Category Archives for Retirement

The most important lesson from Mr CPF, Loo Cheng Chuan (that nobody talked about)

I've heard Mr CPF, Loo Cheng Chuan speak on multiple occasions so far. In his recent talk at an event organised by Endowus, he mentioned a very important lesson about financial independence that was rarely highlighted in articles about him.

Who is Loo Cheng Chuan?

In case you have not heard of Loo Cheng Chuan, here's a quick recap.

Loo Cheng Chuan is your typical Singaporean. Married with 3 children, he created a financial safety net for himself by topping up his CPF Special and Medisave Accounts at an early age, and just let it compound over a long period of time to over half a million dollars. Combined with his wife, they have over 1 million dollars in their CPF accounts since reaching 45 years old, and on the way to a multi-million CPF accounts when they retire at 65 years old. He founded a movement called, 1M65 to encourage Singaporeans to inspire Singaporeans that they can get very rich with CPF.

To date, Loo has shared his story at 71 speaking engagements and he has not received a single cent in payment for his talks. He has also been interviewed by several media and blogs about his feat.

What was your dream job as a child?

Don't we all have dreams and ambitions when we were young?

Maybe you wanted to be a professional soccer player, a crime-solving police officer, or even a world famous musician.

But for most of us, we did not chase after our dreams because they get chiseled away, a little at a time as we grow up, by reality.

Many of us ended up in jobs we may not be passionate about, but they pay the bills. 

Having a strong financial safety net allows you to chase your dreams

Here's something I felt that wasn't given enough emphasis in articles about Loo.

The fact that having a strong financial safety net, knowing that you have a million dollars waiting for you at the age of 65 without the need to do anything more, means you are now free to chase your dreams.

Having read through tons of articles and books about retirement planning, I felt this was an important point that deserved more focus.

Loo chased after his business passions

With a strong financial safety net in place, Loo pursued his business passions.

When I heard Loo speak at the Seedly Personal Finance Festival 2019, he talked about founding the 1M65 movement and starting an online business with his wife to sell leather bags.

Fast forward to almost a year later, he and his wife passionately founded a Luxury Fashion Business. Furthermore, he has invested in several startups and holds director or management-advisory positions in several companies.

According to him, his strong CPF safety net has made his multi-business endeavours much easier. If he did not have this financial safety net in place, I imagine he would still be working in a 9 to 5 job, like most of us.

What are you doing to build your financial safety net?

While I like my CPF Special Account for its stability and guaranteed 4% interest rate (until the government announces any policy changes), it's not my only retirement planning tool.

My financial safety net consists of my CPF accounts, investments made through my Supplementary Retirement Scheme account, cash investment portfolio in AutoWealth and my rental property in Cambodia.

What's your financial safety net like? Please share them in the comments below.

How a Singaporean accumulated CPF Full Retirement Sum in his Special Account by the age of 34

Last Wednesday, Daniel, a 34-year-old Singaporean wrote a post in Seedly's Facebook group to share how he managed to achieve the current CPF Full Retirement Sum of $181,000 this year with screenshots of his CPF account balances as proof.

Screenshot of Daniel's CPF Statement

Shocking? Let's break down the details to understand how Daniel did it.

How it all started

When Daniel was 29, he read the Secrets of the Millionaire Mind by T. Harv Eker and a series of blog posts on A Singaporean Stocks Investor (ASSI) about CPF.

He was motivated to set a series of financial goals for himself to improve his financial situation. One of his mid term goals was to achieve the CPF Full Retirement Sum with his CPF Special Account by the age of 40. He has only one job and doesn't have any side hustles.

Here's how Daniel did it

Like all Singaporeans, regardless of our financial status, we have 3 methods to increase the balance of our CPF Special Accounts.

  1. By working to get 6% (age 35 and below) of our total monthly wages into Special Account.
  2. By transferring money from Ordinary Account to Special Account (before age 55) to tap on the 4% interest rate that Special Accounts earn.
  3. By making cash top-ups to Special Account (before age 55) through the Retirement Sum Topping-Up Scheme (RSTU) to make a direct impact to the account balance.

In Daniel's case, he made use of all 3 methods to grow his CPF Special Account and that required 6 years of disciplined saving and meticulous planning, laser-focused on the single goal of achieving Full Retirement Sum.

On top of full-time employment, Daniel did a combination of cash top up and OA transfer to achieve Full Retirement Sum in his CPF Special Account

Referring to the table above, Daniel started with a $3,000 cash top-up through RSTU and $10,000 transfer from his Ordinary Account to his Special Account in 2015. I imagine the $3,000 was spare cash that he had at that time.

We should also note that Daniel owns a HDB property with his wife and they use the money in their Ordinary Account to pay for the monthly mortgage. The $10,000 that Daniel transferred from his Ordinary Account to Special Account must have been carefully calculated to ensure he has enough cash buffer in his Ordinary Account to service his mortgage loan after the transfer.

From 2016 and 2017, Daniel became more intentional in growing his Special Account as he set aside cash specifically for cash top-ups through RSTU and transferred more money from his Ordinary Account to his Special Account.

In 2018, he pivoted in his plans to not make any transfer from his Ordinary Account to his Special Account in order to be able to make a few more years of cash top-ups through RSTU (both 2018 and 2019) and be entitled to the $7,000 tax relief. This makes a lot of sense, especially when you intend to work for at least a few more years.

By 2020, Daniel was done. He did a cash top-up of $7,000 and transferred $12,266.87 from his Ordinary Account to his Special Account. This was because he calculated that he would have achieved Full Retirement Sum without doing the transfer. But by doing so, he would be able to have more money in his Special Account and accumulate more interest next 20 years before he reaches the age of 55.

That's a smart and intentional planning in getting as much Full Retirement Sum money in Special Account as possible.

Here's what we don't know about Daniel

What I've written above is based on what we know from Daniel's post. It may not be the entire story that allowed Daniel reach Full Retirement Sum by 34.

What if Daniel is CEO of a multi-national company, earning loads of money above the average Singaporean? PS: By the way, I know for a fact that Daniel isn't.

The Ordinary Wage Ceiling for CPF contribution is currently capped at $6,000. No matter how much total monthly wages you earn, only 37% of $6,000 gets into your CPF accounts if your age is 55 and below.

The Additional Wage Ceiling is a CPF contribution cap on your additional wages, such as your bonuses. The formula for calculating the Additional Wage Ceiling is $102,000 – Ordinary Wages subject to CPF for the year.

$102,000 – ($6,000 x 12) = $30,000

As of now, when your monthly salary is $6,000 or more, up to $30,000 of your additional wages will have mandatory CPF contributions.

Personally, I don't believe being a super high earner would have made a drastic difference that the average Singaporean can't achieve with a few more years.

What we can learn from this?

I believe that CPF LIFE will be one of my core retirement income stream when I retire. If you have the same mindset as me, it definitely makes sense to start accumulating more money in your CPF Special Account beyond the usual salary contribution.

By doing so, you can achieve the Full Retirement Sum earlier when the figures are much smaller, and let the 4% interest pay for future incremental Full Retirement Sum adjustments.

Strive to rise up the corporate ladder as early as possible to earn a $6,000 monthly salary as early as possible to maximise your CPF contribution.

Make voluntary contribution* to your MediSave Account to hit the Basic Healthcare Sum so that work contributions to your CPF MediSave Account along with end of the year interest will overflow into your CPF Special Account for those below 55 or to your Retirement Account if you are 55 and above.

* VC to MA for a calendar year is subject to CPF Annual Limit of $37,740 or member’s cohort BHS, whichever is lower. Any excess VC would be refunded without interest.

Create good saving habits so that you have surplus money to be able to make the decision to top up your CPF Special Account through RSTU when it becomes beneficial for you to do so.

What changes are you making to get to Full Retirement Sum earlier? I'd love to hear your thoughts in the comments section below.

Photo by Clark Tibbs on Unsplash

20/20 goal setting for 2020

How has 2019 treated you? If you have read my self reflection of 2019, I would like to think that I've been really privileged to have enjoyed growth in both the personal and professional space.

My 2020 goal setting strategy will largely focus on things that worked well for me last year with additional goal targets to achieve even more. That's why I'm calling it 20/20 goal setting this year.

While I try to keep most of the goals measurable but I'm aware that some goals around eating habits can't be measured and is more around developing a disciplined mindset.

I've grouped my goals in 4 categories:

Health and wellness

Over the course of 2019, I've lost close to 20 kg through a disciplined calorie tracking regime. It felt very similar to when I just started tracking my expenses in 2015 where I was a little too strict with myself and it took a few years to change that mindset.

I want to cultivate a better relationship with food this year, by being more mindful about the food I eat.

Here are my health and wellness goals:

  • Continue to maintain a daily 1,500-1,700 calorie-deficit meal plan to bring my weight down to 70 kg.
  • Switch to whole foods (mostly) diet, starting with weekday lunch and dinners.
  • Increase the amount of fruits and vegetables in my daily diet with at least a fruit a day while vegetables should take up half of my plate during each meal.
  • Meditate at least once a week, either by taking classes or on my own with guided meditation apps.

Fitness transformation

Having achieved success in my fitness journey in 2019, I intend to continue expanding my fitness lifestyle and add more exercises/activities that pique my interest. That will help to create a sustainable and meaningful fitness lifestyle.

These are my fitness transformation goals for 2020:

  • Work out in the gym for at least 5 days a week
  • Reduce my body fat percentage to 15%
  • Learn how to perform a handstand without assistance
  • Pick an additional sport activity that I enjoy and become competent in it

Wealth building

2019 worked really well for me in the wealth department as I maintained a disciplined saving process. I intend to continue doing most of the same things this year just because they worked well for me.

  • Maintain an average net savings rate of 70% for the whole of 2020.
  • Continue to make monthly cash top-ups of $995 to my CPF Special Account using CPF's Retirement Sum Topping-Up Scheme to achieve Full Retirement Sum by 2023 (1 year ahead of my projection last year).
  • Continue to make the maximum contribution of $15,300 to my Supplementary Retirement Scheme (SRS) account by contributing $1,275 each month.
  • Continue to stay invested with my globally diversified investment portfolio with AutoWealth this year and keep growing it with monthly investments.
  • Continue to build a secondary investment portfolio for retirement using surplus cash from my salary. This secondary investment portfolio only consists of my NetLink Trust shares at the moment.

Learning and development

The concept of lifelong learning has 2 different meanings for me.

  1. Professional development: To continue learning either broadly or in-depth about subjects related to my work to grow my career and human capital. This will in return, grow my salary in future.
  2. Personal development: To learn either broadly or in-depth about subjects that pique my interest and may not be related to my career. That keep life interesting and rewarding for me as I am acquiring knowledge purely for interests.

For professional development, I intend to pursue the following Salesforce certifications as my company has made the switch to Salesforce Marketing Cloud over the course of 2019 to further my expertise in the platform. As Salesforce is a popular enterprise platform, these certifications will also increase my career prospects in the near future as there is a growing demand for Salesforce certified individuals.

  • Marketing Cloud Email Specialist certification
  • Marketing Cloud Consultant certification
  • Marketing Cloud Developer certification

For personal development, I intend to learn more about the science behind fitness and nutrition. I have not decided on the courses I wish to take, but I'm contemplating to take on a few online courses provided by reputable universities and certifications from a credible fitness organisations such as American Council on Exercise.

Have you set your goals for 2020?

Benjamin Franklin supposedly once said, “If you fail to plan, you are planning to fail.” Sir Winston Churchill is credited with another saying: “Those who fail to learn from the past are doomed to repeat it.”

What changes do you intend to make in 2020 to improve yourself?

I'd love to hear about your plans. Please share them in the comments section below.

Photo by Estée Janssens on Unsplash

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