My relationship with the CPF system did not get off on the best footing. My starting pay as an overworked auditor was $2,000. This paltry amount became an even paltrier $1,600 after the mandatory 20% CPF contributions. There wasn’t much left after contributing to the family and paying the monthly installment on my education loan.
In my early 20s, planning for retirement sounded really far away. Why should I save for the future when I do not have enough for current needs? As a new investor, I had some lucky breaks and made some easy $ in the stock market. I believed then that it wasn’t rocket science to beat the returns the CPF was offering (2.5% to 5%).
Time flies. I am now in my early 40s. After accruing some hard knocks in the school of investment, I have come to appreciate the risk-free return that the CPF offers. It is not easy to beat the market. I figured my average returns over the past 16 years is about 3-5% per annum. You win some and lose some and over time, it kind of averages out. I no longer have the naive notion that I can beat the market year in year out. Come on, most professional fund managers can’t beat their benchmarks on a 5 year basis and this is their full time job!
I am now a firm believer in the CPF system. Over the past years, I have been actively contributing to the Special Account (SA) on top of the mandatory contributions as an employee. I will share more on my experience in a later post.