CPF after 55

[dork32]

Any comment or sharing of experience on whether it is difficult to get exemption from CPF Life totally with a private annuity? I cannot seem to find published criteria on what may constitute an approved private annuity such that one may withdraw all of own savings from CPF system (other than Medisave which cannot be taken out until death). Thank you.

the many experts here will say cpf life is the best annuity plan. why do want a private annuity?

 

[sohguanh]

you are new here. you are still not sure how this stupid thing works. we have done a lot of work on it. similar to what you have done. we took the numbers extrapolate, interpolate, dissect.... We have analyzed almost everything there is to analyze, except the one we mentioned yesterday: to stay in basic and switch to standard at 80.

you are right in that the interest is 4% + 600 from 55 to 65. but when you switch to cpf life standard, the interest suddenly hits 0.

i just use the estimator, i keyed
born in 1957 (65 this year)
200k in ra
draw at 65
payout = 1120
since there is no interest, no complex financial calculator or excel is needed. $200k/$1120/month = 178.6 months = 14.88 years
14.88 + 65 = 79.88 years. this is why the bequest hits 0 at 79.88 or easier, 80.

i have done this exercise many times. i did not try to extract the numbers because i am confident that the interest is 0

This is quite important finding you have found, did you write in officially to CPF for an answer using the example numbers you input in?

Read so many post, some readers seem to think the monthly payout already include your principal + interest and NOT like you say draw down principal finish then draw down the interest no more draw other ppl interest.

 

[Stingray36]

This information is from the CPF life estimator page.

"As CPF LIFE is a longevity insurance annuity scheme, its main feature is the life-long payouts and not the bequest amount that nominees can receive upon member’s demise. Generally, the bequest amount can be easily derived by deducting the total payouts received from the total CPF LIFE premium paid."

 

[item2sell]

I understand dork32.

for a Long time I just felt the CPF life after 80 is hard to breakdown.

Then dork32 state the one sentence that makes it clear for me.

drawndown Principal. Then own interest. Finally leech others interest.

If passed away after all principal drawn then $0 bequest.

 

[sohguanh]

This information is from the CPF life estimator page.

"As CPF LIFE is a longevity insurance annuity scheme, its main feature is the life-long payouts and not the bequest amount that nominees can receive upon member’s demise. Generally, the bequest amount can be easily derived by deducting the total payouts received from the total CPF LIFE premium paid."

I read this already but dork32 post is different. He seem to say monthly payout is in below order
1. draw from principal <- no interest
2. above step 1 use finish draw from interest
3. above step 2 use finish draw from other dead ppl interest

 

[item2sell]

This information is from the CPF life estimator page.

"As CPF LIFE is a longevity insurance annuity scheme, its main feature is the life-long payouts and not the bequest amount that nominees can receive upon member’s demise. Generally, the bequest amount can be easily derived by deducting the total payouts received from the total CPF LIFE premium paid."

CPF said easily derived. They didn’t show us the formula

 

[vsvs24]

I read this already but dork32 post is different. He seem to say monthly payout is in below order
1. draw from principal <- no interest
2. above step 1 use finish draw from interest
3. above step 2 use finish draw from other dead ppl interest

Refer to this link and select Standard Plan. The last para.

Your CPF LIFE monthly payouts will first be paid from your CPF LIFE premium. When your CPF LIFE premium is depleted, you will continue to receive the monthly payouts from the interest that you and other CPF LIFE members have accumulated, no matter how long you live.

https://www.cpf.gov.sg/member/faq/r...e LIFE Basic Plan,from your CPF LIFE premium.
While it does not break down 2 and 3, it is clear that 1 is used up first.

 

[sohguanh]

Refer to this link and select Standard Plan. The last para.

Your CPF LIFE monthly payouts will first be paid from your CPF LIFE premium. When your CPF LIFE premium is depleted, you will continue to receive the monthly payouts from the interest that you and other CPF LIFE members have accumulated, no matter how long you live.

https://www.cpf.gov.sg/member/faq/r...e LIFE Basic Plan,from your CPF LIFE premium.
While it does not break down 2 and 3, it is clear that 1 is used up first.

Thanks for sharing now it seems Basic maybe better but then if you live much longer rugi. But I think I good man so I die earlier so I think I go for Basic. Lone hero in last episode only one vacancy so hard to achieve.

 

[vsvs24]

Thanks for sharing now it seems Basic maybe better but then if you live much longer rugi. But I think I good man so I die earlier so I think I go for Basic. Lone hero in last episode only one vacancy so hard to achieve.

I am still far from 65. Nearer that time then scratch my head. Think a lot of things will be clearer then as more and more people would start CPF life payout and share info. Policies might also change.

 

[andyhtc]

you are new here. you are still not sure how this stupid thing works. we have done a lot of work on it. similar to what you have done. we took the numbers extrapolate, interpolate, dissect.... We have analyzed almost everything there is to analyze, except the one we mentioned yesterday: to stay in basic and switch to standard at 80.

you are right in that the interest is 4% + 600 from 55 to 65. but when you switch to cpf life standard, the interest suddenly hits 0.

i just use the estimator, i keyed
born in 1957 (65 this year)
200k in ra
draw at 65
payout = 1120
since there is no interest, no complex financial calculator or excel is needed. $200k/$1120/month = 178.6 months = 14.88 years
14.88 + 65 = 79.88 years. this is why the bequest hits 0 at 79.88 or easier, 80.

i have done this exercise many times. i did not try to extract the numbers because i am confident that the interest is 0

My updated conclusion from this discussion is the CPF Life standard plan payout is designed based on:

1) $0 bequest at age 80.
2) 4% interest from age 65 going into common pool instead of own CPF Life.
3) self-funding (interest from own money) until age 87-88.
4) pool funding (interest from other people money) beyond age 87-88.

So lever for CPF if interest rate is kept constant and number of members is kept constant is to adjust the age of bequest at $0 so as to indirectly adjust the payout. This age is pegged to the expected lifespan, number of members and pool of money in the system.

To truly gain from the 4% interest, one will need to live beyond 87-88.

 

[andyhtc]

no where in cpf does it say directly that the interest is 0. because if it does, people will start to rebel. like bbc, they phrase in a very funny way to obscure the truth.

I would think the 4% interest is real but at a pool level beyond 65 years old.

If a person keeps to a healthy lifestyle and lives longer than 87-88, then the person will gain more than the 4% interest.

But the average life expectancy for males is only 81.5. To live beyond 87-88, one would need to stay very healthy and have good genes.

 

[henrylbh]

wow, really a lot of money.

but seriously, i am not very eager for this type of money. i rather my loved one live on

I was persistently asked to draw a Will naming myself as beneficiary. I was not keen as firstly I am not eligible to own the hdb flat and secondly my aunty had children of her own and thirdly the flat was under joint tenancy and no Will would berecognised by HDB and lastly I want to avoid conflict with her family members.

 

[BBCWatcher]

Any comment or sharing of experience on whether it is difficult to get exemption from CPF Life totally with a private annuity? I cannot seem to find much published criteria on what may constitute an approved private annuity such that one may withdraw all of own savings from CPF system (other than Medisave which cannot be taken out until death). It seems that a key criteria may be it has to be *lifelong* annuity and this is what is probably hard to find in private at competitive rates? Please correct me if wrong. Thank you.

You will not find any life annuity that has a lower or same premium as CPF LIFE. You would never rationally buy a private annuity in order to replace CPF LIFE. That makes no financial sense.

If you happen to have a life annuity — as a corporate benefit paid to an executive, for example — then you might opt out of CPF LIFE. But probably not even then since CPF LIFE is still a great deal. Opting out of CPF LIFE means you have to withdraw every dollar from your CPF Retirement Account. There's no "free lunch" on offer.

But the average life expectancy for males is only 81.5.

It is not. You're just not smart if you use life expectancy at birth — that's just foolish. Secondary school students are not receiving CPF LIFE payous. You should be using life expectancy at CPF LIFE entry age, with an estimate of mortality improvement.

To live beyond 87-88, one would need to stay very healthy and have good genes.

Nope. You'd just need to be a typical 65 year old (in the not-too-distant future) and with a modest forecast of mortality improvement.

The CPF Board's independent actuaries know what they're doing. It's a fair, not-for-profit life annuity system.

 

[DriftKing]

Some clarification from the above findings, let's say the person has 40k in RA, you receive the monthly payout, does the 4% interest gets paid out?

Or like how it is discovered, it'll still be drawn down on the 40k up til 80 years old, any interest is only 'distributed' if you live beyond that

 

[dork32]

Refer to this link and select Standard Plan. The last para.

Your CPF LIFE monthly payouts will first be paid from your CPF LIFE premium. When your CPF LIFE premium is depleted, you will continue to receive the monthly payouts from the interest that you and other CPF LIFE members have accumulated, no matter how long you live.

https://www.cpf.gov.sg/member/faq/r...e LIFE Basic Plan,from your CPF LIFE premium.
While it does not break down 2 and 3, it is clear that 1 is used up first.

you are right lah. 2 and 3 is my own story. it does not matter if it is 2 or 3 to cpf or you. it is all not your money

 

[dork32]

i must qualify something here. those things that i mentioned today is for CPF life standard.

in cpf life basic, it is a totally different ball game.

 

[dork32]

Some clarification from the above findings, let's say the person has 40k in RA, you receive the monthly payout, does the 4% interest gets paid out?

Or like how it is discovered, it'll still be drawn down on the 40k up til 80 years old, any interest is only 'distributed' if you live beyond that

there are a number of points here.
first we are talking about cpf life standard. if is only valid if totally bochap your cpf or you choose standard.

second in cpf life standard, your money is not in ra, it is in cpf life premium. anyway it is pandan leaf by any name would smell as fragrant.

third is the interest earn by the cpf life premium does not add onto itself. it is placed in another place called the lifelong income fund, together with the interest of all the other cpf life members.

fourth we know that it is drawn down to 0 at 80 by two area: 1 is from the cpf website. second is through maths. you take the 40k and divide by the payout. that will give you the months that the 40k can last. you add that to your draw down age and it is 80 years old.

fifth is also from cpf website and common sense. you got no more money at 80. who is going to pay you? our cheng hu? in your dreams our cheng hu so nice. so it has to come from interest that is from the income fund.

 

[dork32]

I would think the 4% interest is real but at a pool level beyond 65 years old.

If a person keeps to a healthy lifestyle and lives longer than 87-88, then the person will gain more than the 4% interest.

But the average life expectancy for males is only 81.5. To live beyond 87-88, one would need to stay very healthy and have good genes.

you are right here.

you have also hit the right note here. you will win big is you live beyond 88. but you lose big if you die at 80. this is the story for cpf life standard

if you are worried about dying at 80 losing big, then go for cpf life basic. if you die at 80, you lose just a bit. if you live beyond 88, you also win but not as much as standard.

i will not say anyone is not smart here if you choice is different from mine. i say again there is no right or wrong answer.

henry will say my dad lived to 91, my aunt lived to 99, many of my relatives. i have good genes, i have tonic, i excercise, i sure outlive them.

i will say that you are not smart if you dont know what is happening and anyhow choose.

 

[dork32]

My updated conclusion from this discussion is the CPF Life standard plan payout is designed based on:

1) $0 bequest at age 80.
2) 4% interest from age 65 going into common pool instead of own CPF Life.
3) self-funding (interest from own money) until age 87-88.
4) pool funding (interest from other people money) beyond age 87-88.

So lever for CPF if interest rate is kept constant and number of members is kept constant is to adjust the age of bequest at $0 so as to indirectly adjust the payout. This age is pegged to the expected lifespan, number of members and pool of money in the system.

To truly gain from the 4% interest, one will need to live beyond 87-88.

some of the things that you have written is not stated explicitly in cpf website.
eg 87-88 is nowhere to be found in the cpf website. it is through your own calculation.
eg reach 80 to deplete your bequest is not stated. it is through the estimator that you can deduce from it.
eg self funding and pool funding is also not stated. it is not differentiated at all in the cpf. it is stupid dork's own story. but putting it this way helps to to analyze the system better.

but you are essentially correct.

 

[dork32]

Thanks for sharing now it seems Basic maybe better but then if you live much longer rugi. But I think I good man so I die earlier so I think I go for Basic. Lone hero in last episode only one vacancy so hard to achieve.

i just want to clarify this if you are in basic and you lived to 95, you do not luigi. your returns would be about 4.5%. this is still quite good. but if you are on standard, the return is 5%.

sorry i did the calculations a long time ago. i cannot remember the exact return, but it is somewhere there.