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Hit the FRS in CPF-SA by age 32! Stunned like vegetable?

Wednesday, August 22, 2018

Reader, Spotlessmind, says...

Discovered your blog a couple of months ago and found it both inspiring and educational.

Having read varied opinions on the topic of CPF, I felt compelled to share my thoughts.

Since I started working after graduation, I have been transferring all my money in the OA account into my SA account on the advice of my mother, who despite having only pre-university education, knows the power of compounding interest.

Many of my friends (regardless of whether they are single/attached/married) worry that they will not be able to afford a flat in the future if the money in the OA is transferred to SA. 

There is always a big "what-if" hanging over their heads.

On the other hand, I thought that I would remain single forever and thus would not need to buy a flat.

I will cross the bridge when I get to it.

So, I simply kept transferring.

I met my significant other just before I turned 30.

At 32, CPF stopped allowing me to transfer anymore money from my OA to SA :).

I am lucky that my job pays reasonably well, so I have been able to accumulate a significant sum in my OA for flat.

I think many young people have always thought that money in OA = Flat.

Many fear that if they cannot afford a flat, they cannot get married and risk losing their significant other.

Others who are single want to have the option of being able to use the money in OA when they want to.

My approach is considered very risky by my friends.

In my 20s, I was laughed at for being silly.

It is bad enough that we cannot withdraw the money in OA, but at least we can use it to buy a flat.

Why so silly to lock it deeper into SA when we won't see it until we reach retirement and have a minimum sum?

None of my friends took up my suggestion.

I can understand the rationale of those who need to buy a flat.

But I cannot understand the rationale of the rest.

After all, if we are single, we can only buy a flat when we reach 35.

Or maybe some intend to purchase private property.

In short, while a certain degree of skepticism in life is healthy, too much of it is a hindrance to progress.

We waste time when we hesitate, and as you have mentioned it, compound interest is magic that takes time.

I cannot agree more with you.

AK says...
If readers thought that my story is amazing, yours should rock them off their seats!

I am in awe!


Hit the FRS in the SA by age 32?

Stunned like vegetable?

It is possible and without using any out of pocket money either.

I am not saying that we should all do this.

After all, not everyone has the ability to do this.

Even for those who have the ability to do so, they should always carefully consider their own circumstances and priorities first.

Remember, the CPF is but one piece of the jigsaw puzzle called "retirement adequacy".

Related post:

Sensible to do OA to SA transfer?


AK71 said...

Jieren Azrael Zheng says...

I was just thinking, yea, if I did the same, I would hit FRS as well.

In fact, if I did a full transfer now, I would be 76% of the FRS.

AK71 said...

Jimmy Ng says...

If i could turn back the clock.

Meet the CPF BHS + FRS milestones & then the FIRE target of passive income.

Skip all the BGR, skip buying car / motorcycle for the time being, all these can come later

But at least we realize and took actions.

better late & catch up with zest + valour while we can.

rather than to 靠北靠步 about it for the rest of our life

Ben said...

Hi AK,

I agree with you. I am one of the latecomers. In my 20s, I already have the intention of transferring the monies from my OA to SA. I also intended to make voluntary contribution to my CPF accounts at that point of time. I informed my friends about it. They criticised this is a "stupid" idea. I did not take action until I was 38 years two years ago. I transferred the max balance from OA to SA without telling anyone. Of course, my OA is significally deleted with this transfer. Going forward two years, my OA balance surpasses my SA once again due to mandatory contribution from my active employment. Since then, I have not looked back and regretted my decision which was made in 2016. Of course, I lamented the non-decision of making this decision in my 20s. What's over cannot be done. The only way is to look forward and see what action I can take to make my financial status better.

I am planning my move of whether to quit full-time employment and do the things I like as per your current status. I will adopt my action of proceeding on this plan alone without telling anyone. No one (whom I know) are made aware of my plan. I believe that this is the best approach which I take and I am responsible for the circumstance in respect of the decision which I make.


AK71 said...

Hi Ben,

Yes, doing OA to SA transfer in our 20s would make the government work a lot harder in building our CPF savings to meet the FRS much faster.

People sometimes say that 4% interest in the SA is only 1.5% more than 2.5% in the OA.

I always tell them that it is not 1.5% but 60% more.

Add the magic of compounding, it becomes much, much more. ;)

Kevin said...

As the old saying goes: "What's better than spending money? Spending other people's money."
So a variation on CPF can be: "What's better than earning money? Earning other people's money (by making them work harder for us)"


AK71 said...

Hi Kevin,

My version would be:

"What's better than you earning money? Other people earning money for you!"


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