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AK: A Story of Two Friends and Their CPF Savings
Aspire, Thought Leaders | 16 September 2015
Articles (41) Profile

I always enjoy a good story and Kai Xiang wrote a pretty good one to share with me. He has graciously allowed me to share the story here in ASSI:

A and B are good friends. They went to NS at 19 yrs old after finishing their poly diplomas and started work as technicians at the age of 21 with a starting salary of $2,000 (median gross for poly graduates). Both A and B have the following balance after their 2 year NS stint.

Ordinary Account (OA): $2,738 

Special Account (SA): $708

Medisave Account (MA): $962

However, B realised that the SA offers an excellent 4% interest rate and decided to match his CPF SA contributions every month with cash from his disposable income and plan for his retirement.

A didn’t bother because he feels retirement is too far away and he would rather have his money with him.

Both worked at the same factory and received a salary increment of 2.5% of their last drawn pay annually.

At the age of 31, both had CPF balances like this:

(A and B) OA: $75,320 

MA: $29,064

(A)SA: $21,868 

(B) SA :$41,983

At the age of 36, both A’s and B’s MA have reached the cap of $48,500 and any further increases to MA over this amount would be transferred to their SA.

At that time, their CPF balances look like this:

(A and B) OA :$125,190 

(A) SA: $41,331 

(B) SA: $76,929

All the way until this point, B had religiously matched dollar for dollar his CPF contribution to his SA. He decided to continue contributing cash to his SA every month but fixed it at $200 monthly.

B hits the MS ceiling for his SA at age 43, where he is no longer allowed to contribute cash to his SA. A hits the same ceiling about 6 years later at 49. When both men eventually reached the age of 55, their balances look like this:

(A and B) OA: $400,848 

(A) SA: $307,601 

(B) SA: $414,973

A was able to withdraw about $140k from his SA while B was able to withdraw $250k.


Hope you enjoyed the story too. If you did, you might want to share it with your friends and family. I hope they enjoy it too.

AK is a Singaporean stock market investor and a popular blogger. His blog was created with the intention of educating investors and sharing his investing journey with the target of having a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields.

Please click here for more information about this author.

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