CPF @ 55 & after

[OngHuatHuat]

CPF Life is a big joke, if my calculations are not wrong.

Just before CPF Life, the last min sum was 139k and the monthly payout is $1,240. Based on 4% interest, excluding additional interest, the payout from 65 will last about 19 years and 10 months when the amount is exhausted.

Now CPF Life with min sum of $161k (a much higher min sum), the monthly payout is only $1,220 from 65 and will last for about 25 years and 10 months when the amount is exhausted.

If the min sum of 161k at $1,220 pm can last till age 90 plus, why is there a need for CPF Life that force us to gamble with our bequest?

Can someone point out whether I have made error in my calculations?

fairer comparison is with annuity of similar start amount and payout.
Your calculation is not correct. See my print screens for proof.
Your 1220 pm based on 161 K won't be able to last for 25 years(assume interest rate at 4%), it can only last around 17 plus years. Anything more than that means you are earning from CPF.

65 + 18 = 83 years old.

http://www.singstat.gov.sg/docs/def...atistics/visualising_data/life-expectancy.pdf

This is consistent with life expectancy of Singaporeans.
If you want to get more from this scheme, you have to pray hard you are healthy and able to live past 83 years old.

 

[henrylbh]

Sorry I am not good at maths and formula. Neither do I know how to attach my worksheet here for forumers to check for me.

I have done a worksheet showing 161k compounded annually at 4% from age 55 to 65 is $238,319.

If monthly payout of $1,220 commenced at age 65, the compounded Amount would last to about age 90 and 10 months taking into account that the balance after each payout earns interest at 4% divided by 12. The interest for the 12 months is accumulated and added on to the balance at the beginning of the following year.

If the payout is deferred for a year, the compounded Amount at age 66 would be $247,852. If monthly payout increased to $1,281 (by 6%) the Amount would last to about age 91 and 5 months.

If the payout is deferred for 2 years, the compounded Amount at age 67 would be $257,766. If the monthly payout increased to $1,358 (by 6%) the Amount would last to about age 91 and 7 months.

In the above calculations, I ignore that the first 30k will earn 6% and 5% on the next 30k from age 55 from 2016. The issue of bequest is also not factored in the calculations.

There appears to be no need to have CPF Life as the Amount will last for a very long long if additional interest is taken into account.

Sorry, I don’t know how to attach my worksheet for your verification as there may be flaws in my calculations.

 

[OngHuatHuat]

http://static.webpaage.com/public/p...er/newsletters/FP3Q2009/FP3NL2009article4.pdf

Look at this link for a clearer picture on other annuity plans available in the market, none of them can project a 4% per annum interest, which means the current model of CPF special of 4% + 600 sgd is unbeatable.

Need to compare using sg market other annuity plans.

And the figures provided by herry bro in this thread is incorrect.
Look at this report in 2009, go to page 4 table 3, the monthly payout with no bequest at all is
879 - 957 for males and 768 to 841 for females. This huge difference is due to difference in life expectancy between male and female at that time.
As you can see, this amount if nowhere near current payout of 1220 - 1320

 

[henrylbh]

Your calculation is not correct. See my print screens for proof.

Your 1220 pm based on 161 K won't be able to last for 25 years(assume interest rate at 4%), it can only last around 17 plus years. Anything more than that means you are earning from CPF.

How could it last less than 139k under MSS that pays more at $1,240 for about 20 years?

 

[henrylbh]

http://static.webpaage.com/public/p...er/newsletters/FP3Q2009/FP3NL2009article4.pdf

Look at this link for a clearer picture on other annuity plans available in the market, none of them can project a 4% per annum interest, which means the current model of CPF special of 4% + 600 sgd is unbeatable.

Need to compare using sg market other annuity plans.

And the figures provided by herry bro in this thread is incorrect.
Look at this report in 2009, go to page 4 table 3, the monthly payout with no bequest at all is
879 - 957 for males and 768 to 841 for females. This huge difference is due to difference in life expectancy between male and female at that time.
As you can see, this amount if nowhere near current payout of 1220 - 1320

Appreciate if you can point out which part of my worksheet is wrong. You take into account that after each monthly payout, the balance earns interest at 4% and the 12 months interest is added on to the balance at the beginning in the following year? CPF calculates interest based on lowest balance in each month.

 

[rrr2015]

In the above calculations, I ignore that the first 30k will earn 6% and 5% on the next 30k from age 55 from 2016. The issue of bequest is also not factored in the calculations.

There appears to be no need to have CPF Life as the Amount will last for a very long long if additional interest is taken into account.

first 30K earn additional 2%, 2nd 30K additional 1%, so may i know how does these 1% ~ 2% additional interests able to sustain payout forever?

 

[henrylbh]

And the figures provided by herry bro in this thread is incorrect.

Look at this report in 2009, go to page 4 table 3, the monthly payout with no bequest at all is 879 - 957 for males and 768 to 841 for females. This huge difference is due to difference in life expectancy between male and female at that time.

As you can see, this amount if nowhere near current payout of 1220 - 1320

https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life#Item1712

Based on 161k the monthly payout ranges from 1220 to 1320.

 

[OngHuatHuat]

i was referring to this:

Just before CPF Life, the last min sum was 139k and the monthly payout is $1,240. Based on 4% interest, excluding additional interest, the payout from 65 will last about 19 years and 10 months when the amount is exhausted.

Now CPF Life with min sum of $161k (a much higher min sum), the monthly payout is only $1,220 from 65 and will last for about 25 years and 10 months when the amount is exhausted.

According to my link, the figure wasn't 1240 when the minimum sum was 139 K.

http://static.webpaage.com/public/p...er/newsletters/FP3Q2009/FP3NL2009article4.pdf

 

[henrylbh]

first 30K earn additional 2%, 2nd 30K additional 1%, so may i know how does these 1% ~ 2% additional interests able to sustain payout forever?

Ignore the additional interest. Take 4% throughout to simplify calculation and to show how long 161k can last based on a fixed monthly drawdown.

 

[OngHuatHuat]

https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life#Item1712

Based on 161k the monthly payout ranges from 1220 to 1320.

Wait i think I was using a different financial calculator(US based, their annuity income is subjected to tax), that's why resulting in the discrepancy.

you go to this website and download this version:

http://www.vertex42.com/Files/download2/excel.php?file=annuity-calculator.xls

 

[OngHuatHuat]

Ignore the additional interest. Take 4% throughout to simplify calculation and to show how long 161k can last based on a fixed monthly drawdown.

247386.55
let us take this figure as starting.
this already taken into account the additional 600 per year (but not the extra 1 % promotion on first 30 K)

 

[OngHuatHuat]

around 26 years to deplete to zero if assume 4% interest rate.

 

[dork32]

hi yy, i have just checked that to exhaust 247k in 17 years require a payout of 20k and not 15k. there is something wrong with your apps.

henry's calculation is much more accurate than yours.

i can understand how henry is deriving his calculations, but i am not sure if it is correct. his method is not the real compound interest method but cpf could be using his method for calculation of interest.

 

[dork32]

around 26 years to deplete to zero if assume 4% interest rate.

26 years is more correct than 17 years

 

[OngHuatHuat]

http://www.geoba.se/population.php?pc=world&type=15

singaporean life expentancy is 84.68

 

[OngHuatHuat]

26 years is more correct than 17 years

The app i used, they account for tax on annuity income.
Singapore annuity income is not taxable.

 

[OngHuatHuat]

hi yy, i have just checked that to exhaust 247k in 17 years require a payout of 20k and not 15k. there is something wrong with your apps.

henry's calculation is much more accurate than yours.

i can understand how henry is deriving his calculations, but i am not sure if it is correct. his method is not the real compound interest method but cpf could be using his method for calculation of interest.

you use the excel file i share.
and use 247386.25 as starting amount.

I am doing some trial and error now, later we talk about the interest rate they used in annuity. Apparently, it is not 4%(which is what we assumed to be)

 

[OngHuatHuat]

So that means my cumbersome way of calculating is correct? That 161k would last till 90 years and 10 months?

Yeah it is correct. Thanks for pointing out my mistake.

 

[henrylbh]

i was referring to this:



According to my link, the figure wasn't 1240 when the minimum sum was 139 K.

http://static.webpaage.com/public/p...er/newsletters/FP3Q2009/FP3NL2009article4.pdf

Forget about the link. Ask CPF Board.

Here are some of the answers -

MS 123k payout $1,100
MS 131k payout $1,170
MS 139k payout $1,240
MS 148k CPF Life starts

 

[OngHuatHuat]

Forget about the link. Ask CPF Board.

Here are some of the answers -

MS 123k payout $1,100
MS 131k payout $1,170
MS 139k payout $1,240
MS 148k CPF Life starts

CPF LIFE payouts are designed to be stable. However, we may adjust your monthly payout for the following reasons.

• Changes in mortality experience. If more people live longer than expected, the monthly payout might be lower, and vice versa
• Changes in interest rates. If interest rates are higher than expected, the monthly payout might be higher, and vice versa.
• Transactions which affect your Retirement Account balance, for example, refund of money made from selling property, top-ups, lump-sum withdrawals and so on.
• If you had chosen the LIFE Basic Plan, the reduction in any extra interest earned and paid out as the combined balances in your CPF accounts, including the amount committed to CPF LIFE, falls below $60,000.

We will inform you two to three months before we make any adjustments to your monthly payout.