Tuesday, January 24, 2012

Masses Being Chained into CPF Addiction

Is funny when i read people posting in a forum about the negatives of being self-employed (no cpf) & is better to get a regular job to enjoy CPF (retirement fund) contributions from employer.

While i do agree that certain self-employed professions like taxi drivers slog many hours with no cpf contributions by the employer i'm still of the opinion that being chained to the mindset of cpf is detrimental to one's financial health.

Current interest rate of 3.5% for the first $20,000 in ordinary account & 2.5% thereafter is barely keeping up with inflation. First $20,000 cannot be used for investment also, this ruling serve more as a mean to protect the vast numbers of financially illiterate from losing their retirement fund in ill-informed investment decisions.

Every employee contributes a significant chunk of their paycheck into cpf starting at 20%. If you are an above average investor it is stupid to have 20% deducted every month going into a 'prison fund' that spits out 2.5-3.5% annually. A prison fund that the govt uses for investing for higher returns & returns 2.5-3.5% back.

When one is self-employed one can simply set aside 20% & self invest it for higher returns using his/her financial acumen. I find that those people who are scared of losing out on the portion of cpf contribution by employer have been brainwashed. Employer's portion is part of their paycheck in the first place. At times i do wonder if the idea to have an employer contribution is to breed a 'be a compliant worker & work for boss for rest of life' mentality.

Afterall when one does not know how to invest for higher returns, one has to cling desperately to cpf as life support which is inadequate.

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