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Retiring by 40 is a fantasy for most and AK talks to himself.

Wednesday, October 27, 2021

Imagine a guy in Singapore who is in his 20s.

Imagine he is in love with a female and they decide to get married right after graduation.

Imagine they decide to buy a flat or a condo right away.

Imagine them having 2 or 3 children in the next three years.

Imagine the wife becoming a stay at home mom after having their first child.

Imagine them buying a family car.

Can they retire early?

Well, if they are born with silver spoons in their mouths, yes.

Otherwise, early retirement is highly unlikely unless they got very lucky.

The title of this blog might look familiar to some readers because part of it is taken from a much longer title from a recent article in Today.

Links to financial planning sites littered that article but I guess that is normal since Today isn't a hobbyist blogger like AK.

Anyway, if we want something and if we don't plan it right, we won't get that something.

So, if an early retirement is what we want, then, we must know what will help and what won't.

How to achieve early retirement?

In a nutshell:

Build wealth and avoid wealth destruction.

In more than a decade of blogging, this is something I have blogged about extensively.

I won't rehash since I am lazy.

Instead, I will point interested readers to some blogs here in ASSI which might provide food for thought.

Finally, we need insurance but know what is necessary and don't overpay.


To be fair, retiring by 40 was a fantasy for AK too.

AK only retired a few months before he turned 45.


There are so many blogs in ASSI and I might have missed some useful ones. 

However, the above blogs should be good enough to make many readers lose sleep for many nights.

Jokes aside, for an average person in Singapore who wants an early retirement, it isn't impossible.

It does need good planning and disciplined execution.

Now, why is an early retirement a fantasy for most in Singapore?

If AK can do it, so can you!

Believe it!


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Chasingdreams said...

I am in my early 30s. I am planning/hoping to reach FI when I am 42-45.
After which, I would most likely switch career to pursue things I like.

Bearing no incidents, I should be able to hit FRS in SA by end of next year and full MA in about 2-3 years later. I did a calculation today. Even if I stopped any form of CPF contribution when I am 45, I would still have more than a million in my CPF when I am 65. This requires discipline (topping up SA, MA and transferring OA to SA) and aggressive savings, but as the saying goes, ć…ˆè‹ŠćŽç”œ.

From 45 onwards, I would be able to do what I want (whether I choose to continue working or reach semi-retirement) and this makes me so excited! :)

AK71 said...

Hi sugarhoney,

I have been there and I know exactly how you feel now.

Trust me, it will all be worth it when you finally are able to do whatever you want and not have to worry about money.

There is immense satisfaction to know that you did it because you planned well and stuck to the plan through good and bad times. :)

Gambatte! :D

1. CPF SA savings 10 years from now.
2. 1M50 CPF millionaire in 2021.
3. Free ourselves from wage slavery now!

laurence said...

AK's ASSI Blog is The Ultimate Early-Retirement Planning For Dummies !!!!!! ;)
It's practically the Aladdin's Lamp that makes all our wishes come true !! 0:)

AK71 said...

Hi Laurence,

Eh, ASSI is more Aesop's Fables than Aladdin's Lamp, I feel. ;p

For example:
To be a happy peasant.

"For me, to move from a time when I was dependent on my monthly wages to meet my living expenses to now when I no longer have to is an achievement."

Gambatte! :D

john said...

Wfm is almost like retirement to me but may not last.

AK71 said...

Hi John,

That is a new one to me.


What is that?

SgFire said...

This remind me to set aside money for srs and VC cpf

john said...

wfm is work from home

AK71 said...

Hi SgFire,

For anyone who is paying income tax and wishes for F.I.R.E., the SRS is a relevant and useful tool.

CPF members should try to max out the benefits of their membership, definitely.

Huat ah! :D

1. Why join the SRS?
2. 4 ways to beef up CPF savings.

AK71 said...

Hi John,

Oh, I thought work from home is WFH.

I understand now. :)

Henry said...

Wfm is Work for Myself lah. :)

Henry said...

Good AK. Thanks for sharing all these years. I reached my milestone this year.

AK71 said...

Hi Henry,

WFM stands for "work for myself"?

I like the sound of that. :D

Congratulations on hitting your milestone! \o/

garyp said...

I made a choice when i turned 35yo, drastic move in my terms. Over the yrs, i've topped up my SA with 32k. At the age of 35, i trfr my OA over to SA. So my OA now is kosong, any balance will trfr to SA. This is the choice I made. Everyone is living longer, i feel we shd be responsible person b4 anything. Settle ur health and CPF at the v least. Anything else is secondary. May I ask u 2 thing AK, 1) how much one shd ideally have in SA at the age of 35yo for compounding to work its magic? 2) What r ur views on the govt extending CPF withdrawal. Thank alot!

AK71 said...

Hi garyp,

You have made a bold move and if you have done so with full knowledge of your own circumstances and needs, then, I congratulate you. :)

I cannot comment on whether you were right or not or how much one should have in the SA at at age 35 because all of us have different circumstances and even goals.

For example, I actually have a blog like this one:
Topping up CPF savings can wait for some.

As for CPF withdrawal, it is a fact that we are all living longer and we are fortunate that our government is not only aware of this but decided to act by coming up with CPF LIFE.

Not allowing CPF members to withdraw all their CPF savings at age 55 is the right thing to do because when that withdrawal age was set so many decades ago, longevity was not what it is today.

"When the CPF system was introduced in 1955, the retirement age was 55. Life expectancy then, was between 60 and 62. Today, for those turning 65, one in two will live beyond 85, and one in three will live beyond 90."
Taken from this blog:
IPS Forum on CPF.

I agree with you that all of us have to take ownership of our retirement funding and one thing we can do as responsible adults is to make sure our CPF account becomes a strong cornerstone towards this end.

Even those of us who are savvy when it comes to investing for income should consider taking full advantage of our CPF membership if we can.

"While the CPF is not an equity and isn't a bond in the purest form, I do consider it an essential part of my portfolio."
Taken from this blog:
Largest investment updated.

garyp said...

Thanks AK, I meant how much do I have to have in SA at age 35, so that it will still hit FRS at age 65 even without any contribution? I been following u for so long :)

AK71 said...

Hi garyp,

Ah, I see.

When we hit 55, the prevailing FRS then will apply to us.

I am sure you know that at age 55, the prevailing FRS goes into our newly created RA.

We won't know for sure how much that is until we hit 55 years old, however.

The only thing we can know almost for sure is how much you would have in your SA at age 65 assuming you stop contributing to it today.

See my example:
CPF-SA savings 10 years from now.

Some blogs which you might be interested in:
1. Rushing CPF with 11 years left to 55.
2. FRS by age 35.
3. Want to withdraw $500,000 at age 55?

garyp said...

But safe to say increment by inflation rate of 1.5-2% pa?

AK71 said...

Hi garyp,

It is a reasonable assumption but this pandemic has taught us that unreasonable things can happen and they are totally beyond our control.

Still, what you have done is creating a reliable safety net and it is better to have than not.

I don't know how much you have in your SA account now but for sure you are making the government work harder to help you meet the FRS. ;)

"Could the interest earned, in fact, be higher than the increase in FRS?

"Definitely, it could or, at least, that has been my experience.

"The CPF-SA can actually continue to grow without additional effort on our part!"

Taken from:
CPF-SA is not a free lunch but it is not a myth!

ommmph said...

Hi Ak, given that you have been gaming quite abit, what's your thoughts regarding the whole play to earn gaming, NFT development? Cheers

AK71 said...

Hi ommmph,

Hope I got the number of "m" correct in your name. ;p

I am not a fan of crypto and I play games to have fun.

So, I guess that sums up my attitude towards "play to earn gaming."

1. My final word on Bitcoin and friends.
2. AK is a full time gamer!

Storm said...

Hello AK!

For those who have achieved the full minimum sum in SA of $186,000, how else can that that figure be increased?

Any other strategies other than the compounding effect and default CPF contributions from one's salary?

We can't top it up anymore right? Thank you in advance for your tips!

AK71 said...

Hi Storm,

Once we have hit the FRS in the SA, we cannot do top ups anymore.

If our annual mandatory contribution falls short of the annual contribution limit, we can do voluntary contribution to hit the limit.

We can also do voluntary contribution to our CPF MA to hit the prevailing BHS to enjoy 4% interest per annum.

If we use CPF-OA savings to help pay for our home, we can do voluntary refund to our OA to enjoy 2.5% interest per annum.

I think that's about it. :)

Oh, there is another way but not everyone can take advantage of it and it is in one of the blogs below. ;p

1. 4 ways to beef up our CPF savings.
2. Parents' CPF, voluntary refunds etc.
3. How younger members can get 6% per year from CPF?
4. Voluntary contribution to CPF.

Siew Mun said...

AK, In CY2022, there are changes to CPF that will allow u to get more income tax relief thru tops up
1. Max of $8000 income tax relief for topping up to MA up to Basic Health Sum
2. Topping up to MA up to BHS is not part of annual limit $37,740
So consolidate all your family members CPF integrated healthshield premium for u to pay. Once u paid the premiums top up to MA
Secondly BHS will increase every year. Top up your MA to BHS in Jan before your monthly CPF contribution around Jan 14.
I know u don't pay income tax, but come Jan u can top up your MA to BHS + $37,740. And if u use MA to pay for IHP, U can top to BHS after u paid the premiums.

gagmewithaspoon said...

Hi! how about topping up MA? Should we max out MA on 1 January? during the year, I do get MA contributions from my job and sometimes I do use MA funds for my parents / children.

AK71 said...

Hi Siew Mun,

Thanks for the updates. :D

Some of my blogs on CPF will need updating. ;p

AK71 said...

Hi gagmewithaspoon,

Oh, voluntary contribution to the MA is always a good idea if yet to hit the BHS. :)

SnOOpy168 said...

Thanks Siew Mun. Your summary of the updated CPF rules, helps.

So in short, I can pump VC into MA, upto $8k or BHS, and this is not part of the AL of $37,740. Correct ? If I pump $8k and this will exceed the BHS, still tax deductible and flow to OA ?

Would have loved to VC to all 3 account, to put some more $ into the SA and earn 4% (rather than 2.5%)

Gerard said...

Hi SnOOpy168,

You won't be able to pump VC into MA beyond BHS. For eg, if you are currently 5k short of BHS, the system will only allow you to inject 5k (not 8k), and accordingly the tax relief for such a top-up is only 5k. What you could do is wait for ISP / CSL deductions and then VCMA right after that.

gagmewithaspoon said...

Hi Gerard, so if we are 5k short, then we put in 5k at beginning of year, but throughout the year I get money flowing into MA because of contribution from my job. then it will be above the BHS right? So what happens to the excess?

AK71 said...

Hi gagmewithaspoon,

I believe that once our MA has hit the prevailing BHS, our monthly mandatory CPF contributions for the rest of the year will go to our OA and SA only.

MA will not go above the prevailing BHS.

AK71 said...

Hi EX,

You have to decide for yourself if you want something that is risk free and volatility free?

Or maybe you can stomach some risk and volatility for higher returns?

In options 1 and 2, the CPF is both risk free and volatility free.

In option 3, possibly higher returns but there is risk and volatility.

I would go for option 4 (i.e. SRS) only if I cannot have options 1 and 2 because the SRS interest is very low unless I am thinking of using the funds to go with option 3.

Apart from the first section, the following blog might be interesting to you:
Parents' CPF, voluntary refund to CPF and don't do silly things.

Maybe, this blog too:
Use CPF-OA or cash to pay for HDB flat?

OK, maybe this too:
Win and win again with SRS.

I think that's all I can recall. ;p

Blur Sotong said...

Haha!! Cpf always gets us all up in arms and some, feet. Cpf is our bond portfolio.

Blur Sotong said...

For those whose MA = BHS, Siew Mun idea of consolidating premium of family member to basically deduct as much as possible so one can top up as much as possible to MA is a great idea. Problem is that premium payment is latter part of the year while ideal top up is in Jan. But the opportunity is only lost in the first time in this strategy over the years.

AK71 said...

Hi Blur Sotong,

We can have our pie and also eat it (eventually.) ;p

CPF is a pie!

Unfortunately, the pie might not be to everyone's taste.

Unhappy with CPF and angry with AK!

AK71 said...

Hi EX,

Of course, I am just talking to myself, as usual. ;)

May the Force be with you.

(I am playing "Star Wars: The Old Republic" now.) ;p

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