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How to upsize $100K to $225K in 20 years? Oppa AK style! (UPDATED)

Monday, August 4, 2014

People are naturally attracted by large numbers. 

I mean if we got a 5% discount off a purchase price, we might not be very impressed but if we got a 20% discount instead, then, it could have a WOW factor.

It is the same thing with wealth. We would be more impressed with wealth in the billions than wealth in the millions. 

It is only natural. 

Of course, remember to ask what is the currency it is measured in.

Even if it should be news about some loss of wealth, we would be more likely to share the news of how a widow lost S$1 million in a year than the news of how someone lost his EZ-Link card because he was too distracted while on board a crowded bus.

So, I am not surprised that when I tell young people that the CPF-SA pays 4% to 5%, risk free, they are unimpressed. 

These are the ones who would complain about how they feel that they will not be able to meet the CPF minimum sum by the time they are 55.

When I tell them that they should consider Minimum Sum Top Ups (up to a maximum of $7,000 a year) to their CPF-SA or that they should transfer their CPF-OA money to their CPF-SA, they think I am crazy, naturally. 

(AK must be a pro-government dog. Hey, I am a pig, OK?)

Hey sexy S A! Oppa AK style!

It is only when I tell them how much I have in my CPF-SA that they start to ask questions. Something along the line of:

"Wah! How do you manage to have so much in your CPF-SA? You are only in your early 40s!"

Ah, finally, I got them interested. 

That would be when I show them the numbers "10" and "50".

Unimpressed with 4%? 

Surely, 50% is more impressive. 

The funds we have in our CPF-SA will grow 50% every 10 years even if we stop contributions today. 

That is the power of compounding at 4% per annum.

Compounding grows more powerful with the passage of time.

$100,000 today grows $50,000 and becomes $150,000 ten years later. 

That $150,000 will grow not $50,000 but $75,000 in another ten years from then. 

It would become $225,000! 

So, it continues. 

Why can't we meet the minimum sum again if we do the right things?

Well, for one thing, for most people, there is too little in their CPF-SA! 

Imagine the difference between $10,000 and $100,000 compounding at 4% per annum. 

It is that simple. 

So, voluntarily pushing more money into the CPF-SA is necessary.

Start doing this as early as possible. 

The sooner we build up a strong base in our CPF-SA, the easier it is for the magic of compounding to show its power. 

Time and the government will help us grow our retirement funds in the CPF, all without any risk.

My own experience bears this out as I transferred much of my CPF-OA money into my CPF-SA in the first 4 years of my working life. 

Then, I let the magic of compounding do the rest.

This is something that anyone, especially those in their 20s, should seriously consider doing. 

It might mean putting off marriage plans by four years for some but it would be worth it.

For those in their 30s or 40s, it might mean that they have lost 10 or 20 years of compounding magic but 65 is still years away. 

So, don't envy those in their 20s (too much).

Obviously, for those in their 50s and 60s, this blog post is more of an academic exercise but I hope they will help to share the message with their children and their grandchildren, if they have any. 

The younger ones are likely to live longer and they should plan early and plan well for their retirement.

It is not impossible to meet the CPF minimum sum.

Once we know how, all that is left to do is to make the system work for us too.

Unless severely disadvantaged in some way, we can and should make the system work for us.

Related posts:
1. Build a bigger retirement fund with CPF-SA.
2. Securing risk free returns early for retirement.
3. We do better managing our savings than the CPF does.
4. Thoughts on financial security for Singaporeans.
5. Do the right things and transform our lives.
Hey, sexy S A! Oppa AK style! ;p


Singapore Man of Leisure said...


This CPF SA thing must be the closest thing to "bao jiak" no?


Eh, we wait patiently. Sooner or later bound to have someone come and find bones in your egg.

You can then go "oink, oink, here" and I go "mei, mei, there" (I goat).

Old McDonald had a farm, yi ya yi ya eh!


Solace said...

"If you are topping up by cheque, your application must reach the Board by 31 Dec, 10 am if it is a working day, to enjoy tax relief for the following year’s Tax Assessment. If 31 December falls on a weekend, your application must reach us on the last working day of the year, 2pm."

This is really common sense investing.

I have seen some friends spending weeks researching and seeking opinion about OCBC 360 and fixed deposit interest rate. When i told them to contribute 7K to SA to enjoy 4-5% interest and save on tax, they are skeptics.

A common response from them will be, just to save some taxes and i have lock my money in CPF. Not worth it -__-

We can only do so much.

AK71 said...


Wahahaha! You say leh?

Well, if Big Bird could have an imaginary friend, why can't we have imaginary bones in eggs? Hmmm... Another reason for me to avoid eggs other than the fact that they make me fart. -.-"

Oink. ;p

AK71 said...

Hi Solace,

The tax savings is just a sweetener. If they focus on the tax savings to make an excuse not to make use of the CPF-SA as a retirement funding tool, then, they are not just sceptical, they are misguided.

By the time they are 55, it would be too late for them. :(

Solace said...

Yes, i worry for them.

There are too much distrust in my current generation about CPF system.

I hope they clear their misconception fast.

Roy Thian said...

I think I should quickly input some $ into sa ASAP. Let's start the ball rolling!

AK71 said...

Hi Solace,

I spoke with SG YI who is in his 20s and it seems that his peers also do not trust the CPF. It is worrying indeed. :(

This is why I keep saying that the government has to communicate with the people and do it more effectively too.

At the recent forum organised by the IPS, I was surprised that even some NTUC unionists are disgruntled with the CPF although they were just talking amongst themselves at my table. We have to ask the question "why".

Has the PAP government allowed too many uses for our CPF money? Perhaps so. When there are so many competing uses, it is easy to have a situation of "CPF not enough".

In my opinion, the CPF should be for:

1. Retirement funding.
2. Purchase of a home.
3. Payment for H&S expenses.

Nothing else.

It should not be used for an investment property and not for children's education.

Since most CPF members who invested their CPF money lost money, perhaps, CPF money should not be used for investments too.

AK71 said...

Hi Roy,

You will be doing your peers a big favour too if you help to spread the message. ;)

Everyone's golden years could be and should be better. The CPF could be and should be a cornerstone in our retirement funding plans. :)

pf said...

Made my first top up last mth. Internet banking trf can only be done by ocbc bank?

AK71 said...

Hi pf,

I am very old fashioned and have always sent cheques. -.-"

Maybe, someone else here might be able to share on this. :)

OT83 said...

Hi ak

I only transfer oa to sa. I will not top up using cash. I am part of the distrust generation. How to change distrust to trust?

AK71 said...

Hi OT,

I did OA to SA transfers as well. Do what you are comfortable with.

Trust takes time to build and we can only hope that it won't be too late by the time it is built. :)

Unknown said...

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” Albert Einstein

Nice article as always AK.

Unknown said...

Sorry for noob question. When can we withdraw from SA? Can we transfer back to OA from SA?

AK71 said...

Hi Keith,

The transfer from OA to SA is irreversible.

At 55, we will be able to withdraw what is available less the minimum sum for the RA and the MA.

More answers at: CPF: Reaching 55.

Investopenly said...


Thanks for the education post (and doing the Government a big flavour in the public education part), totally agreed with you.

Jimmy L said...

I topup my SA every year when i started working. Few years ago CPF refused my cheque because my exceeded the limit :)

my wife thinks i am crazy locking up my own money in CPF. Now i know there's also crazy people out there like me :P

any other riskless investment vehicle out? hmm now i am considering OCBC360

AK71 said...

Taken from my FB wall:

Hi AK7, i always wondered why ppl put a chunk of their money in their CPF SA acct to get them locked up forever(can only withdraw a small portion at 55) and they only get a 4% non fix interest rate that changes yoy.

Why not just put them in a 5.125% genting perp and get the money out anytime you want?

To me, the CPF-SA is a fail safe that helps me plan for a more secure retirement. It generates a fairly good risk free return of 4 to 5% per annum in the meantime.

At 55, I am allowed to withdraw what is above the minimum sum required and that minimum sum eventually goes into CPF-Life which pays me an income for life from age 65.

With $155,000, an estimated $1,200 a month will be paid out or 9.3% of $155,000 (per annum). That is very good for an annuity. If we believe that an annuity is a relevant tool in retirement funding, then, the CPF-Life is the best there is out there.

I don't know everything there is to know and I am not 100% sure that my investments will not lose money sometimes. Is there a chance that we might lose money when we have to sell our perpetual bonds issued by Genting? It is easy to forget the bad times when the stock market has been doing fairly well for many years in a row.

Obviously, there are many tools out there which we can use to help plan for retirement funding and we could use the tools if we have the knowledge and resources. In fact, if we are more fortunate than most, we should because the CPF as a tool for retirement funding is actually very limited.

I think of the CPF as a cornerstone in my retirement funding efforts. It is the minimum safety net in my golden years.

AK71 said...

Hi Richard,

This is part of "Retirement Funding 101".

So, I believe that it is a message worth spreading and I think that my experience is worth sharing. :)

AK71 said...

Hi Jimmy,

I know how you feel. Many people think I am mad too. LOL. ;p

I also know how you feel when the CPF told you no more contribution to SA is possible. :(

Solace said...

"pf said...
Made my first top up last mth. Internet banking trf can only be done by ocbc bank?"

Can top up using E-cashier via CPF website. Transaction amount is dependent on limit you set on your bank account.

E-cashier should be applicable to all local banks.

Steven said...

what would you say to someone who needs OA to pay for BTO?

transfer abit to SA or save the trouble, just clear the loan asap?

Unknown said...

I have been a frequent reader of your blog. Firstly, kudos to the information you have shared to us readers.
I myself have just graduated from University and stepping in to the work world soon. I understand the need to be financially smart; top up CPF-SA, investing in S-REITS, save, etc..
I have a question. How frugal should we be till we are happy.
I would like to understand the view point of yours.
I am 26 this year. I hope to get married before 35. I have read many of your articles, should i invest on s-riets or should i take care of retirement plans first.

I hope my questions doesn't sound stupidity in me.

- A guy who is not afraid of frugality, but instead unhappiness.

AK71 said...

Hi Steven,

OK, this is not meant to be any advice. ;)

The HDB home loan attracts an interest rate of 2.6% per annum. The CPF-SA money attracts an interest rate of 4 to 5% per annum. Room for arbitrage? ;p

OK, having said this, remember that the SA is a long term savings tool and the money cannot be used to pay for housing. So, before making that transfer, think carefully.

The most important consideration is whether we have enough in our emergency fund to pay for the mortgage in case we lose our job for an extended period of time.

What is an extended period of time? Most people would say 6 to 12 months. For me, it is 24 months which is super kiasu but in a very bad recession, people could be unemployed for a very long time.

For those who have not overextended themselves by buying as expensive a property as their monthly CPF contributions would allow, I think they are in a "best of both worlds" situation.

Their monthly OA contributions which are in excess of their mortgage payments, they could consider transferring to their SA to help secure a basic monthly income in their golden years. :)

AK71 said...

Hi Desmond,

Again, this is not meant to be any advice. ;)

I would get my finances in order first before I even think of investing. This is quite fundamental, I feel. :)

You might be interested in this blog post:
Graduating soon? Take steps towards financial security.

That blog post was very lucky to have very good comments from fellow readers too. So, make sure to read them as well. ;)

Building up your financial strength before getting married is a always good idea. :)

AK71 said...

From my FB wall:

SA interest is 4% while MS increasing at 6% every year. Hence if u don't use some OA to make good the shortfall of 2%, one will not hit MS at age 55.
If I miss out sth pls let me know.

The MS doesn't increase 6% every year. In some years, it is 6.5%. In some years, it is 4.5%. I believe that this is a source of concern that the government has to address. There should be some predictability since the returns on the CPF-SA is predictable. It will go some way to addressing some CPF members' anxiety.

Having said this, if we believe that the CPF-SA is a fairly attractive and worry free long term saving tool and that CPF-Life is the best annuity we have out there, we will be doing ourselves a big favour by beefing up our savings in the SA as soon as possible.

The money in my CPF-SA has exceeded the current MS by a big margin and the interest I received last year was more than enough to cover the increase in the minimum sum this year.

Compounding is powerful if we give it more time. Compounding is scalable too. Commit more funds in the early years and we will reap bigger rewards over time. We will enjoy the fruits in our golden years.

Unknown said...

Hi AK,
I must say that your words of wisdom is very informative.
CPF is also a cornerstone in my retirement and I have been advising my wife in the same manner on the importance to top up CPF-SA yearly for both tax purposes and retirement reasons.
Yes, Trust is something that is very important. reasons for trust to exist is also very important. to me, the govt had done nothing to erode that trust I have with them. Thus, it perplexes me on some ppl's reasons for any mistrust that exist.

AK71 said...

From my FB wall:

if I am not wrong, the SA 4% is not for ever and depends on govt policies, in other words govt policy may dictate that it can be less than 4%. anyone care to shed light

Due to the abnormally low interest rate environment, the government is maintaining the 4% interest rate for the SA now but the long term plan is to peg the interest rate at 1% above the 10 year SGS yield and this should yield more than 4% in a normalised interest rate environment.

AK71 said...

Hi Julian,

I believe that our government has done more good than bad. There were a few missteps in the last 10 years and they have shown that they are willing to make corrections. They have to or else, the people will show their displeasure with their votes in the next GE. ;)

When people see that something works, there is a higher chance that they will believe in it. Unfortunately, with something that takes years or decades to show that it works, it could be too late for these people by the time they turn into believers.

So, I hope that by sharing my own (18 years) experience with the CPF so far in a light-hearted manner, I will be able to do some good and inspire fellow CPF members that we can make the system work for us if we act and act soon. :)

qook said...

Hi AK, thanks for your post. I have been reading your blog for sometime, but this is my first comment. Last year I bought an annuity for $5k+ a year, for 25 years. After 10 years I would start receiving $1k a month. I happened to stumble on your blog, and realised that my so called annuity would so far worse than just topping up my cpf sa! Luckily I cut my losses at just one year premium paid. This year I will top up sa instead.

I have a question. You mentioned that once your sa balance exceeds the minimum sum, you would not be allowed to too up further. However, what about new monthly contributions from your salary? Would the portion allocated to sa still go into sa, or would it be diverted into OA instead? Thanks very much!

Unknown said...

Hi AK,
Thanks for your effort.
That few misstep in govt is true but ppl cannot expect clockwork precision in life and in running a country. Shit happens and things go wrong. Ppl can scold the govt and make noise but don't make it sound like every mistake happening in their lives are due to the govt.
Life will be boring for the govt and country if everything is clockwork. There is a reason why some foreigners deem Singaporeans and Singapore boring. Becos our govt made so few missteps compared to their own govts.
To me, govt had some misteps but such misteps are not unforgivable. And for those who think the govt cannot be trusted due to such misteps should really wake up their idea.
Again, thank you AK. nothing is free in life. I do hope that ppl visiting your blog will increase and you can make some money out of this. Not that you really care about this money, but since you may not get a medal for spreading your practical thoughts on this CPF matter. this money will be good as petty cash.... LOL....

AK71 said...

Hi qook,

Oh dear. I hope you did not lose too much money. :(

Even if we have hit the ceiling for voluntary contributions to the SA, our monthly CPF contributions from our earned income to the SA is unaffected. There is no ceiling on the SA.

However, there is a ceiling on the MA. So, if that is hit. There will be no further contributions to the MA from our earned income on a monthly basis until the next time the MA ceiling is raised.

AK71 said...

Hi Julian,

Oh, I have nothing against making money as long as it is legitimate. LOL. ;p

I hope more people visit my blog too and I will have to depend on readers like you to spread the word. ;)

The money I make from ads in my blog is good pocket money but definitely not enough if I were to depend on it for a living. Still, it is good to have. :)

A medal? I have never gotten a medal in my life! It would be surreal if I were to be given a medal by the country one day and for blogging, no less. ;p

Unknown said...

I see you guys are talking abt SA contribution limit. I thought there is no such limit. Just that one can only expect up to 7k tax relief per year.
May I have the link to the CPF website stating the limit for SA contribution?

AK71 said...

Hi Julian,

Is there a limit to the amount that a recipient can receive under the Minimum Sum (MS) Topping-Up Scheme?

For a recipient below 55 (i.e. making a top-up to the Special Account)

Yes, the amount a recipient can receive in his Special Account (SA) is the difference between the current MS (i.e. $148,000 since 1 July 2013) and his balance in his SA, including amount withdrawn from SA under CPF Investment Scheme (CPFIS).

For a recipient 55 and above (i.e. making a top-up to the Retirement Account)

Yes, the amount a recipient can receive in his Retirement Account (RA) is the difference between the current MS and RA balance.

Top up to the SA or RA.

anon said...

Hi AK,
Thanks very much for educating us the public and your readers on CPF. Very much needed clarification, re-affirmation of CPF core principles, and its effectiveness as a retirement tool.
Me thinks the CPF Board should have an in-house blogger, don't name the blog with any officious-sounding or govt-related names, clarify issues and make the CPF-related contents casual, personable, un-officious, exactly like an informal blog, and have the public follow the blog just as we do you.
This way, am sure the outreach will be more effective than having people go to the CPF website.
Don't you think it a good idea?

AK71 said...

Hi jojo,

I think it is a great idea. :D

I am looking for a retirement job. I think I will accept if I should be offered the job. ;p

Nominate me hor? LOL.

qook said...

Hi AK, thanks for your reply. I guess that would deter me from transferring my OA to my sa, as I need to keep liquidity to purchase my first home. How would you know when it is a good balance between keeping the liquidity and transferring to sa for higher returns?

Unknown said...

Thanks AK,
Don't think I will reach that amount in these few years. So I dun think I will be affected by this SA limit. LOL....
I don't mean the below in a bad way but I am just thinking aloud here: "But it is a good way for CPF to "prevent" savvy ppl like yourself from "milking" the CPF system". Instead, I hope every Singaporean can achieve hitting their SA limit... Again, Prudence and being savvy in investing is really the way forward for all. I look forward to the day where all these myths about CPF to be debunked.

AK71 said...

Hi qook,

That is a difficult question to answer. It really depends on what each person is comfortable with.

I was quite comfortable with transferring most of my OA money to my SA in the first 4 years of my working life. I didn't mind deferring the purchase of a property by 4 years.

I wanted to let the magic of compounding have as much fuel as possible very early on. I knew what it would look like 20 years later, everything else remaining equal.

People often think that they should exhaust their CPF OA to buy the best property that they could buy, betting that prices will always go up. Up till now, it seems like a good bet. What about the future? I am not so sure.

I don't want to be asset rich and cash poor. During bad times, it would be good to be richer in cash because assets could be worth less and in some cases much less. :(

AK71 said...

Hi Julian,

Indeed, you are right.

During the IPS Forum on CPF, DPM Tharman said that the CPF is meant to help the lower middle income workers more than the upper middle workers and top earners.

The caps on the various voluntary contributions and additional 1% interest on the first $60K in the OA and SA are examples of how this is so.

So, when people tell me that the CPF is a national Ponzi scheme, I just roll my eyes upwards. No Ponzi scheme I know of would ever limit contributions by their victims.

People will believe what they want to believe. -.-"

Catherine Tay said in one of my law classes before, "I hate talking to uneducated people."

I don't hate talking to uneducated people but I do find it trying to talk to opinionated people who base their opinions on hearsay and works of fiction. -.-"

Unknown said...

Hi AK,
On your last sentence. I feel EXACTLY the same way. Nicely put.

Ana said...

I was about to post that if CPF was as evil as Roy & friends say it was, they would never limit the amount of contributions from people.

It's quite amazing how uncommon common sense is!

KC said...


You on leave today ah?

pf said...

The cpf website is quite messy lor. I had a hard time finding the form and by the time i found the form, at the back states i can do online. And i only found ocbc for internet banking.

AK71 said...

Hi AK,

I know it is important to be patient with people, coming from an educator's background, but sometimes, it is just really difficult to talk to some people. :(

However, if it is a job worth doing, it is worth doing well and I will still try my best to reach out. A horse might not drink the water but we should at least bring the horse to water. :)

AK71 said...

Hi Ana,

Yes, although that is true, we should continue to be the voices of reason and try to reach out to these people especially if they are people we love and care about. So, you have to be an ambassador too. :)

AK71 said...

Hi E H,

For most of the day. I had to go to the office to clear some work though. -.-"

AK71 said...

Hi pf,

Please provide feedback to the CPF Board. Tell them to shape up or ship out! Tsk, tsk, tsk... -.-"

LC said...


My monthly mortgage installment left me.with $50 in OA. I should top up $7k annually to my SA. My question is if I do not meet the minimum sum by the age where OA +SA go to the retirement account, there is no way I can withdraw the amount that I voluntarily top up?

AK71 said...

Hi LC,

That is correct. Contributions to the SA is irreversible. So, one should think carefully if one might have need for the money in other areas now or in the future.

Having said this, there is no need to voluntarily contribute the maximum of $7K to the CPF-SA annually. It is always important to have liquidity at hand in an emergency fund and, if we are investors, in a war chest.

However, if we believe in the power of compounding and if we believe that the CPF-SA is a fairly good risk free retirement planning tool, we should consider maxing out the benefits. ;p

Even if we do not meet the minimum sum at 55, we will still be assured a retirement income for life from age 65. If something untoward should happen to us in that 10 year accumulation period, the money goes to our nominees. :)

LC said...

Thanks, AK!

Is it accurate to say that by age 65, we are able to draw a sum of money monthly from the retirement account even if minimum sum is not met?

I am a singaporean in case you are wondering am I a citizen with such ignorant questions. It is just that the phone officers are either not clear of my queries or they have a set timing as KPI to end every phone conversation from the member .

Have a good day!

Sanye ◎ 三页 said...

Hi Mr AK, you see old man no up eh? Why is your blog post only academic exercise for those beyond 50?

Those who have passed 55 can also make voluntary contribution to their RA, if their RA is less than the prevailing minimum sum. RA also enjoy 4% interest. If you make your contribution with cash, there is tax rebate too (capped at 7K per year).

If one is still working when he passes 55, this can be quite a good incentive as we may assume that his income tax should exceed 10% bracket(just my assumption).

Higher RA means higher monthly income when you reach your drawdown age. Who is against having a few bucks every month to enjoy some nice food?

If you are not working, your children can contribute to your RA and enjoy the tax rebate.

Juat an old man talking to himself...

AK71 said...

Hi LC,

Yup. We will get a monthly retirement income for life based on what is available in our RA by the time we are 65. That is the beauty of the CPF Life annuity. :)

AK71 said...

Hi Sanye,

Please accept an old man's apology to an older man. :(

This blog post has its focus on the magic of compounding and how we could grow our savings effortlessly over time. Hence, I thought of it as an academic exercise for seniors. -.-"

However, you have made very good points on how seniors could benefit in more ways than one from voluntary contributions to their RA and your comment has made this blog post more balanced. Thank you. :)

mark said...



Betta man said...

If someone meets the minimum sum of $155K at age 55 now but continues to work and contribute to CPF, does it mean that at 65, his drawn down will be more than $1200 per mth ?

AK71 said...

Hi Mark,

DPU 2.55c. Looks good. ;)

AK71 said...

Hi betta man,

If we continue to work after age 55, our monthly CPF contributions do not go directly into our CPF-RA. The contributions will go into our OA, MA and SA.

If we continue to work and contribute to our CPF accounts after age 55, we could top up our RA if the minimum sum applicable to us has not been met. :)

Unknown said...

thanks for sharing. the only concern is if the minimum sum is reached too earlier, you cannot enjoy the 7k SA top up tax relief each year anymore.

AK71 said...

Hi Lib Lib,

A happy problem. ;)

If you want income tax relief, you could consider starting and contributing to an SRS account then. :)

pf said...

I did a table. I might hit min sum in 7 yrs time. And the tax relief from this and SRS does not make enough diff in tax savings for me. Sigh.

AK71 said...

Hi pf,

Hmmm... I don't know what constitutes "enough" tax savings but I will take any savings I can get. ;p

Betta man said...

Hi AK,

If a person has already reached his min sum at age 55, does it mean that he can withdraw his CPF contribution any time he wants if he continues to work beyond 55 ?

Kyran Tan said...

Hi AK, not sure if u could help shed some light on this. Based on my own situation, I should have $300k in my SA by 55. Assuming I stop working then, how does that translate in cpf life payout eventually? Does that mean I still get only $1200 every mth or much more since $1200 is based on $155k min sum? Thanks!

AK71 said...

Hi betta man,

Withdrawal can be done once a year. I know this because my parents are in the same shoes.

However, they chose to leave their money with the CPF because they cannot get 2.5% to 4% interest anywhere else. :)

AK71 said...

Hi Kyran,

Very roughly, if you have twice of $155K in your minimum sum, the CPF Life annuity payout per month should probably be twice of $1,200. ;)

AK71 said...

Hi Kyran,

OK, too early in the morning. I think you might mean something else.

If the minimum sum required of us is $155K and we have $300K in the CPF-SA, only $155K will go into the RA. And that will eventually go into the CPF Life annuity and we will get about $1,200 a month in annuity income.

What is in excess of the minimum sum, we can choose to withdraw from the CPF at 55 or leave it in the CPF. :)

Kyran Tan said...

Haha AK, sorry to trigger your brain cells so early in the morning. In the bus travelling to work. Best time for social media-ing!
Ok may I assume another scenario (since min sum is unlikely to stay fixed at $155k due to inflation etc). Should the min sum when I am 55 be $300k (hopefully not!), does it mean that I will get payout closer to $2.4k instead of $1.2k? Am hoping to get some clues here as I can't find this sort of info elsewhere. Maybe I think too far Liao haha.

Kyran Tan said...

Oops sorry I didn't scroll up to see your earlier reply. Thanks I think u have answered my question! Thanks AK!

AK71 said...

Hi Kyran,

We Chinese people have a saying,


So, thinking far is a good thing, imo. :)

Kyran Tan said...

Yes I am kind of glad I did the same thing to transfer from SA to OA during my early years of working life. Now that I am preparing for marriage, cash is king so I probably won't have the liberty to do voluntary cash contribution.

AK71 said...

Hi Kyran,

This is what I meant when I said young working adults should consider moving OA money to their SA and if this means deferring marriage plans for a few years, so be it. It is all about thinking ahead. :)

Betta man said...

If a person leave his money in the cpf after seting aside the min sum, he can potentially withdraw the 4% earned interest every year and this can perform like an annuity from age 55. This is provided that he xfer all his OA to SA after 55. I hope i am right in the analysis.

AK71 said...

Hi betta man,

If we have already met the MS, I believe that no transfer is possible anymore.

If we have yet to meet the MS and if we should still be actively employed and contributing to the CPF, we could voluntarily transfer the OA and SA contributions to the RA then.

AK71 said...

Hi Don,

Definitely, you can. You will be helping your CPF-SA to deliver higher returns, compounded, in the coming years. :)

However, before transferring money from OA to SA, be very sure you do not have any need for the money in the OA. The transfer is irreversible.

wh said...

Hi AK,

Im a recent graduate and am trying to plan out my finance to help me into my retirement. I am just wondering if cash from the SA can be used for say buying hdb or something ? Still figuring out how CPF actually works since it's rather confusing.


AK71 said...

Hi wh,

Money in the CPF-SA is to help prepare us for retirement. It will provide us with basic retirement funding. The money cannot be used for the purchase of housing. We could use the money in the CPF-OA for that.

Go to my blog's right sidebar, at the end, you will find a box that has a few tags and one of them is "CPF". Click on it and you will see all my blog posts related to the CPF. :)

Of course, the CPF is a very big topic and the best place to go read up on it all is the CPF website: My CPF.


wh said...

Hi AK,

Thanks for the advice.

In addition, can i also confirm with you that the voluntarily cash top up into CPF SA has a maximum allowance of only $7000 ?

Been searching through the cpf website but it only mentions bout the tax relief rather than stating the maximum cash top up.

Thanks in advance.

Much appreciated. :D

AK71 said...

From my FB wall:

Assi AK:

Dao Jun, I transferred all the funds in my OA to SA in the first 4 years or so of my working life. The magic of compounding is impressive but to be meaningful, I decided to give it a bigger base to start with. It also means that the government worked harder than me to build up my retirement savings very early on in my life.

Doing what I did, if I had plans to use my OA funds for HDB payment, it would mean deferring those plans by 4 years.

There is nothing magical about 4 years, of course. Anyone could choose to do what I did but maybe for the first 2 years or 3 years of his working life (or maybe 5). The idea is to bulk up the SA very early on in our lives as working adults and let time do the rest.

AK71 said...

"Mr Wong has about $70,000 in his CPF, of which $40,000 is in his Special Account, $25,000 is in Medisave and about $5,000 is in his Ordinary Account. Every quarter, he transfers a few thousand dollars - Ordinary Account savings and cash - to his Special Account. By age 45, Mr Wong aims to have enough money in his Special Account to grow to $1 million in his Retirement Account at age 65."
ST, 14 Aug 2016.

AK says:
"Some of us might not have the financial ability to be as aggressive as Mr. Wong but even if we do a fraction of what he does, we will be financially more secure in future.
Hey, sexy S A! Oppa AK style!"

Mirage1981 said...

Hi AK,

Recently I have gotten 300k from insurances due to a health condition and I am thinking of maxing out my SA with voluntary cash contribution of $130k.

A little background about myself. I am 35 this year and have an outstanding HDB loan of $120k. After reading your blog, I come to the realisation that 4% interest rate compounding is just an amazing tool.

I have a question though. Can you help me to see if my calculations are correct? If I max out my SA today, $161k will compound to $455,600 in 20 years. That is also provided that I continue contributing $264.22 into my SA from my salary. Even if retirement sum has been met, the portion meant to go into SA will still go in right?

Lets say I finish paying for my flat and am able to grow my OA as well to $250k when I am 55.

In 20 years, $455,600 + $250,000 = $705,600

Predicting that in 20 years time, Minimum retirement sum is $261k, thus

$705,600 - $261,000 = $444,600.

Is it true that I can withdraw $444,600 from my CPF at age 55?

I read somewhere from the blog that voluntary cash contribution and the interest earned have to stay in the retirement sum until age 65 where it will be distributed as CPF life monthly payments. Thus, if I put in $130k cash tomorrow, am worried it will be stuck till 65. I will gladly place the cash in if 55 is the withdrawal age.

Can you help me to confirm this? Thank you.

Also with the remaining $170k, I am thinking of placing $60k each in my OCBC 360 account and another $60k in my wife's OCBC account. This is to enjoy the 2.25% interest and also be my liquid side of funds.

2.25% x $120,000 = $2700

The interest earned can be used for vacations so that my daughter can see the world or any miscellaneous stuff.

I am not sure what to do with the last $50k for now but am thinking of placing it into STI ETF. Will also open a poems account and place $500 of my monthly salary into it for some ETF funds.

Do you think what I have mentioned sounds like a viable plan? If not, what other suggestions will you have?

Thank you so much for your blog, I have enjoyed reading it and also planning for my future. I wished I have known about this from a younger age and started investing/saving earlier. The power of compounding would have been so much greater. Once again, thank you.

AK71 said...

Hi Marcus,

I decided to post my reply to your comment as a blog. :)

Please see it here:
Thinking of topping up CPF-SA with $130K.

AK71 said...

"Every quarter, he transfers a few thousand dollars - Ordinary Account savings and cash - to his Special Account. By age 45, Mr Wong aims to have enough money in his Special Account to grow to $1 million in his Retirement Account at age 65."
ST, 14 Aug 2016.

$1m in CPF by age 65? What about $1.2m?

AK71 said...

Reader says...
Very happy to read ur blog past 2-3 years.

Hence nw my cpf SA is gg to hit FRS by next yr and MA also max by next year too - on track to hit $1mil by age 55

32 years old this year so gonna compound at least 23 more years, honestly the numbers doesnt matter alr after 20yrs of holding becos the compounding magic just makes it become a numbers game after 20yrs!

Thank God I found your blog before I bought a house.

LOL, circumstances could have been very different

AK says...
You have cracked the CPF code!
Congratulations! 😀

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