Write a first rough plan for a home and for retirement, showing the gap for each.
Big goals such as buying a home or retiring comfortably can stay vague for years because nobody attaches a monthly figure to them. "We'll buy a flat at some point" and "I should save more for retirement" are both true. They are also useless, because neither one tells you what to do on your next payday. The exercise below turns each goal into a rough plan that ends in a monthly saving amount. It takes about twenty-five minutes.
Before you start, gather your notes from lessons 7.1 and 7.2, the CPF LIFE estimate you worked out in lesson 5.3, and a calculator.
At the top of a page, write the price range you are aiming for, a target date, and the number of months between now and then. Then split what you need the way lesson 7.1 does: down payment, buying costs and a renovation budget. Your down payment is the top of your price range minus the loan you expect to get. Add your buying costs and renovation budget to it.
Next, decide how much of that total will come from your CPF Ordinary Account and how much has to be cash. If you aren't sure whether CPF can pay for a particular cost, count it as cash for now. Finding out later that CPF could have paid is a pleasant surprise, and finding out the reverse is not.
Wei Ling and Jun, the couple from lesson 7.1, are planning a wedding and an HDB flat. They are looking at flats priced from S$450,000 to S$480,000 and want to buy in 36 months (example figures). They plan for the top of the range. They expect a loan of S$360,000, so their down payment is S$480,000 - S$360,000 = S$120,000. They add S$12,000 for buying costs and S$30,000 for renovation.
They assign S$100,000 of the down payment to CPF. Cash covers the remaining S$20,000 of the down payment, plus all the buying costs and the renovation. Their cash needed is S$20,000 + S$12,000 + S$30,000 = S$62,000, and their CPF needed is S$100,000.
Next to each figure, write what you have today. The difference between what you will need and what you have today is your gap. You will have one gap for CPF and one for cash.
For the CPF part, compare the gap with what your Ordinary Account will receive by your target date. You can estimate this from the contributions shown on your payslip. For the cash part, divide the gap by the number of months until your target date. The result is your monthly home saving.
Wei Ling and Jun have S$60,000 in their Ordinary Accounts and S$14,000 in cash. Their CPF gap is S$100,000 - S$60,000 = S$40,000. Their combined Ordinary Account contributions are about S$1,500 a month, and 36 months x S$1,500 = S$54,000. That is enough to close the CPF gap before any interest is added.
Their cash gap is S$62,000 - S$14,000 = S$48,000. Spread over 36 months, that is S$48,000 / 36 = S$1,333.33 a month. They round it up to S$1,340, which is S$670 each.
Take the monthly amount you want to spend in retirement, from lesson 7.2. It is at today's prices. Then take your CPF LIFE estimate from lesson 5.3 and make sure it is in the same terms. If the planner gave you the estimate in future dollars, adjust it to today's prices or write a note about the difference. If you compare the two figures without adjusting, the gap will look smaller than it really is.
Your monthly retirement gap is your target monthly spending minus your CPF LIFE estimate. Multiply it by 12 to get the yearly gap, then by the number of years you want to cover. Divide that total by the number of months until you retire. The result is your monthly retirement saving.
This rough method assumes your savings grow just enough to keep pace with prices. Everything therefore stays at today's prices, and the arithmetic stays simple.
Wei Ling works out her retirement plan on her own. She wants to spend S$3,000 a month in retirement at today's prices, the figure she set in lesson 7.2. Say her CPF LIFE estimate is S$1,600 a month at today's prices. Her monthly gap is S$3,000 - S$1,600 = S$1,400.
She plans for 25 years of retirement, from age 65 to 90. S$1,400 x 12 = S$16,800 a year, and S$16,800 x 25 = S$420,000. She is 29, which leaves 36 years, or 432 months, until she turns 65. S$420,000 / 432 is about S$972, which she rounds up to S$975 a month.
Wei Ling's draft asks her to save S$670 for the home and S$975 for retirement, which is S$670 + S$975 = S$1,645 a month. That is more than her spending plan currently saves, and the wedding comes before either goal. She now has a choice with numbers attached: a cheaper flat, a later purchase date, or a smaller retirement amount for now, raised after the flat is bought. Without the plan, she would have found out about the shortfall at the bank, or at age 60.
Write "first draft" and today's date at the top of your page. A first draft is a plan you label as incomplete and date, because it deliberately leaves things out. It ignores investment returns that beat inflation, growth in your income, how long you will actually live, and any rule changes before your goal date. A draft with real numbers in it is more useful than a perfect plan you never start. The course "Property & Mortgages" refines the housing half of the plan, and the course "Retirement & Estate" refines the retirement half.
Your page is finished when it fits on one page in two blocks. The housing block shows a price range and a date, the cash and CPF you need, what you have, and a monthly figure. The retirement block shows your target, your CPF LIFE estimate, the gap, and a monthly figure as well. "First draft" and the date go at the top. Start with the housing block, using your notes from lesson 7.1.
Fill in the one-page housing and retirement draft, with the gap for each goal and the monthly amount that would close it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).