A recent table, published by the CPF Board, was circulating actively around Personal Finance social media and chat groups. The table depicts the various quantum of CPF balances across different age groups.
What caught my eye was the10 young CPF members, aged between 25 to 30 who each have a whopping half a million dollars or more CPF balance! These mega CPF rich youngsters could even breach the upper limits of 4M65 by simply continuing to work till retirement and possibly reach a much higher CPF balance than what I could have ever imagined.
Of course, it is likely that these mega CPF rich youngsters have the support of rich and generous parents (or grandparents) who wisely topped up their children’s CPF balances when they were young. Many of us, including myself, envy these rich youngsters, asking why weren’t we born to families with such foresight and resources.
This data intrigued me to ask myself: What is the maximum CPF balance that a Singaporean can accumulate in his CPF balance by 65 years old if his CPF is topped up to its max from birth? I engaged the help of several financial experts to crunch and audit the numbers for me on excel.
The Result: S$10 Million Dollars!
Yes, it is theoretically possible to achieve $10M by 65 years old. It is extremely difficult, probably near impossible, but knowing the math behind could be useful for you to strategize your CPF investments.
What would it take to achieve this? While the steps are conceptually simple, implementing them can be difficult to do.
Step 1: Top Up To Full Retirement Sum (FRS) In The Infant’s Special Account Upon Birth
Every Singaporean has a CPF account from birth. To maximize the full compounding impact of the Special Account (SA) interest rate, the parents (or grandparents) have to top up the infant’s SA soon after his/her birth to the maximum of S$186K (FRS at 2021).
The first S$60K will compound at 5% interest and the rest of the SA will compound at 4%. By doing this step for the infant, the SA will swell to a phenomenal S$2.5M upon retirement at 65, by leveraging the power of compounding.
Step 2: Consistently Contribute The Maximum Of Voluntary Contribution Every Year Of S$37,740 (Annual Limit) From Birth
To further enhance the wealth accumulation power of the CPF, the parents could top up a further S$37,740 yearly into the child’s CPF, which is the maximum voluntary contribution (VC) quantum under the current CPF policies. The VC will automatically split into Ordinary Account (OA), Special Account (SA), Medisave Account (MA) and compound at the respective interest rates of 2.5% (OA) and 4% (SA / MA).
I don’t expect the parents to continue contributing S$37,740 every year once the child starts working, as the child will be able to make his own CPF contribution then. It is assumed that the child will continue to contribute S$37,740 every year as he/she works till 65years old.
The combined effect of Step 1 and Step 2 will result in the CPF account accumulating to an astonishing S$10M at 65years old!
I have posted the excel computation of this in the 1M65 Telegram Group here for you to scrutinize. You may use it, make changes to the numbers and assumptions used, to suit your financial background, age and wealth aspiration.
Realistically, very few Singaporean will be able to meet this high target of having S$10M in our CPF accounts by 65 years old. It will probably require generous and well-to-do parents or grandparents that are gutsy and have a good understanding of the CPF compounding capacities. It will also require them to have faith in the CPF policies and the political landscape to remain stable for a long time.
Usefulness of the 10M65 Concept
The idea of knowing the astonishing upper limit of hitting 10M65 is to share with you that the sky’s the limit on CPF wealth accumulation. Most of us, including myself, will never have a striking chance of being close to having 10M65 in our CPF account. But the knowledge of 10M65 made me realise that my initial concepts of 1M65 and 4M65 (as a couple) are merely playing around the lower bounds of the wealth accumulation possibilities of our CPF. With determination and multi-generation wealth planning, we could build astonishing wealth using our CPF for ourselves and our offspring.
Multi-million CPF strategies do not require good stock or property picking skills. Neither does it come with the roller-coaster volatility of stock market fluctuations. Yet, as these are CPF based strategies, they are very controversial and highly criticized. But I hope that the 1M65 and 4M65 strategies will offer each Singaporean options to pursue a million dollar or multi-million dollar wealth goal for yourself or as a couple and even for your children or grandchildren according to your family’s level of financial comfort and aspiration.
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. Loo and Kate (his very comical daughter) also have an entertaining 1M65 Youtube video channel.
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