A lot of the money in my CPF-SA is from the government. (AK reveals his CPF-SA numbers in detail for the first time.)

Following my last blog post on a reader's predicament and an earlier blog post in which I said people are naturally attracted to large numbers, I decided to share my CPF-SA numbers publicly for the first time and hope that it will have some positive impact on anyone who might still be wondering if beefing up his or her CPF-SA is a good idea.

Facebook (31/12/16).

I have been pretty consistent in my message that beefing up our CPF-SA early would help us achieve retirement adequacy in our golden years.

Even if we were to stop mandatory contributions after some time, once there is a critical mass in our CPF-SA, the interest received annually would go a long way to meeting the (much feared) annual increases in the minimum sum over time.




In my case, I significantly beefed up my CPF-SA in the first 4 years of my life as a working adult. 

That would be from my mid to late 20s. 


I transferred all the funds in my CPF-OA to CPF-SA in those years. 

From time to time, I would make voluntary contributions too.




I am 44 this year and here is what I have to show for my efforts today after 19 years in the workforce:

AK's CPF SA.

I still do some voluntary contributions which I have marked with the letters V.C. above.




As I am still gainfully employed, I still have mandatory CPF contributions. 

What I want to draw attention to is the interest paid to my CPF-SA: 

$7,651.65.

As a sum of money, it might not look like much but if we were to think deeper, we would start to look at it differently. 

What do I mean?




Now, I know that many people complain about how the minimum sum keeps increasing and how they find it difficult to meet the minimum sum running on their own steam. 

Well, many years ago, my thought went like this:

"Why not let the government help me meet the minimum sum?"

Get a 4% to 5% coupon from a AAA rated sovereign?

If I were to push the balance in my CPF-SA significantly higher, the government would have to pay me more in interest. 

The much higher interest paid to me would then go towards meeting the minimum sum required. 

Sounds good but does it work?




Well, the interest I received in my CPF-SA has been higher than my mandatory contributions to it for many years by now. 

This means that the government have been working harder than me in those years to help me achieve retirement adequacy.

Don't you like it when others work harder than we do to help ourselves?



If we look at the schedule below, I think it is safe to say that the interest paid to my CPF-SA yearly is more or less able to keep pace with the yearly increases to the minimum sum. 

So, the strategy works!

Source: CPF Board.

At age 55, I could withdraw a nice sum of money in excess of the minimum sum (instead of only $5,000) with a smile on my face. 

I would probably have an even bigger smile on my face when I recall that a big chunk of the money is actually from the government and I am not just taking back my own money.

What? 

You want satisfaction? 

Well, then, why stop at taking back our own money? 

Isn't it more satisfying to take the government's money (legally)?





Related posts:
1. Don't be stupid to top up your CPF-SA.
2. Upsize $100K to $225K in 20 years.
3. Get a lifetime income of >$2K a month.

My parents say don't be stupid to top up my CPF-SA.

Update (31 Dec 16):

A reader told me:


"If I had done this, I would have hit the minimum sum too."

Actions today, results at 55:

A lot of money in my CPF-SA.
-----------------

I do not know how best to help the reader here. 

Reader says...

Read one of your post and it says that u often tell youngsters to voluntary contribute to their CPF-SA so that it will reach the minimum sum.

I mention this to my parents, and they said that I am stupid, as withdrawal of CPF $$ is controlled by the government and we will not know when will the government raise the age to withdraw or the minimum amount. 

They still sarcastically said that putting in the bank to earn the meagre interest rate is even better as we can withdraw as and when we like.

seek your advise

pardon my bad english :)

AK says...

It could be difficult to convince anyone who is suspicious of the system. :)

I will say that the CPF-SA is meant to help us with retirement adequacy. 

So, it is not money that is meant to be close at hand, available for withdrawal whenever we might need it. 

The money is locked up till we are 55. 







What is required for the MS will be put into the RA and the excess is available for withdrawal. 

Of course, there must be excess for this option to be available.

If we beef up our CPF-SA in our younger years, we are giving the funds a lot more time to compound and grow more quickly. 

I think the magic of compound interest is easy enough to understand. 






The magic needs time and if the base is bigger, the growth in absolute dollar terms will be more substantial.

Like I said, the problem your parents have is a lack of trust in the system. 

I don't know how to make your parents trust the system. 

Unfortunately, as with certain things in life, only time will tell.

I do know friends and also family members who are deeply suspicious of the system. 

Some are actually extremely negative about the CPF, to put it mildly.

This is a problem that has to be addressed but I suspect it will not be easily solved.


Similar post:
Investing in the stock market makes you a gambler.

Related posts:
1. "Return our CPF" protest in Hong Lim Park.
2. Balancing risks, returns, facts and fallacies.
3. An(other) open letter to the Prime Minister.