If I had done this, I would have hit the minimum sum too.

-------------------------
This is my reply to a comment by a reader and because I want as many people to read this as possible, I am publishing this as a regular blog post.

See qook's full comment: here.
".... I just ran some numbers and they were illuminating. If I'd done the same as AK, I would have hit my minimum sum too!"

AK's voluntary contribution in March 2014.

AK's reply:

Hi qook,

Yes, absolutely! That is what I have been trying to tell people for a long time. :)

Feed our CPF-SA early and feed it well. If we do it early enough and well enough, we would only have to do it for a few years and time will do the rest for us.

4% compound interest is powerful. 4% compound interest risk free is very attractive. 

However, we need a more substantial base to see more meaningful results. 

So, we need to help it along to help ourselves. ;)







Once you hit the ceilings for the SA and MA in any year, your monthly CPF contributions for the rest of the year will go to your OA and SA but not the MA.

So, the money in the SA will continue to grow into something much bigger. 

At age 55, there could possibly be a small windfall for us and not just a $5,000 payout. 

The rest of the money goes into a newly created RA and at age 65, CPF Life will kick in.

Like many things in life, the outcome depends on the decisions we made in the past. :)







Want to create a risk free and more conservative portion for our portfolio and not very sure about bonds? 

I hope this blog post has provided some food for thought. 

There is still quite a bit of time before the year ends.

Related posts:
1. Towards retirement adequacy before the year ends.
2. Videos on reaching 55 and CPF Life. (6 minutes in all.)
3. Build a bigger retirement fund with CPF-SA.
4. Do the right things and transform our lives. (Real story.)
5. We do better managing our savings than the CPF?

A way towards retirement adequacy before the year ends.

A reader sent this message to me in FB and agreed to have me share it in my blog:

Hi AK,


Many thanks for your blog post "How to grow my wealth as I approach 40 years of age" and the other cpf related posts.


After poking around our cpf site, finally decided to move my entire 2013 OA contributions into SA. While it is nowhere near the MS, i feel it's a step in the right direction despite the fact that i am closer 40 than 20!


Thank you for always sharing your thoughts, journey AND nagging at us


P


P.S.
CPF website has an "Ordinary Account-Special Account Savings Transfer Calculator". It estimates how much MORE interest we earn by moving $x amt from OA to SA account. Unfortunately, it only calculates up to age 55 and not the 65 you mentioned. However, it is still a great gauge. Perhaps this may be useful for your readers to convince themselves of how wonderful this 4/5% interest is!

Here's the link:
https://www.cpf.gov.sg/cpf_trans/ssl/financial_model/oa2sa/oa2sa_cal.asp

if you feel it will help others, please (share)

the exchange between you, Endrene and a few others were very helpful to me.

If you like what you read here, there are still a couple of weeks left before the year ends.

Related posts:
1. How to grow my wealth as I approach 40 years of age?
2. How to upsize $100K to $225K in 20 years?

Investing for income and position sizing for peace of mind: Inspired by an exchange of words in Kallang Wave Mall.

Some time back, a reader said it must be a good feeling to be out and about and overhearing people talking about AK71 without them knowing that AK71 was listening in. I replied saying that it had never happened before and AK71 was not as popular as he thought.

Well, you know what they say about never saying never.

I was out one evening, visiting the new Kallang Wave Mall to take advantage of the opening promotional deals when it actually happened. I don't know about having any good feeling. In fact, the experience was rather spooky.

Before I go on, in case you are wondering what lobang (Singlish for "a good deal") I had in Kallang Wave mall, it was this:

I spent $200 in NTUC Fairprice using the Citibank SMRT Card and got a 7% rebate. At the information counter, I showed them the receipt and the Citibank SMRT Card and I was given a $10 Kallang Wave voucher, an Olaf plush toy (Olaf as in the Olaf from the Disney animation "Frozen") worth $19.90, a chance to spin the wheel to win more "Frozen" products and to take part in the grand lucky draw to win a trip for 4 to Hong Kong.

OK, now, you know why I went to such an ulu (Singlish for "in the middle of nowhere") mall.

Now, back to the spooky experience I had.

I was in an aisle in the supermarket looking for some biscuits when I overheard 2 ladies talking about me behind my back! I mean, literally, they were behind my back!

A: "This AK recently like very bad luck. Bought SembCorp and price dropped so much."

B: "Ya. I followed him and bought too. Now, lost about 20%."

A: "OMG! Did you buy a lot?"

B: "Not cheap. Buy a few lots also a lot of money. Now stuck. (Sigh)"

A: "Don't worry. AK says strong company. He buy for the dividends..."

Then, they walked away. I was wondering if I should follow them discreetly to see what else they had to say. I know, terrible! I was eavesdropping! Anyway, I decided not to. Imagine them calling security because an old, fat and ugly man was stalking them. Yikes!

Anyway, if you know me, I didn't write to simply share a spooky tale. There is enough stuff in that short exchange between the two ladies which disturbed me enough to blog about my thoughts.

It is true that I started buying SembCorp Industries at $5.04 per share not too long ago and I blogged about my motivations for doing so, admitting that it was not a cheap purchase at the time. It ticked all my boxes but because it was not undervalued, I nibbled. I initiated a small position.

As its share price fell, I nibbled again at various points. Some might be interested to know that I actually nibbled a bit more at $4.14 a share just yesterday. I will probably continue to take small bites because although I feel that the stock is now undervalued, I am reminded of the saying that Mr. Market can stay irrational for a long time.

Although my initial entry price of $5.04 has lost almost 20% in market value, it might be useful to know that the nibble formed less than 1% of my entire portfolio. So, it means that my portfolio has lost 0.2% in value because of that purchase. If we add my other recent nibbles and their paper losses along the way, the total paper loss due to these is probably between 1% to 2% of my portfolio's value.

So, although the absolute dollar value might look substantial to some, we must remember that it is about percentages. We should always look at our own circumstances and decide how to size our positions in the stock market accordingly. Don't bite off more than we can chew.

Finally, because I am more interested in investing for a regular income, most of my portfolio ensures that I always have funds coming in on a regular basis. Yes, even my badly timed investment in SembCorp Industries will, in all likelihood, generate income for me in 2015 and beyond. This is an important reason why I am able to stay level headed, well, most of the time.

I thought for a while whether to blog about this because the two ladies I mentioned will probably read this blog and I don't know how they would feel but I guess I should just do it for everyone's benefit, including mine.

Related posts:
1. How to make recovery easier?
2. Motivations and methods in investing.
3. Do not love unless it is worth the loving.
4. Managing exposure in investment.
5. What should I do when I am down 25%?
"... the important thing to know is "What should I do?" given a certain set of circumstances." AK