The maximum ERS is 150% of the FRS, and this figure increases every year. I believe you’ve got the correct figure for 2018.
Apparently, from age 55, you can add a small top-up to your RA every January 1 when the BRS/FRS/ERS increase, even if you’ve hit the ERS previously. And you can do that for about 10 or 15 years. So ERS on your 55th birthday plus January top-ups to the new ERS would be the absolute maximum CPF LIFE participation level.
I’m not following you. If you zoom to ERS level, that determines your payouts. All you’d do is choose your payout plan just before your 70th birthday in this example — I’d pick the Escalating Plan — and that’s that.
I agree with you and disagree with Henrylbh about bequests. You cannot use CPF LIFE to guarantee a bequest, not directly. None of the CPF LIFE payout plans guarantee a bequest — not even close. (All stand a high chance of yielding zero bequest.) However, you can better assure that your other assets will turn into a bequest if you maximize the longevity insurance characteristics of CPF LIFE. That means three things: (a) funding RA to a level that provides at least a sufficient CPF LIFE income stream for your purposes; (b) deferring CPF LIFE payouts to age 70; (c) choosing the Escalating Plan, to combat possible inflation. That’s the safe and the smart play, even if you are trying to assure a particular (or higher) bequest. Anything else means you’re playing the “bequest lottery,” which is not safe if you’re trying to assure a bequest.
There is another part of CPF that can act as a nearly 100% guaranteed bequest. That’s your Medisave Account. It earns 4% interest, which is very attractive. And it’s restricted to medical spending (and some medical insurance). So what you can do with a bequest aim is to keep topping up your Medisave Account within any/every month that there’s a Medisave deduction. You can top up to the Basic Healthcare Sum (BHS) in your Medisave Account. The BHS for you is the BHS figure at your age 65. (Once you hit your 65th birthday the BHS is not increased for you.)
Medisave is not quite a 100% guaranteed bequest when used this way, because there’s the possibility that you’ll need to spend some Medisave funds for late-in-life qualified medical expenses. But it’s a much better assured bequest bet than any of the CPF LIFE payout plans, and you do want to keep it full (if you can) because of the attractive interest. Upon your demise your Medisave balance is paid to your nominated CPF heir, in cash I’d suggest. (The Enhanced Nomination Scheme is occasionally useful, but cash is better if your nominee is at least somewhat responsible.)
But doesn't the bequest be approximately following the [compounded interest rate + principal sum - payouts]? What would cause the bequest to deviate significantly from that?
Also, there's another option i would like you to advise on. Assuming i have a property pledge(property bought partially using CPF), i can opt for a BRS($88,500 as of 2018). Since i can top-up my SA to FRS($171,000), if 55 this year, $88,500 will be moved to RA while the remaining left in SA would still compound annually at 4% & the BRS would hit the 4-6% interest rate in the RA. The amount in SA, OA and MA would be a guaranteed bequest. If cash is needed, same day withdrawals can be made too. So, wouldn't it be better to just CPF LIFE using BRS with the Basic Plan? In the event of my death, my children(nominee and next owner of house) do not have to refund CPF for the sale of the house right?
The freed up cash from supposedly topping up to ERS from FRS can be used to purchase SSBs. The interest earned(10 years from now till 65) + cash on hand & emergency fund + withdrawal from OA first as and when needed then SA + dividends/sale from the 30% stocks can last me till payout from 65 or 70. I would lose the extra 1.5% interest(4% compared to the 2.5%ish in SSB till maturity) in the RA but would be more liquid for the impending recession. If it happens within the next 10 years, capital gain can last me till death and holdings would pass on to my children. Thoughts?
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