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The head of a typical HDB flat household speaks.

Wednesday, December 31, 2014

I enjoyed the following email because it seems to be from a guy who is the head of a typical HDB flat household in Singapore. Married with 2 young children, he is trying his best to make sure he is financially secure in his golden years.

From what he has shared in his email and with certain assumptions I am willing to make, I feel that he will be quite comfortable in his retirement. I am sharing our correspondence here:

Hello AK


I have been reading your blog for about one year now. Truthfully I think you have been doing a good job in sharing your money saving and investing experience. 

I am 39, married with 2 young children. We just paid off our HDB flat and happily debt free, for now. We are not high income but live simple life. We take public transport to work and our friends (who stay in EC condo & drives a luxury car) make fun of us for staying in a dilapidated flat, but your blog keeps me motivated to achieve Financial Independence (FI) soonest I can. Nothing matters, except to achieve FI for us.

You inspired me to use cash and transfer from OA to max out my CPF - SA, which is on track to hit $161,000 by Dec of 2015 based on my monthly income contribution. 

Judging by our incomes, we'll be lucky to each have about $500,000 in cash savings (not counting the flat)  by the time we turn 55.

I know you a big believer in buying S-REITS and stocks and I agree with you too. The only small issue here is that I have to spend quite a bit of time studying and hanging out with my family, so with limited time to study and select stocks, would you recommend that I just dollar averaging into STI ETF from now until I am 55 years old? Do you know people who have successfully build up a retirement nest egg with this ETF strategy ? The other issue is that ETF does not give out much dividend as compared to REITS.. 

Grateful if I can hear from you, thank you very much


When our home is fully paid, we have control AND ownership.
Before it is fully paid, we have control but NOT ownership.
We cannot say we own our apartment until it is fully paid for.
My reply to C:

Hi C,

Welcome to my blog and I am glad you have found it useful. :)

Next, congratulations on being debt free! It is a good feeling, isn't it? I don't think your friends staying in an EC and driving a luxury car are debt free. They could be, of course, but if they belong to the same cohort and have similar level of earned income as you, the probability is lower.

If your friends are still servicing a mortgage and car loan, you are being very nice not to laugh at them for being still in debt. OK, AK is being naughty here. Bad AK! Bad AK! ;p

Now, let me say that having $161,000 in your CPF-SA by end of 2015 is an accomplishment at age 40. By age 50, you would have $241,500 and by age 60, if you were to leave your funds in the CPF-SA and, of course, the mandatory CPF-RA, you would have $362,250. This is assuming that there is no more mandatory contribution from 2016 and this is also not taking into consideration the extra 1% paid on the first $40,000 in the CPF-SA. $500,000? I think you have nailed it with this strategy.

Oops, I forgot about your savings in the CPF-OA which will build up from age 40 to 55 (or 62 if you choose to retire later). ;)

As for investing in the STI, you want to read the guest blogs by Matthew Seah. Just go to my blog's left side bar and look for his name under the section that says "Guest Bloggers". Matthew wrote about options provided by POSB and OCBC.

For people who do not have the inclination nor the time to actively monitor their investments in the stock market, index investing is a pretty good choice. However, do take note that the stock market goes through bullish and bearish phases too. So, it is important that you are able to sit out bearish phases and not break into a sweat.

The trick is only to invest with money you can afford to lose and not to use money earmarked as emergency funds or for any other purposes. You do not want to have to liquidate at the depths of a bear market.

Investing will always have an element of risk. Look at the Japanese and the Americans and how their countries' economies went into a tailspin in the past. Investors saw years of gains wiped out. This is why I think that the CPF is an important cornerstone of retirement funding adequacy. It is not only risk free, it is free of volatility.

Continue with a financially prudent lifestyle. Make more money. Spend less. Keep a big enough emergency fund (and I think this should grow in size as we grow older). Invest the rest but always keep a war chest ready to buy more during bear markets. Quite simple. :)

Best wishes,

We should never laugh at people just because they are staying in homes less "prestigious" or if their mode of transportation is not as flashy. 

There are many HNW individuals in Singapore who stay in HDB flats and take the public transport.

Don't judge a book by its cover. Better still, don't judge. Just a reminder to myself, of course.

Related posts:
1. In my 40s, married with kids? What to do?
2. An essential habit to becoming richer.


Unknown said...

Hi C,

It is very common for people to believe that those who do not display abundant material possessions are not successful. To these people, nondisplay-oriented
people like you and I are their inferiors.

It is unfortunate that these people judge others by their choice in foods, suits, watches, motor vehicles, homes, and such. To them, superior people have excellent tastes in consumer goods.

Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement.

I believe that you are in a better status than many in terms of your finances. We just have to keep calm and not be negatively affected by remarks made about our lifestyle and soldier on toward FI.


Rebel said...

Stay on course C!

It's strange that folks on the island like to laugh at the peasants leading a simple life. The illusion of prosperity is deadly.

AK71 said...

Hi Rebel,

I still remember being labelled as someone with a peasant mentality towards wealth building. -.-"

To be a happy peasant.

Solace said...

I have personally known a senior who is a multi-millionaire and stay in a HDB 3 Room Flat. She has quite a few condos and properties on her hand.

I asked her: Why not stay in the Condo?

She Replied: If i stay in a condo, my friends and relatives would be expecting me to have certain lifestyles and habits that reflects my status or wealth. Such a lifestyle goes against my financial principles.

Much food for thought. My respect.

WTK said...

Hi all

In my personal view, people like to compare with one another on the type of lifestyle. When one (being frugual & having a simple lifestyle) differs from the usual norm, the majority will try to criticise this person of being mean to him/herself. Some of the criticism will go to the extent in which this person will not be able to bring the accumulated wealth wuth her/him when he/she pass on.

I think that the criticism made by this majority is to the extreme.

I am of view that each person has his/her right on how he/she leads his/her preferred lifestyle.

My two cents worth of views.


C said...

Hi All

Thank you for your kind words and encouragement.

This journey is all fun for me & my wife. Our end goal is just to give one of the best gifts we can to our kids (besides education), which is achieve FI and not having them to support us so that they are free to pursue their career & build up their own families.

CPF is the cornerstone, or what I called my last line of defence. If possible, try to meet the minimum sum asap so that compound interest can work its magic. This so that we qualify for the monthly payout via CPF Life upon hitting 65 yr. Some may say the monthly payout is so little. But at age 65 with no debt, paid-off flat and kids already working, I think it should be sufficient.

Wishing Ak & fellow readers a prosperous and happy new year ! You guys are a amazing group of people.



caelitus said...

I will like to share my example. I am 36 in 2015. Up till the age of 27, I squandered my savings and monthly income. It took a while but I got down to managing my cash flow to build up my reserves. At 34, I topped up SA using cash to meet the prevailing Minimum Sum. It was painful but i found it necessary. I am even more convinced when I calculated the result at the age of 60. I encourage everyone to view the SA as a bond component of your portfolio to build your retirement savings. The magic is in the compounding effect over time. It is a pity I did not do it earlier but better late than never. I can choose to withdraw the excess over MS in the future or leave it to continue.

AK71 said...

Hi caelitus,

Thank you for sharing your story with us here. I really appreciate it. :)

Yes, the CPF-SA should be viewed as a very long term bond guaranteed by a AAA rated sovereign. This bond has a twist when we reach age 65 as it morphs into a lifelong annuity.

I believe this product is unbeatable as it is risk free and free of volatility. In planning for our retirement, we need such high level certainty. :)

Unknown said...


caelitus said...

We always hope that when we share our experiences, somebody will learn from there and avoid the pitfalls or help to refine our thoughts by pointing out something different.

I have been advocating the wonders of SA and SRS to my friends and colleagues. I am happy a few have started their SRS accounts in 2014. I find that depiction of the benefits using spreadsheets is useful. SRS is an important second component of retirement planning.

Thank you for inspiring other people to learn from you. Next up, I wish to share with them about the wonder of managing one's cash flow.

AK71 said...

I would always encourage home ownership but it must not be home ownership at any price. It has to make financial sense.

Consumption when we have to stretch our resources very thin is not a good thing. Consuming when we do not have the resources to do so is worse.

C said...

Hello AK Shifu

It's been over 6 years since you blogged about my financial life story in your above 31 Dec 2014 -"the head of a typical HDB flat household speaks"

In your reply, you estimated my SA should reach $241,500 when I am 50y. Surprisingly my SA is $250,000 at my current ripe old age of 46y old, this due to my work contribution and yearly cash top up to 3 cpf accounts, no magic but just boring perseverance. My wife also took my advice to transfer OA to SA in the past 10 years or so, both of us can't top up SA anymore as it has reached contribution limit.

The friend who sneered at our hdb flat has lost his job a few times since then, but managed to get back to his feet everytime. I really admire his resilience. He still stays at his OCR condo and continues to drive his european car. Wife continues to be homemaker since their second child came along.

Sadly in the past 4-5 years, this friend of mine has been going around taking small loan from his friends, which i came to know as one of his creditors is our common friend. We are not sure why he resorted to taking small loans, but despite all these he seems adamant in keeping his rich men toys.

As for me, i still stays in my hdb flat (paid off when I was 38y) and continue to take the bus to work everyday.

have a prosperous new year

AK71 said...

Hi C,

Thank you for the update.

Very happy for you. Gong xi gong xi! :D

Unfortunately, there will always be people who want to keep up appearances but how is going around borrowing money from friends going to help?

You blur? I also blur.

You are a good example of what being financially prudent can do for us. :)

Reminds me of another story:
More passive income than richer friends.
"There are also many people who stay in private properties and who drive luxury cars to look rich."

Happy CNY! :D

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