Goal: to achieve $1.2 million in 25 years

Hi Mr. Tan,

I target to accumulate $1.2m in 25 years time. I now save $18,000 a year in insurance premiums. I wish to increase it to $24,000. My savings in CPF is capped at $17,000 a year. How can I make my savings grow faster?

REPLY:

If you save $24,000 a year and invest to earn an average of 5% per annum, you will get $1.14 million at the end of 25 years. Your savings of $17,000 in insurance policies probably earns for you a return of 3% per annum (just a guess). This will accumulate to only $0.65 million in 25 years time.

You can make your savings grow faster by earning a higher rate of return in a diversified, low cost, equity fund. You may wish to consider terminating some of your insurance policies, and investing the premium to earn a higher return.

Read this FAQ:http://www.tankinlian.com/faq/savings.html

However, you have to bear in mind that $1.2 million in 25 years time is worth only $0.73 million in real terms, if you discount for inflation at 2% per annum.