to service, no dependent family members requiring immediate financial protection, and no planned use for your OA, seeking long-term growth through approved investment vehicles or upcoming initiatives (such as the CPF Board’s planned lifecycle investment schemes slated for 2028) may be a far better fit.
The Bottom Line
Retirement planning is not just about accumulating the biggest possible number on a screen; it is about building household resilience and reducing monthly pressure. For some, that means maximizing every single percentage point of growth through active investing. For others—like The Dividend Uncle—it means trading a degree of potential upside for absolute capital certainty, housing security, and peace of mind.
Watch the full breakdown and discussion here: Why I Don’t Invest My CPF-OA — But It May Not Make Sense for You!
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