Archive for March, 2007

Finances

Friday, March 9th, 2007

Singapore is not a welfare state. Thus each and every individual is responsible for their own lives and retirement. Unfortunately, we have this system called CPF, which although is suppose to ensure we have money to retire with, fails quite miserably at its function. Most people aren’t aware that CPF as it is just isn’t enough. They find out sooner or later – later for most.

Fortunately, I have a brother and friends who are financial advisors, and people who are miserably paid like me aren’t lost causes! Weee. So recently I started 2 investments with my brother. One invests a lump sum ($6k) from my CPF while the other is a monthly savings/investment thingy ($150/mth). On top of that, I have life insurance with a savings element.

So I did some hypothetical calculations as to how much I would have in 20 and 40 years based on these investments.

In 20 years:
Total amount forked out: $42k
[CPF $6k @ 5%*] + [$150/mth @ 5%] = approx $55.6k ($13.6k extra)
[CPF $6k @ 9%*] + [$150/mth @ 9%] = approx $92.9k ($50.9k extra)
Approx $64.3k additional if Life Insurance is cashed out. ($32.3k paid)

In 40 years:
Total amount forked out: $78k
[CPF $6k @ 5%*] + [$150/mth @ 5%] = approx $97.6k ($19.6k extra)
[CPF $6k @ 9%*] + [$150/mth @ 9%] = approx $213.9k ($135.9k extra)
Approx $106.3k additional if Life Insurance is cashed out. ($51.8k paid)

Of course all these are merely estimates, and only based on my current financial status. The more your initial investments are, the higher the figure, as money snowballs and is invested every year. The figures are expected to increase as my pay and cpf increases and I pump more money into investments.

Initially, I wanted to pump in more each month into the savings investment thing instead of what I’m putting in now, but I wasn’t sure how long I would be in my current job so I didn’t want to make too big a commitment. In the end, I decided to just do it. A low amount is better than no amount!

Whatever the case, don’t let your money sit there doing nothing, especially money in your cpf which you can’t touch! Let a financial advisor help you multiple your money. You win, they win too. If you need one, let me know. My brother would be glad to help, and there are 2nd opinions available too. 🙂

*Projected increase per annum. Since % depends on the market, a hypothetical 5% and 9% are used for projections. Actual % can be a lot higher.