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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 version 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:



And it appears that 1M55 alone is possible for me!


So as long as the CPF Board doesn't lower the interest rates, and that I managed to start work at age 30 with a starting salary of at least $3,600 (and a 3% yearly increment), it is very much possible to actually attain $1 million dollars by age 55. That's the beauty of compound interest my friends.


Assuming also that I don't lose my job of course haha (and/or fall seriously sick such that I have to wipe out my entire Medisave).


Note: The starting FRS here at age 30 is set at the 2024 projection since that's when I am 30 and is likely to start work.


Second Calculation (Working start age: 25, Starting pay: $2,700)


Now while the above situation might play out for me, I know that it does not apply to everyone. Not everyone wants to further studies and that majority of the cohort is likely to start work earlier.


As such, for my second analysis, I will be working with a younger working start age of 25 and a more conservative starting pay of $2,700 (~75% of the national median gross monthly salary of $3,600 for fresh graduate in 2019).


The rest of the assumptions continues to hold.


And now for the moment of truth, is 1M55 still possible?



A big yes! In fact it is achievable by age 54. And yeshh, achievable alone.


Isn't that great news?


Now you know why I am so intrigued by it.


Note: The starting FRS here at age 25 is set to 2020, i.e. now.


Closing Thoughts


All in all, by observing the figures mentioned above, it’s clear that achieving 1M55 alone is certainly possible, so long as you put in some effort and work towards attaining it. Otherwise, 1M55 as a couple is definitely still an achievable target for many local couples.


That said, there's a (big) catch though, which you probably have already realised too - the fact that one of the main assumptions requires that you do not use your CPF for property payment. Given that most local couples rely on their CPF Ordinary Account (OA) to pay for their property, this will have a huge negative impact on their 1M55 journey, since these monies would not be earning the (guaranteed) interest for them in their CPF. It is thus recommended to pay your housing instalments entirely by cash instead if you are keen on the 1M55 journey, so that the monies in your CPF can be left alone to compound at the attractive interest rate of up to 6%.


However, if paying your housing instalments entirely by cash is not possible, my personal opinion is then at least to try to partially fund your property repayment using some cash, so that one can still build a sizeable retirement nest egg with CPF.


Otherwise, if 1M55 is really not possible or too hard a goal to aim for, you can always aim for 1M65 instead, or whatever retirement target sums you might have set for yourself. It may not be a million dollars anymore, but it is still a pretty good achievement if you can hit the CPF Full Retirement Sum (FRS) or Enhanced Retirement Sum (ERS) by 55. As of 2020, the FRS and ERS stand at $181,000 and $271,500 respectively.


After all, our CPF money is also our own and just like the money in our bank saving accounts, we should carefully consider all decisions that we make which would impact it for the many years to come.


Do you subscribe to the concept of 1M55 or 1M65? Let me know your thoughts in the comments section below!

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Disclaimer: All information contained herein this blog is solely the writer's personal opinion, and does not constitute an offer, recommendation or solicitation of an offer of any kind. Readers are also advised to do their own due diligence, and to consult a financial adviser for any financial advice.

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All information contained herein this blog is solely Jeffrey's personal opinion, and does not constitute an offer, recommendation or solicitation of an offer to enter into a transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. It also does not constitute an offer to buy or sell an insurance or financial product or service nor is it intended to provide insurance or financial advice. Readers are fully responsible for their investment decision, including whether the product or service described (if any) herein is suitable for them. Readers are also advised to do their own due diligence, and to consult a financial adviser for any financial advice. Jeffrey will not accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information herein, and makes no representation or warranty of any kind, express, implied or statutory regarding any information contained or referred to herein.