Today is my 49th birthday. Yesterday, I crossed S$1,000,000 mark in my CPF monies (not including the CPF used for my house). I termed this milestone of achieving S$1M at 48 years old with my CPF “1M48A” with a little emphasis on “A” for “Alone” and not combined with my spouse. I would like to share the steps that I have taken to reach 1M48A, in the hope that many more Singaporeans will become millionaires and multi-millionaires in Singapore.
In my early days of sharing the 1M65 strategy in 2015, I was heavily criticized that the 1M65 strategy was designed for a couple to each achieve S$500k at 65 years old. At that juncture, I deliberately set the bar low, so that more Singaporeans will be inspired working toward 1M65, considering that many Singaporeans cannot even meet the Full Retirement Sum of S$186k upon retirement.
However, I had pushed myself hard to outdo my own strategy. Internally, I set my mind to cross S$1M before 50 years old on my own individual account. It was very tall order! The best way to achieve it is to start early by topping up my CPF in my early 20s. However, I started the 1M65 journey much later when I was about 30 years old, only after I met my mentor and learnt about this “kungfu”. Many did not believe that it is even possible.
This is how I achieved 1M48 alone:
I Maxed Out My Special Account (SA) And Medisave (MA) In My Early 30s
This is a no-brainer: the SA and MA have a 4% interest rate that compounds powerfully over 30 years. Every S$1 put into a 4% instrument compounds into S$3.24 in 30 years. So by living frugally and diligently transferring my OA to SA and not touching my MA, I was able to meet the CPF Full Retirement Sum in my early 30s. After close to 20 years, the CPF has compounded powerfully and contributed to the bulk of my 1M48A CPF net worth. This will continue to snowball into a multi-million dollar CPF retirement fund when I cross 65years old.
I Did Not Indulge In A Private House And Stayed In A HDB All These Years
I know it is many Singaporeans’ aspiration to own a condominium or landed house. Private housing has a halo effect in Singapore in terms of aesthetics, comfort and social status. More importantly, given our land constraints, property in Singapore could appreciate. In fact, we are currently experiencing a property bull run, caused by the pandemic.
However, owning a private property comes at a huge opportunity cost of depriving your CPF of the ability to compound significantly. Most private property owners also have to leverage their housing purchase with huge property loans, which increases stress levels in times of job insecurity and reduces your job mobility.
By not owning private property, I allowed my CPF balances to compound powerfully to reach a significant 1M48A.
I Worked Two Jobs And It Doubled My CPF Contribution!
This strategy involves two lesser-known CPF policies, that I used to my advantage:
First: The only way you can contribute over the Full Retirement Sum of S$186K in your Special Account is to through your earned salary.
Second: The salary ceiling for CPF contribution of $6,000 per month is on a per job basis. This means that if you have 2 jobs earning $6,000 each, you will be able to contribute 2x 37% x $6,000 = $4,440 into your CPF every month!
Since I work in two jobs that earned above S$6,000 monthly, I am able to double my CPF contribution, when compared to another worker who earns S$12000 monthly.
Yes, it is not easy to get your employer to allow you to take on an extra job. Many companies would not allow it in the past. However, in this post-pandemic economy, taking on an extra job has become more acceptable, as most of us are working from home. Additionally, taking on an extra part-time job could provide extra job security.
My OA Investment In S&P500 Has Reaped Good Returns Over The Years
I have been very vocal about my affinity with the S&P500 and equivalent globally diversified index (on both my YouTube channel and in my writing). These funds compound very healthily (usually annualized returns of 8-12% across a long period of time), despite the occasional volatility. Coupled with my gutsy strategy of buying heavily during market crashes, I have reaped reasonably good returns from the S&P500. This has boosted my CPF position.
I Rarely Utilize My Medisave Account (MA)!
The CPF MA reaps a return of 4% annually – one of the highest amongst risk-free assets. Thus, it is to our advantage not to utilise our Medisave for any medical expenditure where possible especially when we are young. Whenever a medical expenditure arises, my preferred mode of payment would always be cash. This way I can maximise the compounding interest on my MA, even if it means having to be more frugal to replenish my cash savings depleted by medical expenses.
I Made A Little Cash Injection Using The Voluntary Housing Refund (VHR) Scheme
Actually, I kind of cheated… As of 12 Oct 2021(one day before my birthday), the total in my CPF account, including stocks and funds purchased using CPF, was about $980,000, a little short of $1 million. The recent stock market correction has set back my 1M48 attempt by a little. Nevertheless, just before my birthday hour, I made a transfer under the Voluntary Housing Refund (VHR) scheme to return S$25,000 into my CPF OA. The VHR scheme allows CPF members to return cash back into their CPF to make up for the amount of CPF that was withdrawn for housing payments, including accrued interest.
More Singaporeans should take advantage of this scheme as they near the age of 55, as they could easily withdraw it anytime after 55 years old. Moreover, they would earn at least a 2.5% interest, beating any fixed deposit rates available in the market now. So for me, this is akin to making a fixed deposit of S$25K for 7 years, earning 2.5% interest annually. Quite attractive huh?
Final Words On My 1M48A Strategy
In a nutshell, accumulating significant CPF wealth requires one to appreciate the power of compounding and the high interest rates that CPF offers. One must take deliberate efforts to accumulate the CPF funds as much and as early as possible. Besides maxing out our SA and MA, one could explore higher returns that give decent market returns like the S&P500 or equivalent investment products that CPF Board allows under the CPF Investment Scheme (CPFIS). In the 1M65 Telegram community, I am seeing more and more CPF millionaires and multi-millionaires emerging – a very encouraging phenomenon. I urge all Singaporeans and residents in Singapore to make good use of your CPF to build your wealth.
Loo Cheng Chuan, is the Founder of the 1M65 Movement. He developed the 1M65 & 4M65 CPF investment strategy that is helping many Singaporean couples to become millionaires at retirement. He runs a 1M65 Telegram Group where he regularly coaches passionate 1M65 enthusiasts on good personal finance virtues and financial market analysis. Loo and Kate (his very comical daughter) also have an entertaining 1M65 Youtube video channel
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