Oct 31 2023, 08:23 AM, updated 2y ago
The idea behind 1M65 is by keeping your money invested in CPF and allowing it to compound over your working lifetime, you can achieve the target goal of $1M by age 65.
| Parameter | Value |
| Starting Age for both husband and wife | 30 years old |
| Starting CPF Balance for each person | At least $130,000 in SA and MA |
| Monthly Salary for each person | $4,000 |
| Annual Interest Rate | 4% (compounded) |
| Desired CPF Balance at age 65 | $1,000,000 |
| Final CPF Balance after 35 years | $1.3523 million SGD |
At around 30 years old, both you and your spouse should each have at least $130,000 in your CPF Special Account (SA) and MediSave Account (MA) combined.
The prevailing interest rate of 4 per cent compounded over time will grow both of your combined CPF balances to $1 million by 65 years old.
Key changes that the CPF has gone through:
In its original iteration in 1955, a member could withdraw everything at 55 years of age.
1977 — The Special Account was created for retirement purposes.
1981 — CPF was liberalised to allow the funds to be used for housing.
1984 — The Medisave Account was created to allow members to use the funds for medical bills.
1986 — CPF funds were allowed to be used for specific types of investments.
1987 — The minimum sum scheme was introduced where CPF savings were disbursed over a 20 year period.
The "minimum sum scheme" refers to a policy in the Central Provident Fund (CPF) system in Singapore. Under this scheme, CPF savings are disbursed over a 20-year period.
It means that when an individual reaches a certain age, their CPF savings are not paid out as a lump sum but are spread out and disbursed gradually over two decades to provide financial security and support in retirement.
This is designed to ensure that individuals have a regular stream of income in their retirement years rather than receiving all their savings at once.
1990 — Medishield health insurance funded by CPF funds was introduced to provide a form of universal healthcare to all members.
2014 — The CPF Life annuity plan was introduced which improved on the minimum sum scheme.
CPF Future Value Calculator
Both the husband and wife have a monthly salary of $4,000 each.
Here's the calculation :
Starting CPF Balance for each person: $130,000
Monthly Salary for each person: $4,000
Monthly CPF Contribution for each person: Approximately 37% of the monthly salary, so it will be around $1,480 per month
Annual Interest Rate: Assumed 4% (compounded)
Now, let's recalculate the CPF balance at age 65 using the updated monthly contribution:
You can use the future value formula:
FV = P * [(1 + r)^n - 1] / r
Where:
FV is the future value (the CPF balance at age 65)
P is the periodic contribution ($1,480 per month)
r is the periodic interest rate (4% annually, so 0.04/12 per month)
n is the number of periods (in months) until they both reach age 65, given that they are currently 30 years old (which is equivalent to 35 years or 420 months).
Now, plug in the values and calculate for one person:
$130,000 compoind interest after 35 years
= $130,000 * (1 + 0.04)^35
= $ 512,991
FV
= $512,991 + ($1480 * ( ( (1 + (0.04 / 12) )^ (35 * 12) ) - 1) ) / (0.04 / 12))
= 1.8653 millions
Calculating this will give you an approximate CPF balance for one person at age 65 with the updated salary. To get the combined balance for both husband and wife, double this result, as both have similar contributions and starting balances.
This recalculation should provide an estimate of their CPF balance at age 65 based on the new salary amount and the provided assumptions.
This post has been edited by plouffle0789: Nov 2 2023, 11:22 AM
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