If you ask anyone on the street, “How much do you need in order to retire?” The answer would probably start at S$1 million. And that’s ignoring the current financial status of the individual or real-world stuff like inflation.
As young working adults with little to no liabilities or responsibilities, we’re all guilty of splurging on life’s simple pleasures over saving for our retirement. After all, retirement seems so far away…
More often than not, we cook up 1,001 reasons why our expenses keep exceeding our budgets and end up putting off saving till the “next month”.
But did you know that we have a financial tool that can help us accumulate S$1 million by retirement?
Yep. We can use our CPF accounts to save $1 million by 62 years old!
Note: According to the Retirement and Re-employment Act by the Ministry of Manpower, Singapore’s retirement age is 62 years old.
Disclaimer: All information presented is accurate as of the date of publication.
Is It Possible To Use Our CPF To Become A Millionaire?
Did you know that apart from CPF’s 2.5% to 6% interest rate per year, we are also able to withdraw our Ordinary (OA) and Special Account (SA) savings above our Full Retirement Sum (FRS) of S$176,000 in 2019, anytime above 55 years old?
This means that our CPF is similar to a high-interest yielding savings account.
If you wish to calculate the FRS when you finally turn 55 years old, check out this simple formula for a rough estimate.
S$1 Million By Retirement: Is It A Pipe Dream?
She is currently 23 years old and has just started working.
Here’s some more information about her:
- Her salary is S$4,437^ including her employer’s CPF contributions (this was based off the median salary of Singaporeans which is S$3,792.31 excluding her employer’s CPF contributions)
- We’re going to assume that there’s no inflation and Sally, unfortunately, does not receive any pay raise or performance bonuses for her work (if you need help asking for a pay raise, we gotchu)
- The calculations below only take into account the base interest rate of 2.5% for OA and 4% for SA and MediSave Account (MA)
- Sally also chooses not to use her OA and MA monies at all (meaning she does not use her OA to purchase her BTO or Dependants Protection Scheme and neither does she use her MA to pay her annual MediShield Life premiums, etc.)
- Lastly, we’re also assuming that the CPF contribution rates are fixed:
|CPF Contribution||Contribution Rates*
(% of Total Salary)
|Total % Of Your Total Salary|
(including employer's CPF contribution)
|20% + 17%
(Self + Employer)
*Note: CPF contribution rates change according to different age bands in order to cater to different needs at different life stages.
^CPF contributions are computed based on total salary earned by an employee in a month. Hence, CPF contributions are computed based on the total salary of $3,792.31 (which excludes employer’s CPF contributions of 17% of total salary i.e. $644.69).
Sally’s Monthly CPF Contribution
We’ve established earlier that Sally’s salary (excluding employer’s CPF contribution) is S$3,792.31.
Using CPF’s Contribution Calculator, here’s how much goes into her CPF every month:
|CPF Contributions (1% of Salary)||Monthly Contributions|
|By Self (20%)||$758|
|By Employer (17%)||$645|
|Total CPF Contribution (20% + 17%)*||$1,403|
*The above CPF Contribution rates are only applicable to Private Sector employees and Public Sector non-pensionable employees who are Singapore Citizens and Third year and onwards Singapore Permanent Residents (SPR), earning a total monthly salary of $750 or more.
And here’s the breakdown of how much goes into the various accounts in her CPF:
|CPF Amount Contributions||Monthly Contributions|
|Total CPF Contribution||$1,403|
Sally’s Retire A Millionaire Goal
- To accumulate S$1 million in her CPF accounts by the minimum retirement age of 62 years old
- To do it by herself – yes, we believe that everyone should be responsible for their own financial well-being!
So, When Will Sally Achieve Her Goal?
We did the math and… she’ll be a millionaire by 56 years old!
To be exact, Sally’s total CPF accounts will amount to a little under S$1.01 million. And that’s wayyyyy earlier than when we expected her to do so.
We’ve also not even taken into account the extra 1% interest that she’ll earn for the first $60,000 in her CPF accounts (up to $20,000 from her OA), plus the additional interest of 1% on the first $30,000 of her CPF balances when she turns 55 years old.
Here’s a breakdown of how much Sally will have in her CPF accounts:
|CPF Account||Amount at Age 56 Years Old*|
|CPF SA||S$194,000 + S$201,800|
|CPF MA||S$57,200 (capped)|
|Total Amount||S$1.01 million|
*Figures are rounded to the nearest hundredth.
In case you’re wondering why S$201,800 was added to Sally’s SA: the Basic Healthcare Sum (BHS) in 2019 is S$57,200. For members below age 55, anything in excess of BHS will overflow into their SA if they do not have the FRS.
The BHS will be adjusted yearly for members who are below age 65 in each year to keep pace with the growth in MediSave use by the elderly, especially with rising life expectancy and healthcare costs, as well as expansions in MediSave use. Once members turn age 65, their BHS will remain fixed.
In Sally’s case, we will use the BHS in 2019 (although it should be much higher by the time Sally turns 55) and assume that S$210,900 overflows into her SA.
If she continues to let the amount roll until she hits the minimum retirement age of 62 years old, Sally’s total CPF accounts will amount to about drum roll S$1.3 million.
Here’s a breakdown of how much Sally has in her CPF accounts at 62 years old:
|CPF Account||Amount at Age 65|
|CPF SA||S$264,000 + S$295,000|
|CPF MA||S$57,200 (capped)|
What If Sally Wishes To Save S$1 Million Together With Her Partner?
It’ll be even faster! Duh.
Assuming Sally and her partner are of the same age, profile, and contribute to CPF religiously without taking a single cent out… We did the math, and they’ll achieve their combined millionaire dream (at least S$500,000 each in their respective CPF accounts) by 44 years old!
How Can We Get To Our First S$1 Million FASTER?
Kudos to you if you’re still here after going through all of that math. Now, here’re some ways which you can reach S$1 million earlier using your CPF account:
1. Transfer Funds From OA To SA
Did you know that by transferring your OA balance to SA, you will enjoy 1.5% more interest? This is because of the SA’s higher interest rates. However, this move is irreversible. So you have to be 100% sure that you won’t need your OA monies for housing or any other uses before going ahead with this transfer.
2. Top Up SA (And Get Tax Relief Too!)
You can also top up your SA with cash to build your retirement nest egg even faster.
By doing so, you’ll also enjoy tax relief for CPF cash top-ups (read: reduces your taxable income). The maximum tax relief for cash top-ups made to your own SA or RA is S$7,000 per calendar year. If you are also making cash top-ups for your loved ones, you can enjoy additional tax relief of up to $7,000 per calendar year. This makes a total of S$14,000 eligible for tax relief.
Think of it as the government giving you money because you decided to save more money for your retirement. Now that’s a pretty sweet deal.
Our Closing Thoughts
If you’re trying to figure out how to retire with at least S$1 million, this little exercise that we did with Sally paints a pretty optimistic picture.
Granted, there are some assumptions at play. There’re a lot of sacrifices to be made in order to achieve your ideal retirement nest egg like how Sally did.
Basically, you can’t touch the money in your CPF at all – you’d have to pay for your home in cash and avoid using your MA completely – and just allow compound interest to work its magic.
But hey, it does prove that CPF is a viable instrument which you have the option of using to its fullest extent when making your retirement plans.
What steps will you take in order to achieve your S$1 million? Let us know in the comments below!
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