Get Intelligently Connected to the Right Financial Advisers!

Dear visitors of fundMyLife Blog!

Ever had that burning question on financial planning but you’re worried about getting products being pushed in your face?

Ever wonder whether you could get multiple perspectives from different companies without approaching financial advisers separately one by one and not know how suitable the products are? 

Wonder no more!

At fundMyLife, we understand. Let us do the legwork for you!

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Screenshot of fundmylife.co question box so that you can find the right financial adviser.
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Screenshot of client’s review on the profile page! Neat, huh?

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What’re you waiting for? Head on over to our main site and let fundMyLife connect you to our financial advisers and find the perfect fit for your exact needs!

Can $300/month become $1,000,000 by retirement?

Earlier in the year, NTUC Income received quite a bit of of attention regarding financial planning and retirement. First, for their publicity stunt with Rebecca Lim, and second with their infographic on a survey conducted on financial planning.

The survey, conducted by Nielsen and commissioned by NTUC Income, interviewed residents across different age groups to assess their perspective on savings. One of the more interesting questions we observed was that whether interviewees aged 25-35 were willing to save $300 per month to get $1 million by 65 years old. 86% of them responded yes, which is not surprising given how the question is phrased.

However, is it truly possible to save $1,000,000 with $300 per month? We here at fundMyLife are suckers for maths. And validating maths is one of our many specialities. This includes watching paint dry, shadow puppetry, and papier mache.

Retirement Mathematics

Let’s give it a go shall we? Assuming we have a friend, John, who is currently 25 years old. Here are the conditions:

1) John starts saving $300/month for 40 years, until 65
2) And, for assumption’s sake, no inflation

A naive calculation would reveal that at the end of those 40 years he would have saved:

Interest rate and amount of money for retirement

Wait a minute, that’s kinda off. Perhaps some readers might have realised this calculation is not a good assessment because it ignores compound interest rate. Fair point – we thus add another condition:

3) An arbitrarily generous savings account compound interest rate of 2.00%*
4) Interest compounds at the start of every year

How does this check out? This is an instance where the interest rate compounds yearly/monthly (depending on the policy, really) with a steady amount of monthly contribution. The maths is a little complicated…but for those who are interested, the following equation applies:

Where P is the principal amount (the first payment), Y (number of years), r (interest rate), c (monthly contribution).

But of course, we use our trusty calculator and plot out the numbers for John to see how much money he’d have at retirement at 2% interest:

This is a graph showing how much John will have after 40 years
The black line (2% interest) shows how much John has over time, from beginning till 40 years later.

Wow! John would have had only $218,096 in his account after 40 years by the time he reaches retirement. That’s almost twice of what he has if he only kept it in a tin under his bed, i.e. no interest rate. But that’s only a quarter of a million. I think he can do better by choosing a better bank that offers, say, 5%.

At 5% interest, the graphs shows that John will have twice the amount of month at the end of 40 years
The red line (5%) shows how much John will have over time, as opposed to the black line (2%)

No way! At 5%, John will get $436,890 at the end of his retirement. It is double of the amount at 2%! That said, it’s still pretty far away from that $1 million. Let’s try to increase it again to 7%, shall we?

The graph shows how 7% interest rate can double what 5% can do over 40 years
The blue line (7%) shows how much John will have over time, as opposed to the red (5%) and black line (2%). The difference is quite dramatic, no?

Omg what. Even at 7% compound interest we’re still having trouble? Stay with me and don’t leave, dear reader!!! Let’s give this ONE MORE TRY at 8%!

The graph shows that the line reaches the 1 million mark
The green line (8%) reaches close to a million dollars after 40 years for John’s retirement.

Finally, John reaches close to $1 million by retirement, after 40 years.

That’s all folks!

We hope you guys are impressed by how much a difference of 1% can make. It can mean between having close to $800,000 and $1,000,000. If that’s not mind-blowing, we don’t know what is. That’s the power of compound interest, my dear readers – underestimate them you should not!!!

Unfortunately, to the best of our knowledge there are no saving accounts of such magnificence at the moment. Ultimately, while the spirit is willing, the maths is not. That said, please do not despair!!! There are quite a few variables in the equation, e.g., monthly contribution amount, length of time spent saving, etc.

With healthy spending habits, constant planning, strict discipline, and the right investment products (which we will discuss in the following articles), you too will be able to achieve that amount. As the Chinese proverb goes: “The best time to plant a tree was 20 years ago. The second best time is now”.

Stay tuned for more articles and like us on our page! In addition, if you have burning questions that you want to ask, why not ask us on our platform? We guarantee you that our carefully curated financial advisers will be able to answer any questions that you might have 😀