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Here’s how you and your spouse could retire as a millionaire using CPF

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This article was not reviewed by Monetary Authority of Singapore (MAS) or any other relevant authorities.

Could it be? That my dream to live as a millionaire could now be a reality? Or even better, with my spouse too?

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I do not have a formula for you to become a millionaire instantly (I wished I knew), but I do have some insights to share with you in becoming a millionaire later on when you retire! (same same but different)

While retirement may still seem far away, it is good to already start thinking about it—especially when you are a young working adult.

As we all know, part of our income goes to our Central Provident Fund (CPF) accounts every month which eventually becomes our retirement savings. Hence, as working adults, what better way is there than to understand that there is actually a way to leverage on our CPF so that we could retire comfortably later?  

Read more: https://sgpinsights.com/article-4-cpf-for-dummies/

Tell me, how many times have you wished you could stop working and still live a comfortable life for you and your family? Well, that could be your reality with 1M45!

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What is 1M45?

1M45 is a movement founded by Loo Cheng Chuan where he shares about how you could become a millionaire with your CPF at 45 years old by leveraging on its interest rates. True to his words, his wife and him have already achieved S$1 million in their CPF accounts at 45 years old.

How does 1M45 work?

1. Transferring your Ordinary Account (OA) savings into your Special Account (SA)

AccountsUsesInterest Rates* (as of 2021)
Ordinary Account (OA)Housing, insurance, investments and educationUp to 3.5 p.a.
Special Account (SA)Retirement and investments in retirement-related financial productsUp to 5% p.a.
MediSave Account (MA)Hospitalisation expenses and medical insuranceUp to 5% p.a.
Retirement Account (RA)At age 55, RA will automatically be created in which your OA and SA will be combined to form your retirement fund 

* The above interest rates include 1% p.a. extra interest on the first $60,000 of combined CPF balances (OA + SA + MA), with up to $20,000 from the OA. From January 2016, those aged 55 and above also earn 1% p.a. additional extra interest on the first $30,000 of combined balances (OA + SA + MA), with up to $20,000 from the OA, thus earning up to 6% p.a. on their retirement balances.

If you refer to the table above, you would see that the interest rates for SA is higher than OA. Hence, transferring your OA savings into your SA would allow your savings to proliferate at a maximum of 5% per annum as compared to a maximum of 3.5% per annum.

As your Retirement Account (RA) would be the combined savings of your OA and SA, you would eventually yield a higher amount by doing this as early as possible.

2. Top up your SA voluntarily

Yes, you could actually top up your CPF accounts!

Extending from the logic above where the interest rate for SA is higher, you would yield even more money in your RA if you actively top up your SA!

3. Avoid using your Medisave Account (MA)

Your MA possesses the same interest rate as your SA, which means if you leave as much money in your MA, the more it will grow by the time you reach age 45.

What are the Trade-offs?

In life, there would always be trade-offs in anything that you do. Similarly, there are trade-offs when you implement 1M45 with your CPF. Hence, it is definitely good to keep these in mind so that you could make a better informed choice!

  • You cannot touch your CPF savings until you are at least 55 years old.
  • You might have to forgo some of your “wants” such as your travel bucket list or property dreams. For example, you might have to opt for minimal renovations so as to cut cost.
  • If hospitalised, you might have to avoid staying in expensive wards.
  • When paying medical bills, you might have to pay with either your insurance policies or cash as much as possible.
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As the saying goes, “There is no free lunch in the world”. Whenever you enjoy a benefit, you would also have to give up on something. However, whether or not the benefits outweigh the costs is perceived differently for everyone.

Thus, it is good to start thinking about your retirement plans now and decide if 1M45 is something you would subscribe to. Alternatively, you could also engage financial advisers to help you with this!



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