The following is a story shared by AK on his blog, an email from a 54-year-old reader intending to leave $166,000 in his newborn son’s CPF Special Account (SA). It’s heartwarming and illuminating at the same time.

Hi AK,

I have an idea to bounce off you. Just chit chat. I know you don’t give advice.

I am 54 and just became a father. I married rather late in life.

As a father, I am thinking about my child’s future. I am well aware that by the time he is 21, I would be 75 if I am still alive by then.

Next year, I will be able to withdraw more than $100,000 from my CPF account as I have already met the minimum sum for my age. I am thinking of putting the money into my child’s CPF SA instead of leaving it in my OA.

I could top it up to $166,000 and do a one-time top-up to his CPF SA and, compounding at four percent a year, he will have a retirement nest egg of more than $1.4 million when he turns 55. I won’t be here for most of his life, and this is something I can do for him.

Hi,

You have to remember that your CPF money is meant to help fund your retirement. If you have other ways to fund your retirement adequately, then, OK.

Yes, your child won’t be able to touch the money until he turns 55. If your plan is to help your child be financially secure in his old age, I would say that this is a very generous and thoughtful thing you are doing for him.

However, remember, the CPF SA interest rate could change over the very long term and 55 years qualifies as very-long-term. After all, the plan is to peg it to long-term government bond coupons eventually, if I remember correctly.

When would this happen?

I have an inkling that this might happen when the 10-year SGS bond rises to a level that is at four percent or a bit higher. We will have to accept higher or lower returns on our CPF savings in future from then on.

So, we won’t be wrong to expect CPF SA interest rate to fluctuate over the very long term. So, don’t think of four percent as something that is sacrosanct.

Even so, at 3.5 percent per annum, $166,000 will become $1.1 million in 55 years. At three percent per annum, it will be about $844,000 in 55 years. Still quite a bit of money.

Your child won’t have to worry as much about retirement funding and can be quite comfortable as a working adult, I imagine. Lucky kid.

A father’s love. :)

Best wishes,
AK

This article originally appeared on AK’s blog.