Sunday, April 03, 2022

How I Achieved CPF FRS in mid 30s

Let me share some strategies on how I achieved this feat.

1. Work, work and work

Not born with a silver spoon, I started working odd jobs since teenage schooling days i.e. waiter, customer service officer, ah beng handphone shop, telemarketer, factory labourer and so on. Whatever freelance jobs available, I would have done it.

I was lucky to get several job offers before graduation from university and accepted an IT job with starting pay of $3.2k, rejecting other offers in semiconductor and aerospace engineering that pay slightly lower at $3k and $3.1k respectively more than a decade ago. My income has now more than doubled.

Working in a regular job gives us income and thereby consistent CPF contributions to all 3 accounts.

I aim to always grind long enough in a job to be eligible for annual salary increments and bonuses, which all translate into higher contributions to CPF accounts.

2. Transfer funds from OA to SA

By working consistently to have regular income with CPF contributions, we can then consider whether to transfer the funds from OA to SA. This act is to boost the interest income because SA has 4% interest rate which is higher than OA's 2.5%. 

In my first few years of working, I did transferred around $40k to 50k of OA funds to SA because I did not forsee buying a property using CPF OA funds anytime soon. After every monthly CPF contribution, I transferred every single cent of OA to SA, leaving OA balance zero.

This greatly helped to let my SA account have a strong foundation to compound and start growing earlier at a higher rate.

3. Retirement Sum Top-Up

As my income grew, I accumulated  more disposable cash. So after a few years of working, I started to make cash tops ups to my CPF SA through the Retirement Sum Top-Up (RSTU) scheme for tax relief.

4. Earn at least $6k asap

From working consistently in a regular job with decent salary increments, it is possible to propel our active income to hit the maximum amount which is subjected to CPF contributions. This magic figure is $6k. 

Try to work smart, upskill and learn, add value, gain valuable experience, sucking up to bosses if need be, to get the promotions for higher pay, or job hop to other companies or roles with higher pay or salary ceiling and strive to earn a salary of at least $6k as soon as possible in your career.

If you do not like to be a slave working for others, let your creative brain juices and entrepreneurial spirit motivate yourself to build up a business empire which provide decent goods, services or solutions that alleviate human pain points, to churn growing revenues and profits. Easier said than done, a successful business depends on a myriad of factors, many of which are out of your control. Being self-employed or owning a great business do help greatly in boosting one's income where the sky is the limit.

I personally did not work smart nor suck up to bosses nor job hop for higher pay. I merely farmed all the increments consistently and waited for my turn to be promoted for more increments. Nonetheless, I was lucky to be in a resilient IT industry providing essential services and hence hit $6k salary when I was 31. This allows me to farm the maximum CPF contributions for both employee myself and employer portion.

In the past 5 years, I was getting maximum contributions of $37,740 annually to my 3 CPF accounts.

From having maximum CPF contributions, we could accelerate the growth of our CPF SA towards FRS earlier.

5. Voluntary contributions to CPF

We could actually make voluntary contributions (VC) to our CPF (all 3 accounts) up to the CPF annual limit of $37,740. This is common for self employed but is also possible for those who did not manage to hit the $6k salary soon enough for maximum CPF contributions.

Though VC does not earn tax relief, it will still help to gradually boost CPF savings artificially and grow the SA account faster than if we were to purely rely on CPF contributions from salary alone.

I did not take this action but would like to share about this last resort to grow our CPF SA account and make steps closer towards FRS.

Actually, I could have achieved FRS much earlier 5 years ago. However, I held back by stopped transferring any OA fund to SA because I wanted to enjoy tax reliefs from RSTU as my income grew and considered using OA fund for property purchase.

See related posts:

1. Why I do not want my CPF SA to attain FRS in 2022?

2. Why I do not want my CPF SA to attain FRS in 2020?

Thanks for reading.

As always, stay safe and remain strong.

With love & peace, 


JJ said...

thanks for sharing. may i know how old are you now?

Qiongster said...

Thanks to reading. As the title of this post suggests, mid thirties now.

Anonymous said...

In my opinion, it's not really necessary to transfer OA to SA if you are still working.

Most uni graduates would have reach FRS in their SA when they are in their early 40s...if their starting salary is about $3k with an annual increment of let's say 3~5% each year.

OA should be used as a back-up to pay for the house mortgage because once you are in ur 40's, job security is something u can't control...this is true for most of Singaporean

The best is maximize the OA the house mortage in cash as much as you that once job loss happens, the OA can save u from letting the bank take possession of the house...

(Speaking from experience)

Anonymous said...

Forgot to add...

Once ur house mortgage is settled and fully paid...then only u can consider transferring the OA to SA

Qiongster said...

Hi Anonymous,
I agree that it is not necessary to transfer OA to SA and that most uni graduates with decent salary will be able to reach FRS. This action to take depends on how early individuals want to reach FRS relative to their dependence on OA funds to cover housing mortgage. There is no one size fits all strategy.

Anonymous said...

Looking at 1.2mil networth u had achieved, I can't help but super depressed. I tried my best but only attain Ard 700k including CPF, cash and investment. No property .at mid 30s too.

Qiongster said...

Hi Anonymous,
To each his or her own, there is no point comparing wealth with each other. Net worth is a number to measure how much financial resource we own for choices or to redeem our own time if possible. We all come to this world with nothing and leave with nothing. It is best to enjoy the process of living and be happy with what we already have.

Anonymous said...

Shld I use CPF to pay for house or cash to pay? Thinking to top up SA till FRS too. But left with no much cash . N need to work for many more years. Sob.

Qiongster said...

Do you invest you cash to earn more than 2.5% yield? Use CPF to pay for house if your opportunity cost of cash is greater.

Anonymous said...

Have u tot of setting up small business?

Qiongster said...

The risk-to-reward ratio of doing business as too high for me to stomach.

I am actually already doing "small" businesses through selling decluttered items at home on Carousell and also writing articles occassionally here for some ad revenue.

I also "own" many great profitable conglomerates and businesses through long-term growth investing and many "properties" via Reits through income investing.

I greatly value daily sleep with a peaceful mind without debts or worries.