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1M45: Reaching $1 Million In Our CPF By Age 45 – This Is How We Did It

Accumulating $1 million as a couple for retirement requires early planning, hard work, frugality, and sacrifices. But it is very possible.

This article was contributed to us by Loo Cheng Chuan.

The year 

2018 was a milestone year where the combined CPF savings of my wife and I crossed S$1 million. Since we are both 45 years old, I termed this milestone: 1M45.

In this article, I hope to share our journey towards this 1M45 goal, and also to encourage my fellow Singaporean friends that accumulating a S$1 million retirement fund (especially 1M65) is possible with your CPF.

# 1 Harness The Power Of Compounding In Our CPF

In our late 20s, my wife and I started transferring from our Ordinary Account (OA) to our Special Account (SA), effectively increasing the yield from 2.5% to 4% per annum.

At 4% interest per annum, $100,000 invested into our CPF-SA 15 years ago would “snowball” to more than $180,000 each today! Moreover, the CPF contributions that we continue to make from our monthly salaries from our daily jobs would make the “snowball” even larger.

It is worth noting that a person with a monthly salary of $6,000 would have in excess of $750,000 in their SA alone when they retire at 65 years old, if they were to follow my strategy of CPF-OA to CPF-SA transfers when they were younger.

# 2 Actively Top-Up Our SA With Cash Transfers

Possessing a deep appreciation of the strong compounding power of the CPF-SA, I took a very unconventional approach towards CPF top-ups: I performed voluntary top-ups of my CPF-SA using most of my annual performance bonus.

With a larger base to compound, our SA balance would accumulate much faster. It took a lot of conviction and guts on our part to move liquid cash into illiquid CPF as it meant forgoing the precious year-end holiday with the family, or savings that could have gone towards a nice condominium that we see our peers moving into, or not able to give ourselves a special treat after a year of hard work.

But having tasted the fruits today, I am happy to spur you on and let you know it is all worth it in the end.

Read Also: 5 Reasons Why You Should Top-Up Your CPF Special Account

# 3 Forgoing The Property Dream

At the start of our financial journey, my wife and I decided that compounding our CPF balances was one of the best way for us to build our wealth. Therefore, unlike many of our peers who chased the property dream of buying condominiums and landed homes, my wife and I applied for a rather affordable new flat in a non-mature estate (Punggol) back in 2001.

We were also thrifty and spent no more than $12,000 on our home renovation. Whatever spare cash or CPF-OA monies that we had, we would actively transfer them to our SA until we hit the CPF Minimum Sum (now known as Full Retirement Sum, FRS).

Since then, we have always stayed in HDB flats to allow our high-interest paying CPF balances snowball significantly.

# 4 Avoid Using Our Medisave Balance

Did you know: the CPF Medisave Account (MA) also yields 4% interest per annum. Upon learning this, my wife and I decided at a early phase of our life to minimise the use of our MA monies.

Whenever we encountered hospital stays or clinical treatments that allowed the use of Medisave, we would avoid staying in expensive wards, streamline medical treatments, and co-pay with our term insurance or pay with cash whenever we could afford it. Minimising the use of our MA monies has allowed us to yield generous returns of 4% continually over the years.

# 5 Buying The Dips: Capitalising On Stock Market Crashes With Our CPF-OA

After maximising our Special Account and Medisave Account, we grew increasingly unsatisfied with our CPF-OA’s interest rates of 2.5%.  With a strong financial safety net built up in our CPF-SA and MA, we took advantage of several stock market crashes (2008 Great Recession, 2012 Europe Debt Crisis & 2015 China Stock Market Crash) and invested our CPF-OA balances into several index funds and blue chip stocks.

The returns have been healthy over the years and have also helped us to work towards our 1M45 goal.

Can You Do It Too?

In many online discussions about 1M65, there is a noticeable group of skeptics who think that accumulating S$1 million in one’s CPF is impossible.

As I have articulated, the process toward S$1 million in our CPF account is certainly not a walk in the park – it requires early planning and a lot of personal sacrifices. After more than 15 years of hard work, frugality, and sacrifices, we are very comforted that our combined CPF have surpassed S$1 million and are going to continue to accumulate at an exponential rate.

If attaining S$1 million in our CPF accounts by 45 years old is possible, then 1M65 would be an even more attainable goal for those who are willing to work hard and make the necessary personal sacrifices.

Loo Cheng Chuan is a father of three and founder of the 1M65 movement. To find out more about the 1M65 movement, you can watch our DollarsAndSense Tonight interview with him: