Use Power of Compounding to Retire Well
The power of compounding interest have been used to
sell endowment/insurance-linked products(ILP) by financial “advisers” for so
long, and to much good effect.
But I was just
wondering why not I sell this concept to myself. Using CPF as a cornerstone for
my retirement, I plugged in some CPF-special accounts(CPF-SA) contribution
rates with reference from Table C2 of [1]; while adding values of salary and
fair assumption. (The 15-month package is not unfair, considering 12 months of
work, 1 month of AWS, and 2 months of performance bonus. 15 months was a fair
consideration, just that I didn’t factor in promotion as I hope to lean towards
a more conservative estimate.)
So please see below!
Based on a conservative estimate
with salary adjustment pegged to inflation rate of the Full Retirement Sum
(FRS), we can see that a 30-year old salaryman can really hit the FRS in 16
years!
How is it possible? So basically, what did was that I placed a huge chunk of my CPF-OA (yielding
only 2.5% to 3.5%*) and transferred to my CPF-SA account( yield of 4 to 5%),
and the time horizon , plus better more secured interest rate ( SG government
guaranteed).
What it means.
At the age of 55, I would be able to withdraw slightly more than $182K (but I won’t
if I am still working), and then enjoy the CPF Life annuity monthly pay-out
after the age of 65. This is just purely on money accumulated on CPF-SA.
Conclusion. Thinking
back, I wished I had gained such awareness at a younger age (when I started
working), and probably with be able to hit the FRS purely on SA at a younger
age!
anyway happy chinese new year!
Reference
No comments:
Post a Comment