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Planning a $1.4m legacy but be aware of this.

Saturday, June 17, 2017


I have an idea to bounce off you. 

Just chit chat. 

I know you don't give advice.

I am 54 and just became a father. 

I married rather late in life.

As a father, I am thinking about my child's future. I am well aware that by the time he is 21, I would be 75 if I am still alive by then.

Next year, I will be able to withdraw more than $100K from my CPF account as I have already met the minimum sum for my age. 

I am thinking of putting the money into my child's CPF SA instead of leaving it in my OA.

I could top it up to $166K and do a one time top up to his CPF SA and, compounding at 4% a year, he will have a retirement nest egg of more than $1.4 million when he turns 55. 

I won't be here for most of his life and this is something I can do for him.


You have to remember that your CPF money is meant to help fund your retirement. 

If you have other ways to fund your retirement adequately, then, OK.

Yes, your child won't be able to touch the money until he turns 55. 

If your plan is to help your child be financially secure in his old age, I would say that this is a very generous and thoughtful thing you are doing for him. 

However, remember, the CPF SA interest rate could change over the very long term and 55 years qualifies as very long term. 

After all, the plan is to peg it to long term government bond coupons eventually, if I remember correctly.

When would this happen? 

I have an inkling that this might happen when the 10 year SGS bond rises to a level that is at 4% or a bit higher. 

We will have to accept higher or lower returns on our CPF savings in future from then on.

So, we won't be wrong to expect CPF SA interest rate to fluctuate over the very long term. 

So, don't think of 4% as something that is sacrosanct.

Even so, at 3.5% per annum, $166K will become $1.1 million in 55 years. 

At 3% per annum, it will be about $844K in 55 years. 

That is still quite a bit of money.

Your child won't have to worry as much about retirement funding and can be quite comfortable as a working adult, I imagine. Lucky kid.

A father's love. :)

Related post:
Make CPF part of child's savings.


apex property investment said...

I beg to differ. At this point of time, you can buy a legacy plan to be bequeath to your son upon your passing. This is way better than the CPF SA. you can will it to be set aside some money into his SA and then another sum to fund his lifestyle.

AK71 said...

Hi apex,

I know some people like SMOL would say we shouldn't coddle our children. I tend to agree.

However, I am not a parent and I know that there are many parents who would want to leave something for their children.

As for whether a legacy plan will return more than the CPF-SA, I am skeptical as it is usually a universal life insurance and annuity bundled. As returns go, what the CPF-SA and later the CPF Life offer would be hard to beat.

Of course, if the intention is for the son to access the money earlier and not when he is 55, your suggestion is the better option. :)

AK71 said...

Luis Tan:
How about 60k to SA, the remaining into investment vehicle? Still need cashflow as education fund for the child? 60k shld be able to help the son to him MS when he retire... that shld be sufficient

I don't know if the reader has more savings elsewhere or if he has other sources of income. I only know he is thinking of what to do with the money he is withdrawing from his CPF account next year. I guess it is better to transfer the money into his child's SA than to keep it in his OA if he has no other plan for the money. :)

ED said...

Hi AK,

I know that most parents want to leave something for their kids when they are gone. Me included. But after reading this article:

It maybe wise to not leave them too much.

I think, forcing our kids to donate away part of their inheritance will greatly humble them. A good life lesson to pass on, besides money.


ED said...

Hi AK,

I know that most parents want to leave something for their kids when they are gone. Me included. But after reading this article:

It maybe wise to not leave them too much.

I think, forcing our kids to donate away part of their inheritance will greatly humble them. A good life lesson to pass on, besides money.


apex property investment said...

AK71, I come from a point that the money had more flexibility as a legacy insurance than to put into the SA, which is stuck for a VERY LONG time.

AK71 said...

Hi ED,

When I read that Warren Buffett would not leave his children any of his abundant wealth but is giving everything away to help the poor, I thought it was a bit extreme but he really believes that they don't deserve it and that there are people who need his help more.

AK71 said...

Hi apex,

Yup, I know. That was why I said if he wants his child to be able to access the money sooner than later, your suggestion is the better option. :)

Cory said...

The best way I feel to show love is to equip our child the skill to survive well.
We do have to remember the inflation monster after 55 years means the effective amount is not going to be enough vs a good education effectiveness.

laurence said...

Jackie Chan has also been doing great charity work in china, building schools for the poor. He has also declared he will donate everything to charity. Many other ultra rich in the west are doing similar or at least giving away a huge chunk of their legacy to charity or charitable foundations.
It's also my intention to leave everything to children's charity, although by then there might only be peanuts left.

AK71 said...

Hi Cory,

Most parents would worry. It is normal. However, when we are 6 feet under. Cannot see liao. Sometimes, it is not even about money. I look at the current saga with the Lee family and I shake my head. -.-"

AK71 said...

Hi Laurence,

I believe a significant portion of my assets will go to charity too when I pass on. :)

Kevin said...

How about topping up a portion to his child's CPF OA as it can greatly help him or her in purchasing his/her first home upon marriage in future(that is if no properties are going to be bequeath by the 54 yo father)?

AK71 said...

Hi Kevin,

Sacrificing some interest income to do a regular voluntary contribution is a good idea if the intention is to help the child fund his local tertiary education or to purchase his first property in future.

Such a voluntary contribution would see funds channeled into the OA, SA and MA. However, it would be subjected to the CPF annual contribution limit. For a sum of $166K, it would take about 5 years to complete.

AK71 said...






Full translation at:

RayNg said...

Instead of get lock-up in CPF-SA, he may consider to invest lump sum into STI ETF or similar market index.

STI ETF historical CAGR is ~9% excluding ~3% dividend.

55 years invested STI ETF may leads to ~$19 million as compare to CPF-SA of $1.4 million.
On the worst case if STI CGAR is 6% (33% down), it still yield $4.1 million

On top of that, he will have a modest dividend of 3%.

p.s. assume he has a discipline 1) ignore market volatility, 2) "lock-up" this investment and never sell them till 55 years later... 3) This is a surplus cash that he has 'donated' to his son.

AK71 said...

Hi RayNg,

Investment grade bond versus a basket of local equities.

Of course, no one can say for sure what the future will be like for either option.

I wonder what would he choose to do. ;)

AK71 said...

Reader says...
I'm thinking of maxing my 2 year old SA account to $166k. After compounding for 53 years to the age of 55, he will receive $1327012. Without taking into account PV/FV of money + policy changes, means he's receiving a total of about 1.1mil in interest (1.327mil-166k). Is that correct?

And if I were to do that, do u feel that I will be snatching his motivation to work hard knowing that he has a bit of money waiting for him in his SA when he retires? Actually this is my biggest fear in topping up his SA. But on the other hand, I want to utilise CPF to the max!

AK says...
I am not a parent.
I don't know... 😛

fenix said...

Not a good idea. Unless you taught them well and they show motivation. Otherwise, like what happen to my friend, his son is not working, just living life without aim because he's got money coming. And he's just over 30.

AK71 said...

Hi fenix,

That was what someone said about me.

AK should be ashamed. :(

AK71 said...

Sau Yee Fong says...
in 53 years' time, going by 3% p.a inflation, the FRS will be around $795K. $166K in SA will become $1.32m in 53 years if 4% interest remains unchanged. Means he can withdraw about $530K from CPF SA alone at age 55. That's about $111K in today's value. I think he still needs to work hard but maybe not as hard as his peers.

AK71 said...

Jimmy Ng says...
i think this daddy may have been better topping up all 3 account. perhaps sufficient post compounded interest OA can help to pay education & greatly help with their 1st apartment ?

AK71 said...

Lee Jiahui says...
I thought of that too. But cpf smart, only let you topup either MA or all 3. So to max out the SA, you need to top up 1.05M cos 6% of 37% goes to SA lol

Terence Ong says...
That is not true lei. I top up 5000 for my child all goes to her SA. She is 3 yrs old. I deposit all angbao money in her SA turbo interest at 5 percent for first 60000.....she is a rich girl now.

AK71 said...

Sau Yee Fong says...
No matter how rich the parents are, I think it is not right to give monies to your children after they are of working age. AK, you are different. You are a self-made retiree. Hence there is nothing to be ashamed of.

AK71 said...

Lim Li Chin says...
I think it is dumb to leave so much money to the kid and then they become lazy . They should learn how to earn their own keep . I will spend my money to the last penny and up Lorry . Leave behind the house for the kid is good enough already

AK71 said...

Jack James says...

The failure of parenting .

Don’t blame the kid’s SA la , adui .

Such a good “investment vehicle”!

By the way , your kid can ONLY take out the CPF money at his age of 65 also !

How does that related to this example of just over age 30 and do nothing ?

He can’t take out a cent from CPF dur ?! 🤷‍♂️

AK71 said...

Jack James says...
I wonder if FRS will continue to increase at today speed , the younger generation will surely have difficulty to achieve ! My 1980s generation , FRS would be S$250,000 . I can’t imagine my kid FRS !!

Kenichi Xi says...
the job of the "law marker" is to meet inflation.
the ability to achieve is not their concern.

Jack James says...
Just checked , when I am at age of 55 , FRS will be S$261,000.
When my boy hits age of 55 , his FRS will be S$421,000.
FRS now of S$176,000 is peanut!

AK says...
Some parents are giving their children a leg up in building their CPF savings. ;)

AK71 said...


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