Questions about CPF Life...

[kingboonz]

Too good to be true.

 

[kangkang86]

I swear I've been trying to do my homework before asking you guys... But I can't find the answers...

1. If I pledge my property at 55 years old, do I only need to fund my RA with BRS, OR must I still fund it with FRS and then withdraw up till the BRS?

The FRS can be set aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and property. You may also withdraw your RA savings (excluding top-up monies, government grants, and interest earned) above your BRS if you own a property.


2. I can't figure out how does CPF Life works. So after I set aside my BRS + Property Pledge in RA at age 55, which accumulates interest until age 65, then CPF Life starts compulsorily. What I can't understand is -

. 1. Are the premiums for the CPF Life Annuity deducted annually, monthly or in 1 shot at the beginning?

. 2. How do I choose what payout I get for CPF Life?

. 3. Can I still withdraw from my RA after CPF Life begins?



I am so so confused about what happens in the timeframe between 55 to 65, the CPF website isn't very clear/skips the tough questions.

Replying to the best of my understanding. Should approach cpf for specifics.

1. If you decide to pledge your property then only the BRS is transferred to your RA.

2a. CPF Life premium is deducted one lump sum.

2b. CPF will send you a letter before you reach 65 to ask you which plan you prefer.

2c. After deducting your premium for CPF Life there will be little or no money left for withdrawal in your RA.

 

[BBCWatcher]

1. If I pledge my property at 55 years old, do I only need to fund my RA with BRS, OR must I still fund it with FRS and then withdraw up till the BRS?

From the CPF Website: The FRS can be set aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and property. You may also withdraw your RA savings (excluding top-up monies, government grants, and interest earned) above your BRS if you own a property.

1. If you decide to pledge your property then only the BRS is transferred to your RA.

No, that's not correct. Just as CPF described in the portion that kingboonz quoted, your Retirement Account is funded on your 55th birthday up to the Full Retirement Sum, if it can be. Your property pledge and associated withdrawal occurs after that, if you wish. (I don't recommend you do so.)

2. I can't figure out how does CPF Life works. So after I set aside my BRS + Property Pledge in RA at age 55, which accumulates interest until age 65, then CPF Life starts compulsorily.

No. If you simply do nothing, nothing happens until your 70th birthday except that interest accumulates. If you then still do nothing, CPF LIFE Standard Plan payouts start at age 70.

What I can't understand is -

. 1. Are the premiums for the CPF Life Annuity deducted annually, monthly or in 1 shot at the beginning?

There's a one-time transfer from your RA to the CPF Lifelong Income Fund just before CPF LIFE payouts start. The amount of the transfer varies depending on your choice of payout plan....

....But that's just the mechanics and doesn't really matter as such. You just decide which payout plan you wish, and at what level (i.e. if you want to make a property pledge and some amount of withdrawal before payouts start).

. 2. How do I choose what payout I get for CPF Life? (OR What determines the payout I get for CPF Life?)

The primary driver is how much your RA is holding how early. If you top up your Retirement Account to the Enhanced Retirement Sum on your 55th birthday, then that'll produce the maximum obtainable (or nearly maximum obtainable -- you might be able to do some more top ups each January as the ERS is increased) monthly payout amount across all three CPF LIFE payout plans. Another major driver is when you start payouts. You can choose to start at age 65, at age 70, or anywhere in between. If you defer to age 70, your monthly payout amount increases very substantially.

Guess what I plan to do?

. 3. Can I still withdraw from my RA after CPF Life begins?

I don't think you're allowed to withdraw from your RA while payouts are happening. You're allowed to suspend CPF LIFE payouts if you're below age 70 and then resume them no later than age 70. I'm not sure if you can make a withdrawal during a suspension, but I don't think so.

This one is a great question for CPF.

I am so so confused about what happens in the timeframe between 55 to 65, the CPF website isn't very clear/skips the tough questions.

Nothing, really, except lovely interest and bonus interest credited to your RA. Nothing really happens at age 65 either if you do nothing except more lovely interest accrual.

Yes, there are some levers you can pull and knobs you can twist within the age 55 to 70 range, but you're not required to do so.

2b. CPF will send you a letter before you reach 65 to ask you which plan you prefer.

Yes, CPF will explain what you could do at age 65. But CPF will also explain that you're not required to do anything at age 65.

2c. After deducting your premium for CPF Life there will be little or no money left for withdrawal in your RA.

Here's one place where you don't want to get too bogged down in the mechanics. Withdrawals happen (if they happen) before you start you payouts, and thus before CPF's accounting exercise in how it allocates RA and CPF Lifelong Income Fund amounts as you enter your chosen CPF LIFE payout plan.

For whatever reasons, CPF opted to track your RA and your individual claim on the LIF as separate accounts. "Whatever." Hypothetically CPF could just transfer everything in your RA to the LIF, and then manage all individual claims to the LIF across the three different payout plans. But maybe doing it this way was just easier for the existing systems that were designed for the old fixed term annuities. Private life annuity providers don't send you statements with the equivalent of RA balances, but so it goes.

 

[kingboonz]

Too good to be true.

 

[henrylbh]

I swear I've been trying to do my homework before asking you guys... But I can't find the answers...

1. If I pledge my property at 55 years old, do I only need to fund my RA with BRS, OR must I still fund it with FRS and then withdraw up till the BRS?

From the CPF Website: The FRS can be set aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and property. You may also withdraw your RA savings (excluding top-up monies, government grants, and interest earned) above your BRS if you own a property.


2. I can't figure out how does CPF Life works. So after I set aside my BRS + Property Pledge in RA at age 55, which accumulates interest until age 65, then CPF Life starts compulsorily. What I can't understand is -

. 1. Are the premiums for the CPF Life Annuity deducted annually, monthly or in 1 shot at the beginning?

. 2. How do I choose what payout I get for CPF Life? (OR What determines the payout I get for CPF Life?)

. 3. Can I still withdraw from my RA after CPF Life begins?



I am so so confused about what happens in the timeframe between 55 to 65, the CPF website isn't very clear/skips the tough questions.

I am not answering but giving you a brief idea about CPF.

At 55, amount in SA followed by OA will be transferred to RA to meet prevailing FRS. If you are not able to meet FRS, you are allowed to withdraw $5k max.

If you are able to meet FRS, any balance in OA and SA, can be withdrawn anytime in any amount.

If you are not able to meet FRS, future CPF contributions will need to make good the shortfall if you wish to withdraw the future contributions.

Anytime from 55, you can charge your property to withdraw any amount and at anytime in excess of BRS. Amount in BRS must be attributed to contributions from work or voluntary contributions.

From 65 you have option to commence monthly life payout. There are 3 life payout plans (standard, basic or escalating) to choose and the annuity premium will be deducted at one go according to the plan chosen.

You can choose to do nothing, but automatic life payout will commence at 70 based on standard plan.

 

[maleman]

Besides the BRS, FRS, ERS amounts, can I choose to have an RA amount that is in between FRS and ERS, eg. $200k

 

[dork32]

I did my calculations too, to see how much should i split between SA drawdown and RA CPF Life, but in the end, i decided to favour liquidity in SA over a higher monthly payout. (Seems like the breakeven age for me is around 77.) I am assuming there is no limit to the maximum you can withdraw from SA after 55 after setting aside BRS + Property Pledge.

this is very wrong.

by ra cpf life, i would assume that you mean cpf life basic. i take it that you are comparing cpf life basic and sa account.

both ra and sa gives the same interest of 4%. at cpf life, 20% of your funds is not earning interest for your ra. this means that ra is foreever behind sa if all else remains the same.

the only way that the cpf life is going to overtake sa is that when the ra is exhausted. the people here in the forum will tell you it will take a lot more than 77 for you to exhaust your ra.

 

[lifeafter41]

this is very wrong.

by ra cpf life, i would assume that you mean cpf life basic. i take it that you are comparing cpf life basic and sa account.

both ra and sa gives the same interest of 4%. at cpf life, 20% of your funds is not earning interest for your ra. this means that ra is foreever behind sa if all else remains the same.

the only way that the cpf life is going to overtake sa is that when the ra is exhausted. the people here in the forum will tell you it will take a lot more than 77 for you to exhaust your ra.

This will be applicable only after 65, or after the choosing of the CPF Life options.
Perhaps a calculation of making voluntary contributions to CPF annual limits, vis a vis to topping up to ERS, at age 55, will give a better picture.

 

[Value.Matrix]

this is very wrong.

by ra cpf life, i would assume that you mean cpf life basic. i take it that you are comparing cpf life basic and sa account.

both ra and sa gives the same interest of 4%. at cpf life, 20% of your funds is not earning interest for your ra. this means that ra is foreever behind sa if all else remains the same.

the only way that the cpf life is going to overtake sa is that when the ra is exhausted. the people here in the forum will tell you it will take a lot more than 77 for you to exhaust your ra.

If you did an excel spreadsheet, then you would know it hovers between age 87 to 93 depending on how you did the calculations.

However, for bequest (if it is even a concern for you), it drops to 0 at age 80s + abit for Standard and Escalating Plan.

For basic plan, around age 85 to 90 then 0 (check with CPF Life estimator for a better view.

 

[eaterofworlds]

If you defer, is the premium deducted at 65 or 70?

Also if you do nothing and join at 70, instead of selecting a plan at 65 and apply for defer, do you still get the 35% payout?

Asking because, if you check the FAQ on how to apply for defer the video will show that
"if you pass away during the deferment period, any unused premium (without interest) will be refunded to your RA"

Moreover wont it make more sense to get 4% annual interest from 65 to 70 then join (especially for those not at ERS yet) and get 35% more (assume it works this way), and also your bequest if you pass away during deferment period also accumulates interest

 

[BBCWatcher]

If you defer, is the premium deducted at 65 or 70?

The premium is deducted shortly before you start CPF LIFE payouts. (It doesn't particularly matter, though. It's just how the CPF Board handles the accounting.)

Also if you do nothing and join at 70, instead of selecting a plan at 65 and apply for defer, do you still get the 35% payout?

You don't make any plan selections any more much ahead of payout start. That used to be how CPF LIFE worked, but no longer. Now you just say, for example, "Start my CPF LIFE Escalating Plan payout next month, please," and that's that.

What you could do at age 65 (or 66, or whatever) is contact the CPF Board and say (for example), "Start my CPF LIFE Basic Plan payout next month, please." Then payouts start, then you can contact them again and say, "Please suspend my payouts." Then resume payouts under the same plan any time before age 70, or they'll automatically start back up at age 70. But the basic point is that plan selection = payout start. It's all the same transaction now. There's no such thing any more as "Hey, CPF Board, I think I'd like the Standard Plan, but don't start paying me yet." The very first CPF LIFE participants did things that way, but not any more -- the CPF Board simplified the program.

The online form to make a CPF LIFE payout plan selection and start payouts is called "FORM LID-APP(1)."

You're certainly free to think about what payout plan you might select in the future, but you don't have to notify the CPF Board ahead of time what your thinking is.

Asking because, if you check the FAQ on how to apply for defer the video will show that
"if you pass away during the deferment period, any unused premium (without interest) will be refunded to your RA"

I'm not sure what that's referring to, but it's old information now (unless you're among the first CPF LIFE participants).

Moreover wont it make more sense to get 4% annual interest from 65 to 70 then join (especially for those not at ERS yet) and get 35% more (assume it works this way), and also your bequest if you pass away during deferment period also accumulates interest

Sure, 4+% interest is attractive. To keep it simple, it's usually best to start CPF LIFE payouts only when you need them for basic living expenses or at age 70, whichever is earlier.

 

[Andrew833]

No, that's not correct. Just as CPF described in the portion that kingboonz quoted, your Retirement Account is funded on your 55th birthday up to the Full Retirement Sum, if it can be. Your property pledge and associated withdrawal occurs after that, if you wish. (I don't recommend you do so.)


No. If you simply do nothing, nothing happens until your 70th birthday except that interest accumulates. If you then still do nothing, CPF LIFE Standard Plan payouts start at age 70.


There's a one-time transfer from your RA to the CPF Lifelong Income Fund just before CPF LIFE payouts start. The amount of the transfer varies depending on your choice of payout plan....

....But that's just the mechanics and doesn't really matter as such. You just decide which payout plan you wish, and at what level (i.e. if you want to make a property pledge and some amount of withdrawal before payouts start).


The primary driver is how much your RA is holding how early. If you top up your Retirement Account to the Enhanced Retirement Sum on your 55th birthday, then that'll produce the maximum obtainable (or nearly maximum obtainable -- you might be able to do some more top ups each January as the ERS is increased) monthly payout amount across all three CPF LIFE payout plans. Another major driver is when you start payouts. You can choose to start at age 65, at age 70, or anywhere in between. If you defer to age 70, your monthly payout amount increases very substantially.

Guess what I plan to do?


I don't think you're allowed to withdraw from your RA while payouts are happening. You're allowed to suspend CPF LIFE payouts if you're below age 70 and then resume them no later than age 70. I'm not sure if you can make a withdrawal during a suspension, but I don't think so.

This one is a great question for CPF.


Nothing, really, except lovely interest and bonus interest credited to your RA. Nothing really happens at age 65 either if you do nothing except more lovely interest accrual.

Yes, there are some levers you can pull and knobs you can twist within the age 55 to 70 range, but you're not required to do so.


Yes, CPF will explain what you could do at age 65. But CPF will also explain that you're not required to do anything at age 65.


Here's one place where you don't want to get too bogged down in the mechanics. Withdrawals happen (if they happen) before you start you payouts, and thus before CPF's accounting exercise in how it allocates RA and CPF Lifelong Income Fund amounts as you enter your chosen CPF LIFE payout plan.

For whatever reasons, CPF opted to track your RA and your individual claim on the LIF as separate accounts. "Whatever." Hypothetically CPF could just transfer everything in your RA to the LIF, and then manage all individual claims to the LIF across the three different payout plans. But maybe doing it this way was just easier for the existing systems that were designed for the old fixed term annuities. Private life annuity providers don't send you statements with the equivalent of RA balances, but so it goes.

I just don't understand why you have to reply ppl with long answer and worst in your own opinion instead of simply answer to simply question.

 

[BBCWatcher]

I just don't understand why you have to reply ppl with long answer and worst in your own opinion instead of simply answer to simply question.

And instead of wasting everyone's time with this post, you could simply post what you think is a better answer.

 

[henrylbh]

I just don't understand why you have to reply ppl with long answer and worst in your own opinion instead of simply answer to simply question.

just let it be. That's his idiosycrasy. There is nothing much you can do except to skip or don't bother to read them.

 

[8zaoyu]

I need not decide which CPF Life Plan of Basic, Standard or Escalating till one month before 65, not like last time - to decide at 55 which Plan. But now CPF can release $$$ above FRS by Paynow instantly because I have that Full Retirement Sum when I was 55 already. I can do SRS Invest, CPF OA/SA if I am as savvy as some forumners like Dork here. Some folks already seasoned investors from reading the other threads. But I had rather not touch my CPF to invest. Leave it for minimal payout from Basic w property pledge OR the normal Standard plan which give about the "minimum wage" for around $1.3k ? monthly. I will get the payout definitely from 65, otherwise if no job on retirement -eat grass? The extra $$$ because of fulfilled FRS, can play with handphone and Paynow to self for overseas travels or emergency events only.