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A million dollars in CPF by 55 - Is it possible for the average Joe?

You may have heard about 1M65, a movement by Mr Loo Cheng Chuan, or more commonly known as the"Mr CPF". 1M65 says that it is possible for a couple to achieve 1 million dollars together in their CPF by age 65, given certain conditions and the right actions. But is it possible for the ordinary man to achieve it alone by 65? or maybe even by 55?



[UPDATE]: An earlier calculation of this blog post overlooked the fact that you can't transfer anymore funds from your CPF OA to CPF SA once the Full Retirement Sum (FRS) is reached. I have since corrected the error in this post and updated my calculations here to account for that. A big thank you to reader Oken for pointing that out to me!



So 1M65, a movement made famous by Loo Cheng Chuan, or "Mr CPF". The term was coined after Loo discovered that it was possible to attain a combined CPF balance of $1 million dollars with his spouse by age 65.


The movement gained widespread public attention in the past few years, and recently, Loo even came up with a new concept of 4M65, which you guessed it, says that it is possible for a couple to accumulate a combined balance of $4 million in their CPF by age 65. For the purpose of this article though, I would only be talking about 1M65, since it is in my opinion that 4M65 is not for the faint-hearted.


Now, let's talk 1M65.


Before I begin, if the 1M65 concept is new to you, you can watch a video of DollarsAndSense interviewing Loo about it here:


To sum up, the 1M65 concept is actually quite simple, and essentially meant the following:

At around 30 years old, both husband and wife puts $130,000 each into their CPF SA and MA. The prevailing CPF SA and MA interest rate of 4% compounded over time will grow the couple’s combined CPF balances to over $1 million when they retire at 65 years old. - Source: DollarsAndSense

Now, I have to admit that when I first came across the 1M65 concept I was sceptical to say the least. After all, I grew up in an environment where most people are not the fondest fans of CPF:


"Set aside money to invest for retirement?" - Sounds about right.

"Set aside money to put in your CPF for retirement?" - What? You crazy arh.


And that's where the conversation ends.



1M55 alone - possible or not?


Yet, after exploring more about the idea, I became increasingly intrigued by it. In fact, the more I explore it, the more I realise that the idea might actually be possible for the average Joe, a.k.a myself.


And so intrigued was I that I decided to do my own calculation.


After some deliberation, I decided that I would aim for 1M55 instead, and so because that's the age where you can technically withdraw all your money from your CPF after setting aside the Full Retirement Sum (FRS). Also, 55 feels less distant to me, and I am more comfortable working towards that first.


To make it more challenging, I would also be aiming for 1M55 alone.


Before I begin, here are some base assumptions for myself*:

  1. Start work at age 30, with a gross monthly starting salary of $3,600 and a 13th month bonus;

  2. CPF account to start with zero balance at age 30;

  3. A 3% yearly salary increment until $6000 monthly salary is reached;

  4. All CPF Ordinary Account (OA) funds are transferred into CPF Medisave Account (MA) or CPF Special Account (SA) until the projected Full Retirement Sum (FRS) for the cohort is reached;

  5. No CPF funds are used to invest (i.e. CPFIS is not utilised);

  6. No using of CPF to pay for housing (i.e. Housing instalments to be paid in cash);

  7. FRS is projected to increase at 3% yearly.

*Note: This might not apply to everyone, and I would later on do a second analysis based on a earlier working age and lower pay.


And my reasoning for the aforementioned assumptions:


Assumption 1

Reason why I indicated a working start age of 30 is due to the fact that I might be considering further studies and will hence likely start work later than my peers. Salary wise I am taking the 2019 national median gross monthly salary of $3,600 for local fresh graduates. This is likely to be slightly higher in a few years down the road when I enter the workforce but I am just gonna assume $3,600 for my calculations. Nonetheless, I will subsequently relax assumption 1 later on with a younger working start age and a lower starting pay, for a second analysis.


Assumption 2

Next, I am also assuming that I would start my CPF account balance with zero amount at age 30.


Assumption 3

Thirdly, It is also assumed that I would have a 3% salary increment yearly until a maximum monthly salary of $6,000 is reached, following which it is assumed that there will be no more pay raise. The amount $6,000 is chosen as it is the Ordinary Wage Ceiling amount for CPF, meaning any salary above $6,000 will not attract CPF contribution. A brief calculation shows that a 3% salary increment would take roughly 20 years to hit $6,000 monthly from a starting pay of $3,600, and I think this is reasonable.


Assumption 4

Fourthly, it is assumed that all CPF OA funds shall also be transferred to my CPF MA or CPF SA to take full advantage of the 4% base interest, additional 1% interest for first $60k, and additional 1% interest for first $30k (age 55 and above), until the projected Full Retirement Sum (FRS) for the cohort is reached. Amount above the FRS will only earn the 2.5% interest in the CPF OA. Note: The transfer is irreversible.


Assumptions 5 & 6

I will also assume that no funds are used to invest under the CPF Investment Scheme (CPFIS), and that no CPF is used to pay for housing instalments as well.


Assumptions 7

Lastly, it is assumed that the FRS will increase by 3% yearly, based on historical data and by CPF.


Calculations (Working start age: 30, Starting pay: $3,600):


Now with these assumptions in place, I am now ready to find out if achieving 1M55 alone is possible. Enlisting the help of an excel sheet to do the calculations, we have: