$1.5m in CPF savings by doing nothing henceforth.

Reader says...
"I know you think of CPF as bonds in your portfolio and you want to grow it to reduce portfolio risk and volatility but what if you are unable to do it one day? 

"Do you have back up plan?"

AK says...
"Although I feel that I should be able to continue to do Voluntary Contributions to my CPF account yearly to reach the Annual Contribution Limit, there could be a year or two or a few when I might not be able to do so.

"After all, we cannot know what might happen in future and there could be times when my passive income takes a hit or when my expenses spike for whatever reason.

"It is a situation that I would have to accept but it is not a situation that I would need a back up plan for.

"I will blog about this and you can have a read."

Why did I say it would not be a situation I would need a back up plan for?

Well, assuming that I am unable to make Voluntary Contributions to my CPF account henceforth, how much do you think I would have in my CPF account by the time I hit age 65?

Remember my CPF accounts by end of 2018?

OA:
OA:
$538,878.

SA:
$250,783.

MA:
$55,713.




To arrive at an estimate, I shall ignore the effect of the extra 1% interest on first $60K of our CPF savings as well as the additional 1% interest on the first $30K once we reach 55 years of age etc. 

So, I would approximately have the following in my CPF by age 65 if I were to stop Voluntary Contributions from this year on:

OA:
$840,465.

SA/RA:
$508,040.

MA:
$117,378.

Remember, this is surely inaccurate and only serves to give me a rough estimate.




So, total CPF savings by age 65:

$ 1,465,883.

Or almost $1.5 million and this is all by doing nothing from now on.

This is the beauty of compound interest and having a relatively large base makes it even more beautiful.




Compound interest.

He who understands it, earns it.

He who doesn't, pays it.

It might seem magical but it is really just math.




My CPF savings is my back up plan for in case things should go terribly wrong with my investments.

It has probably reached a critical mass where it can take care of itself to do the job I expect it to do.

Unable to do voluntary contributions to my CPF account henceforth?

I don't think it is a situation I would need a back up plan for.




Related post:
AK responds to HWZ on CPF savings.