This blog post involves CPF talk. To spare you the agony, if you are not keen on the topic, do not read any further! I have no interest in arguing, convincing, or justifying anyone or anything here.

P/S : I do not advocate topping up of CPF. No no no. I have never done so in my life.


Once again, I am back to keep a running update of this series of CPF posts which I’ve started in 2015.

I’m definitely considered as being less than optimal when it comes to maximizing my income (I’m an idealist) so there are tonnes of other examples that are better than mine. But hey, if I can do it, that means many of you have a better chance of doing it even better than me.

Self-Fulfilling CPF Retirement Sum?

A little back story to this in case you’re not familiar. In April 2015, I came across a blog post by B who blogged about topping up $7,000 to his CPF-SA account. In his blog post, he referenced another blogger – AK71, which got me thinking.

I read the post and really liked the idea of a self-fulfilling CPF minimum sum. Why fight the system when I can make it work for me?

This was my comment back then :

Oh wow, just the blog post that I need, and thanks for pointing me to AK71. (Reading his posts now) Recently I’ve been toying with the idea of a self-fulfilling CPF minimum sum (standard amount of $161,000) <this was in 2015>, since my annual total CPF interest already pulls in around $3000+. Based on average CPF minimum sum increase over the past 12 years, which average around $6,750 yearly, it wouldn’t be that far of a stretch to achieve actually. Was this part of your thinking process as well?

This is B’s reply :

Yes that’s the thinking I would have. Assuming the average incremental for the ms is around $6,750 yearly, it wouldn’t be an impossible task to achieve if the ms is hit much earlier in the days. The interest from it alone should be able to sustain the increase eventually.

Let’s look at the historical increase of CPF Minimum Sum (now renamed to Retirement Sum) for context.

  • 1997 : $50,000
  • 2002 : $75,000 (increase of $25,000)
  • 2007  : $99,600 (increase of $24,600)
  • 2012  : $139,000 (increase of $39,400)
  • 2017  : $166,000 (increase of $27,000)

That escalated quickly.

I entered the workforce in 2007 and thought it was bad, considering I was starting at negative $20,000 net worth due to my study loan.

Retirement Planning & CPF

In an earlier post, I talked about retirement planning and what it meant it its simplest form despite being seen as a big and complex subject.

Christopher from Providend said this : “If I can reduce it to the irreducible minimum, it means this – that when you retire, you must have three things.”

  1. You must have a fully paid house. [me : check!]
  2. You must have a good medical expense insurance. [me : check!]
  3. And of course, you must have a lifelong stream of income. [me : working on it!]

1. A Fully Paid House
Technically I have not achieved this because I chose not to repay my HDB loan now. However, I have hoarded enough money in my CPF Ordinary Account to make sure that I have enough in my CPF-OA to service all the remaining 23 years of payments even if I stop working now.

2. A Good Medical Expense Insurance
Achieved via insurance plans.

3. A Lifelong Stream Of Income
I’m with veteran blogger CW8888 on this regarding the need to secure multiple sources (or “taps” as he calls them) of income. CPF is obviously one of them. Other potential sources are HDB lease-buyback, dividends from portfolio or rental income etc.

CPF interest is credited on the 31st of December every year. Like many others, I eagerly logged into my account to see how much interest I have earned and tally my CPF accounts.

In my post in 2015 and 2017, I had made projections based on very conservative estimates (salary that is assumed not to increase at all) to err on the side of caution.

This year, I’ll take the reverse stance. With the end goal in sight, it makes sense to re-adjust my projections based on reasonable estimation to optimize planning.

  • 2015 : Hit target in 15 years time (@ age 48)
  • 2017 : Hit target in 11 years time (@ age 45)
  • 2018 : Hit target in 3 years time (@ age 38)

Based on my adjusted projections as of now, I’m on course to hit my CPF requirements in 2020. Yes! The self-fulfilling CPF retirement/minimum sum.

In the diagram below, the first row starts from year 2014 when I started tracking, all the way to 2020. The cells in pink are amounts that have been confirmed by CPF. Based on the BHS and FRS requirements in 2020, it would total up to $240,500 which I should achieve by then. After that with overall interest at around 3%-3.5% it would yield enough to cover the perpetual annual increase.

The assumption, of course, is that I would not get a new apartment (BTO as second timer) in the next three years. It would require some financial engineering to retain the max amount in my CPF-OA subjected to CPF rules if that happens. On the flip side, it would unlock the massive cash value in my HDB apartment into cash which is a good thing. Win some, and lose some, I suppose.

Do note that I have not done a single CPF top-up in my life, which means this is entirely based on my mediocre earning powers and wealth-destructive actions over the last decade of my working life.

Despite my dual Achilles heels, two things made this possible.

  1. Continuous employment regardless of salary. I have drawn salaries of merely $1,000+ doing part-time work when pondering where my life is headed. Compounding is a bitch when it is working against you so every little bit counts.
  2. Buying an affordable first home (Christopher’s advice is gold) with the maximum loan period. Read this and this too. Being debt-free is a state of mind that I don’t need. Nope, no 5-room HDB / DBSS / EC / condominiums for me. No mature estates for me either.

New HDB apartments have ridiculously small kitchens so I hacked it away

Of course, this also means that I would have reached my target much faster if not for (1). But then, life works in mysterious ways. If not for (1), I might not have developed my interest in personal finance!

Challenges For The Younger Generations

It is probably easier for us to achieve this than the younger generations. From 2007 to 2017, the retirement sum has increased by $66,400. The problem with say, a graduate that entered the workforce last year in 2017 compared to someone like me who had done so ten years earlier, is that the retirement sum is now $66,400 more. On top of that, housing prices has been increasing too. Double whammy if you are planning to utilize CPF money for housing.

Take myself for example. From my figures, I’m currently –

  1. Meeting the annual increase in CPF requirements (~$7,500/yr) and
  2. Paying my share of HDB loans via CPF-OA (~$4,080/yr) plus
  3. Making up an additional $20,000 in shortfall annually.

To literally chase after the retirement sum figure, one have to put in MORE than the annual increase in requirements and any other obligations to actually make some headway or it is a losing battle.

Looking Forward

My simple plan is to make up the remaining $70,000 shortfall in three years by 2020 which will go towards supplementing my lifelong stream of income.

For 2017, I earned a total of $4,881.61 in interest from CPF @ an average of 3.3% based on my 31-Dec-2017 balance. CPF has an unique method of calculating CPF interest if you’re not aware. This is another milestone unlocked for myself as it is now higher than the amount of HDB loan repayments ($4,080) I’m servicing annually.

Little milestones lie further ahead –

  • 2018 : CPF [MA] > Basic Healthcare Sum (BHS) @ $54,500
  • 2019 : CPF [Total] > Full Retirement Sum (FRS) @ $176,000
  • 2020 : CPF [Total] > BHS + FRS @ $240,500

Never Gonna Top You Up

I don’t advocate CPF top-ups. I don’t advocate transferring of money from CPF-OA to CPF-SA either.

Yeah, the arguments supporting the actions are sound, for sure. I mean, who doesn’t like to have the power of compounding working for us?

The problem is that for each action we take, the less flexibility/security we have. It’s a trade-off ultimately.

If I top up my money into CPF, it gets locked up until I’m 55, at least.

If I transfer my money from CPF-OA to CPF-SA, what little flexibility CPF-OA has e.g. housing becomes even less. Irreversibly goodbye. For an extra 1.5%? That’s a lot to give up on.

It is a trade-off that I’m not willing to make. The more money I have locked up in CPF, the more encumbered I am to Singapore. Twenty to thirty years is a long time and things can change really quickly.

I shall end with some advice from the veteran CW8888 : “In investing, our account size really matters.” And for more CPF reads, check out the recent post by My 15 Hour Work Week for this thoughts on this issue.

Shameless Plug

I shared with thoughts (this is my second year doing so) with Aaron over at Mr-Stingy on what to expect and look forward to in 2018. Maybe you’ll like the advice from 16 other contributors in the blog post too 🙂

Remember last year when I mentioned to expect the unexpected, and learn to roll with the punches — for every single year? The crash that many predicted didn’t come, but the cryptocurrencies boom ​took the world by storm.

So lets never be afraid to learn new things and venture outside of our comfort zones. Nobody will know what’s gonna be the next “biggest thing” this year!