Looking at the past, planning for the future

CPF remains as one of my several retirement tools that I am closely watching and building up towards my retirement planning 30 years from now — a move that I am confident in not fallling between the cracks during my retirement.

Mr Loo’s concept of 4M65 or 4 Million dollars accumulated as a couple at age 65 is a very interesting proposition, which he will illustrate in his subsequent articles. At $2M per individual, an average but comfortable retirement lifestyle is still possible even if you take into account inflation — you wouldn’t be living in pure luxury, but you wouldn’t starve either. Of course in today’s dollar value is 4M65, we can ignore the argument on the numbers and future value of money, but agree on the concept. I will probably have a go at mapping out my child’s journey, who has a longer timeframe from birth.

Moreover, this $2M is just like I mention, just one of the retirement tools. We have not included other sources of retirement funds to draw down from e.g. equities, annuities.

Honestly speaking, I had not taken an interest to my CPF ever since I started working in 2011 all the way to 2016. Like taxes by IRAS, I took it very harshly as a tax by the government on my monthly income. It’s working is transparent to me as I can only “see” take-home pay as money I could spend.

2 scenarios close to my heart that I was glad such a source of funds was available at the right time. I wasn’t from a well-to-do family. An overseas education was definitely out of the books without a scholarship. My dad had worked hard all his life as a lone working parent to raise both my brother and I up, with my mum as a housemaker. CPF funds came in handy as I managed to graduate with a degree with a $26K CPF education loan.

For my first house at 32, I realised that I had the dreams but not the means to pay. Being able to foot the monthly installments wasn’t enough. You had to have the dough to foot the downpayment. There goes $117,374.44 (including housing grants) from my own Ordinary Account. That explains the large drop in CPF balances from 2016 – 2017.

I realised that money is important as a means to the end. And there are many paths to it. The main obstacle for many folks is to get started or initiating the first step. You would be surprised on the inertial to get people to actually open a brokerage account, or to spend some time reading up on investment, or to communicate and be open about conversations on finance.

So every year on the 31 Dec, CPF will prepare to send out the Yearly Statement Of Account (YSOA), something that I do not spend more than 30 sec for about 8 years of my life. Taking a closer look, the yearly contributions, whether it is employer/employee or my voluntary contribution or even the interests earned, it is and could be a substantial part of your wealth building.

Currently, my SA balance currently stands at $98,250.04, slightly more than half of 2020 FRS or 54.3% of the journey as per my CPF Balances Update – February 2020. Just a quick calculation from the employment contributions and interests earned, it is very likely that I will reach Full Retirement Sum (FRS) within the next 2 years when I am 36 years of age. I could then let the SA continue to roll, while I channel my efforts to grow my OA past the current 2.5% yield.

The main idea is to take plentiful of small, manageable steps in making a positive change for the future. I have also crafted my own Personal Finance Journey by taking into account my past experience. Now that I have looked back on the past, I have no qualms on taking much larger, more decisive steps for the future for both myself and my family.

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