Jul 14, 2022

Cory Diary : How much is Enough in CPF ?

With the Popularity of 1M65 movement where we become CPF Millionaires by Age 65, people starts to realize that it can go much higher if one top-up their CPF to Max in their early years. Then this beg the question is how much is really enough before we forego our current living and outside CPF returns.

Don't get me wrong. CPF returns and Capital are kind of "Protected". The risk is vastly different from Equity or Private Bond Markets of varying Risks. However, to get 2.5% to 4% returns, the amount may not be sufficient for a lifestyle retirements that one's wish to have unless the capital is significantly more and if that is the case, you are rich anyway to manage it up to 2M65 or 4M65 in a low return environment, does not really matter because of the huge capital base.

To put into perspective, for a person who invest in 4% vs 8%, after 20 years the gap can be $2.4M !
We need to be rich enough to forego.

To add to this into another perspective, inflation is another killer. 1M today is very different from 1M in 20 years time.

Lastly, the risk is different and the gap of $2.4M is not free to take. One could also lose a big chunk of their investment in risky asset and perform much worst than CPF returns. It maybe better not to do anything or much outside CPF too. The answer probably lies between but where we can be ?


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  1. Cory,

    Somebody finally did the math ;)

    1M65, or to be precise, 4M65 makes a lot of sense for those in their late 40s or early 50s who have already made their money OUTSIDE of CPF.

    And have experienced first hand how the market takes away just as easily as it gives...

    Its about wealth preservation.

    The "Tarzans" at my watering hole who have 4M65 all have one thing in common - CPF is just a minority part of their net worth.

    They are market timers with loads of dry powder waiting to wash, rinse, and repeat...

    Having said that, 1M65 is probably more suited for those who have discovered they are Charlie Brown when it comes to investing - the more they invest, the more they lose...

    Different strokes for different folks!

    1. Interesting I was thinking the opposite after reaching certain stage of investment level. The rationale is that the more money I have outside but diversified (lethality risk), the lesser CPF (basic net) needed to protect the base line for daily expenses. Having more money diversified outside CPF, even with GFC Financial crisis 50%, one will still generate enough dividend income at "Stage 2" net worth level. This mean rich get richer as have percentage larger portion outside of CPF means higher return growth.

  2. Realistically it's a mixture of both CPF savings & external investments, and over the years you work out which one you want to overweight.

    It's just that most people below 50 yrs old don't want to put any more than what is required by law into CPF since it's so illiquid. And most people wipe out their OA anyway for property & upgrading to condo which defeats the purpose of CPF as retirement fund, unless you're prepared to downgrade or rent out rooms.

    For those who made millions outside CPF, it's also impossible to put the millions into CPF at one go due to limits, e.g. $37+K per year and $190+K FRS.

    So for those with millions in their CPF, it either means they utilised CPFIS successfully, or they maxed out FRS in their mid-20s, and then always maxed out the annual CPF contributions. Which also means high salary occupations.

    1. Agreed it will likely be something in-between. Hence the article on where the line be drawn. Extreme in either places maybe possible but the cost and risk will be extreme.