CPF Easy Info Thread. :)

[Kaypohji]

Guys, this is what I interpreted from CPF life.

If u have reached the FRS by age 55, u will receive payouts from 65 that is around 1.3k. Exact amount depends on the plan u choose.

And the monthly payout is FOREVER UNTIL YOU DIE.

True ? It sounds too good to be true.

 

[BBCWatcher]

If u have reached the FRS by age 55, u will receive payouts from 65 that is around 1.3k. Exact amount depends on the plan u choose.

Yes, if you start payouts at age 65, which requires that you tell the CPF Board to do it. If you don't ask, then the default is that payouts will start at age 70. The monthly payout amount is higher the later you start payouts.

And the monthly payout is FOREVER UNTIL YOU DIE.
True ? It sounds too good to be true.

It's true. As long as the Government of Singapore exists and maintains its debt and other obligations (a very safe bet), that's the deal.

Longevity insurance (life annuities) are not new. They've been available in certain parts of the world for at least 300 years. The U.S. Social Security system has been continuously paying retirement life annuity benefits to elder Americans since January 31, 1940 -- over 80 years ago. Ms. Ida May Fuller received the first U.S. Social Security retirement payout, a check for US$22.54, which is approximately equivalent to S$600 in 2020 Singapore dollars. Government-sponsored longevity insurance is relatively new to Singapore, but it's one of the world's oldest forms of insurance and works perfectly well. It's a different form of life insurance. Life insurance pays a particular benefit (to survivors) upon the policyholder's death. Longevity insurance flips it around and pays a periodic benefit for as long as the policyholder is alive. Which is really quite simple. If you can do life insurance, you can do longevity insurance.

 

[Kaypohji]

That’s good to know...

1.3k per month is pretty good provided one can hit the FRS, which seems to change when needed

Was trying to do some budgeting for retirement... I did a simple estimation of 1.2k per month for retirement. If one retires at 65, 1.3k seems sufficient for basic and simple life.

Yes, if you start payouts at age 65, which requires that you tell the CPF Board to do it. If you don't ask, then the default is that payouts will start at age 70. The monthly payout amount is higher the later you start payouts.


It's true. As long as the Government of Singapore exists and maintains its debt and other obligations (a very safe bet), that's the deal.

Longevity insurance (life annuities) are not new. They've been available in certain parts of the world for at least 300 years. The U.S. Social Security system has been continuously paying retirement life annuity benefits to elder Americans since January 31, 1940 -- over 80 years ago. Ms. Ida May Fuller received the first U.S. Social Security retirement payout, a check for US$22.54, which is approximately equivalent to S$600 in 2020 Singapore dollars. Government-sponsored longevity insurance is relatively new to Singapore, but it's one of the world's oldest forms of insurance and works perfectly well. It's a different form of life insurance. Life insurance pays a particular benefit (to survivors) upon the policyholder's death. Longevity insurance flips it around and pays a periodic benefit for as long as the policyholder is alive. Which is really quite simple. If you can do life insurance, you can do longevity insurance.

 

[BBCWatcher]

Was trying to do some budgeting for retirement... I did a simple estimation of 1.2k per month for retirement. If one retires at 65, 1.3k seems sufficient for basic and simple life.

Not if you need S$1.2K per month to start. Why? Inflation.

Fortunately there's an easy solution that should work pretty well: the CPF LIFE Escalating Plan. That payout plan includes a 2%/year escalation, which is a decent inflation forecast. (A real, inflation-indexed payout with a nominal "plateau" feature would be ideal, but unfortunately the CPF Board doesn't offer a "CPF LIFE Real Plan." The Escalating Plan is the closest available plan to that ideal.) So if you need S$1.2K to start, then fund your Retirement Account such that the projected CPF LIFE Escalating Plan payout at start is S$1.2K. That's easier if you defer payout start. Or, if you don't like that simple idea, you need some other effective, reliable, durable way to combat inflation. Personally I wouldn't try to do something complicated -- "don't mess around." So I'm highly inclined to select the Escalating Plan. All three plans are extremely fair offers, so the simplest approach that comes closest to assuring a particular real lifestyle is appealing.

 

[8zaoyu]

The behavior of the life annuity (how long it pays) depends on lifespan.

We went to the CPF branch to enquire whether to add in cash up to Enhanced portions. In the end, we decided to just remain at our Full Retirement Sums although one party having lower. No point. You earning the interest for others, or ourselves IF we live beyond 90, i roughly calculate, don 't need to so scientific and expert, may not be yourselves especially you know as a couple, one may live to 85 and the other till 90. Keep some outside cash in EBonus, UOB1 account, DBSMultiplier, savvy, dividend income, etc.

 

[8zaoyu]

Not if you need S$1.2K per month to start. Why? Inflation.

Fortunately there's an easy solution that should work pretty well: the CPF LIFE Escalating Plan. That payout plan includes a 2%/year escalation, which is a decent inflation /QUOTE]
We thought of this too. But if we as a couple, one retire at 65 and the other extend till 68. We better start enjoy on some recreations and doing good deeds to the poorer and that bring good memories rather than leaving material things to your kids. If you leave good values, maybe you may see/hear a great grandkid cackling with laughter and hopes just before we close our eyes

 

[maple96]

COVID-19 is one such event which can shorten one's lifespan.

Hedge!

 

[alt2015]

We went to the CPF branch to enquire whether to add in cash up to Enhanced portions. In the end, we decided to just remain at our Full Retirement Sums although one party having lower. No point. You earning the interest for others, or ourselves IF we live beyond 90, i roughly calculate, don 't need to so scientific and expert, may not be yourselves especially you know as a couple, one may live to 85 and the other till 90. Keep some outside cash in EBonus, UOB1 account, DBSMultiplier, savvy, dividend income, etc.

Would it be good to TOP up to ers now, at 65, you still can withdraw 20% of the frs .... so essentially the TOP up helps to earn 4%.

 

[8zaoyu]

Would it be good to TOP up to ers now, at 65, you still can withdraw 20% of the frs .... so essentially the TOP up helps to earn 4%.

Now we just put back under voluntaryvcash refund to OA for our property that used OA and the accrued interests. No doubt earning 2.5 % only but can be taken out anytime as we are over 55. The 4% ERS can see only. Family genes longevity about 80 yrs of age average only. If only can take out a "13th month interest" , I don't mind joining ERS

 

[Kaypohji]

Yup will take that into consideration. I feel I will request for early payout because I don’t know how long can I live.

Then will keep cash to supplement.

By the way how to know what exact amount is needed in RA so that the cpf life escalating will give at least 1.2k?

Cpf life has a simple table. So if reach minimum of FRS, the standard plan will have at least 1.3. It is given as a range though. So I’m not sure what exact amount will give what exact amount of payout

Not if you need S$1.2K per month to start. Why? Inflation.

Fortunately there's an easy solution that should work pretty well: the CPF LIFE Escalating Plan. That payout plan includes a 2%/year escalation, which is a decent inflation forecast. (A real, inflation-indexed payout with a nominal "plateau" feature would be ideal, but unfortunately the CPF Board doesn't offer a "CPF LIFE Real Plan." The Escalating Plan is the closest available plan to that ideal.) So if you need S$1.2K to start, then fund your Retirement Account such that the projected CPF LIFE Escalating Plan payout at start is S$1.2K. That's easier if you defer payout start. Or, if you don't like that simple idea, you need some other effective, reliable, durable way to combat inflation. Personally I wouldn't try to do something complicated -- "don't mess around." So I'm highly inclined to select the Escalating Plan. All three plans are extremely fair offers, so the simplest approach that comes closest to assuring a particular real lifestyle is appealing.

 

[andyhtc]

Yup will take that into consideration. I feel I will request for early payout because I don’t know how long can I live.

Then will keep cash to supplement.

By the way how to know what exact amount is needed in RA so that the cpf life escalating will give at least 1.2k?

Cpf life has a simple table. So if reach minimum of FRS, the standard plan will have at least 1.3. It is given as a range though. So I’m not sure what exact amount will give what exact amount of payout

I did a simple comparison of ERS and FRS payout over 15 years (65 to 80 years old) using the CPF Life tool:

https://tinyurl.com/CPF-Life-Payout

Although the initial difference between the ERS and FRS is $90,500, over 15 years the difference in payout is $124,200. The longer one lives, the greater the difference.

 

[henrylbh]

I did a simple comparison of ERS and FRS payout over 15 years (65 to 80 years old) using the CPF Life tool:

https://tinyurl.com/CPF-Life-Payout

Although the initial difference between the ERS and FRS is $90,500, over 15 years the difference in payout is $124,200. The longer one lives, the greater the difference.

For own satisfaction, can do another chart for Bequest

 

[BBCWatcher]

I feel I will request for early payout because I don’t know how long can I live.

I don’t understand why uncertainty about lifespan means starting payouts as early as possible. Almost nobody knows how long they’re going to live. Why does that follow?

Actually, it’s rather the opposite. If you die between age 65 and 70ish (at least a little past 70), your CPF nominee(s) are most probably better off than if you had started collecting payouts from age 65. (Possible exception: A nominee needed the money earlier for some important reason, and you didn’t provide it but could have if you started payouts earlier.) At age 70 you also have 5 years of additional knowledge about your health situation and, while you still probably won’t know how long you’ll live, you’ll have a somewhat better idea and can have a little better insight to choose a particular payout plan.

Age 70 deferral (the default) is definitely the winning financial move, if you can afford it. If you’re broke (or someone you care about needs bail money), OK, different story.

By the way how to know what exact amount is needed in RA so that the cpf life escalating will give at least 1.2k?

You won’t know exactly, but you can estimate using CPF’s online calculators and benefit illustrations. For example, let’s suppose the benefit illustration suggests (making up fictitious numbers here) that a FRS-level RA this year (age 55) will generate at least $1,000/month of Escalating Plan income starting at age 65 and ERS-level would be $1,450. So for 50% more you get a 45% higher payout. If you want a 20% higher payout to start ($1,200/month) then how much more would you put in? Multiply 20 by 50/45, and that’s your answer: about 22.2% above the FRS. This linear interpolation will be pretty darn close, close enough anyway.

Please note you’re not required to stop at “bare minimum.” If $1,200/month is minimum for you, but $1,300/month is affordable, why not? At every available level this (CPF LIFE) is a heck of a good deal to buy — a very fair offer from this government. Also, don’t forget about your spouse or partner. CPF LIFE isn’t really designed well for couples, so you’ve got some more work to do in that respect.

For own satisfaction, can do another chart for Bequest

Answer: every dollar you add to a Retirement Account that then spins into any CPF LIFE plan results in a higher residual at every point in time when a residual remains.

 

[dork32]

(b) Insofar as possible, financially help them as early as you can. Don't make them wait until you're gone, when investments in them would be ill-timed or even useless. If somebody needs help to pay a university tuition bill in 2022, don't make them wait until 2032 when they're 10 years older to pay for university. That'd be awful.

I don’t understand why uncertainty about lifespan means starting payouts as early as possible. Almost nobody knows how long they’re going to live. Why does that follow?

Actually, it’s rather the opposite. If you die between age 65 and 70ish (at least a little past 70), your CPF nominee(s) are most probably better off than if you had started collecting payouts from age 65. (Possible exception: A nominee needed the money earlier for some important reason, and you didn’t provide it but could have if you started payouts earlier.) At age 70 you also have 5 years of additional knowledge about your health situation and, while you still probably won’t know how long you’ll live, you’ll have a somewhat better idea and can have a little better insight to choose a particular payout plan.

Age 70 deferral (the default) is definitely the winning financial move, if you can afford it. If you’re broke (or someone you care about needs bail money), OK, different story.

Did anyone detect any contradictions between the two post

 

[dork32]

on one hand, people are advised to get their money out fast so that they dont have to wait 10 years to receive money for their uni education, even though if the amount were to be much larger if you wait.

on the otherhand, people are advised to leave their in cpf for 5 more years so that the amount received will be larger

 

[dork32]

the moral of the story is you choose the right scheme for yourself. you do not have to justify your actions to a one trick pony.

there is no true right or wrong answers here.

just remember, every benefit stated comes at a cost. You must weigh the cost vs benefit when you choose

 

[BBCWatcher]

You didn’t read the “Possible exception” part, did you? Good grief!

Moreover, delaying payouts to age 70 increases the payout amount, making CPF LIFE stronger longevity insurance that supports giving away more money before death. AND delaying increases the residual on the front end should the member die far too soon. AND it gives 5 more years of insight into longevity to optimize payout plan selection.

The only contradictions here are in your head.

 

[dork32]

You didn’t read the “Possible exception” part, did you? Good grief!

Moreover, delaying payouts to age 70 increases the payout amount, making CPF LIFE stronger longevity insurance that supports giving away more money before death. AND delaying increases the residual on the front end should the member die far too soon. AND it gives 5 more years of insight into longevity to optimize payout plan selection.

The only contradictions here are in your head.

i am not denying the benefits of withdrawal at 70. It is your argument that is flawed. delaying your withdrawal means money comes in 5 years later. means your kids will have to delay the uni education by 5 years. this is terrible isnt it? wait.. can you remember who raised this point in the first place?

it is always cost vs benefits.
cost = delayed payout
benefit = larger payout

 

[dork32]

the other point argued here is cpf life standard vs basic. standard is the preferred choice based on our guru. the argument is this: take the money first such that your kids do not have to wait till you die then they can get their uni education (bequest).

my cost and benefit analysis is this
cost: interest on your cpf life does not form part of the bequest
benefits: higher monthly payouts

people should analyze on their own which is better

 

[dork32]

Fortunately there's an easy solution that should work pretty well: the CPF LIFE Escalating Plan. That payout plan includes a 2%/year escalation, which is a decent inflation forecast. (A real, inflation-indexed payout with a nominal "plateau" feature would be ideal, but unfortunately the CPF Board doesn't offer a "CPF LIFE Real Plan." The Escalating Plan is the closest available plan to that ideal.) So if you need S$1.2K to start, then fund your Retirement Account such that the projected CPF LIFE Escalating Plan payout at start is S$1.2K. That's easier if you defer payout start. Or, if you don't like that simple idea, you need some other effective, reliable, durable way to combat inflation. Personally I wouldn't try to do something complicated -- "don't mess around." So I'm highly inclined to select the Escalating Plan. All three plans are extremely fair offers, so the simplest approach that comes closest to assuring a particular real lifestyle is appealing.

again another insurance agent like pitch. you would be an idiot if you do not choose escalating plan.
again cost vs benefit
benefit= payout increase every year
cost = much lower starting payout + interest do not go into bequest