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FIRE Finance Math

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Singapore-focused financial independence tools: CPF bonus interest calculator, SSB vs T-Bill comparison, and FIRE number projection with local cost-of-living defaults.

FIRE Finance Math

CPF Bonus Interest

CPF interest is computed monthly on the lowest balance for that month, with bonus interest on the first S$60,000 of combined balances (capped at S$20,000 for OA). The effective annual rate depends on how contributions are timed throughout the year.

The monthly interest for Ordinary Account (OA) base rate:

IOA=Bmin⁡×0.02512I_{\text{OA}} = B_{\min} \times \frac{0.025}{12}

With bonus interest on the first S$60,000 (up to S$20,000 from OA):

Ibonus=min⁡(BOA,20000)×0.0112+max⁡(0,60000−BOA)×0.0112I_{\text{bonus}} = \min(B_{\text{OA}}, 20000) \times \frac{0.01}{12} + \max(0, 60000 - B_{\text{OA}}) \times \frac{0.01}{12}

FIRE Number

The FIRE (Financial Independence, Retire Early) number estimates the portfolio size needed to sustainably withdraw living expenses. Based on the 4% rule (Trinity Study):

FIRE Number=Annual Expenses0.04=Annual Expenses×25\text{FIRE Number} = \frac{\text{Annual Expenses}}{0.04} = \text{Annual Expenses} \times 25

Singapore-specific adjustments include CPF Life payouts from age 65, which reduce the required portfolio drawdown rate. The bridge fund covers expenses from retirement age until CPF Life payouts begin:

B=Y×(65−R)where Y=annual expenses,R=retirement ageB = Y \times (65 - R) \quad \text{where } Y = \text{annual expenses}, R = \text{retirement age}

SSB vs T-Bill

The Singapore Savings Bond (SSB) uses a step-up coupon structure where interest rates increase over the 10-year tenure. The effective yield is the average of all coupon rates. T-bills are sold at a discount with the yield determined by the cut-off price at auction:

Yield=Face Value−PricePrice×365Days to Maturity\text{Yield} = \frac{\text{Face Value} - \text{Price}}{\text{Price}} \times \frac{365}{\text{Days to Maturity}}

The break-even analysis between SSB and T-bills depends on the holding period and interest rate expectations. SSB offers the option to redeem early without capital loss, while T-bills must be held to maturity or sold at market price.