You should use Singapore life expectancy at 65 and not at birth.
Ideally from age 70, the default CPF LIFE payout starting age. If you’re trying to extract as much value out of CPF LIFE, that’s how to do it. Of course if you need the money before age 70 to survive then that’s another matter.
Male is 19 years at 65 so 84 and female is 22.2 so 87.2.
That’s undercalled because it’s based on data from Singaporeans who’ve already died. We know with high confidence Singaporeans alive today will live longer, on average. (They smoke less, for example.) How much longer, we don’t know exactly, although actuaries can make very reasonable estimates. Actuaries aren’t predicting 19/22.2. They’re much smarter than that, and you should be too.
Moreover, that’s not the risk for you. Your risk is being ”unlucky”: living to 102, as one example. If you’re in decent or better health you have to prepare for the “worst.” At least if you’re sensible. If you look at the life tables from age 70, then look at the age when 1% of those individuals who made it to 70 are still alive, that’s a start. But that age would still mean you run a >1% risk of excess longevity. Many people would consider that ~2% level of risk undesirable.
Trust me: longevity risk mitigation is EXPENSIVE without risk pooling.
All this discussion seems to suggest that people rely solely on CPF for their finances.
No, you hope not. But (high quality) longevity insurance is “s**t hit the fan” defense. Y’all seem to be assuming nobody is going to steal and/or blow your elder self’s life savings. Y’all are wrong. It could happen. It does happen. This is last line of financial defense stuff. (Assuming also you don’t want to ever risk being a financial burden on children, grandchildren, nieces, grandnieces, nephews, or grandnephews. If you even have any.)
This is cheap insurance against this class of risks. Do it. Don’t fool around. It’s not complicated.
1. CPF is likely not the only source of funds for most people.
For too many it will be. On this occasion (and many others) the government is very correct.
2. Studies on retirement spending indicate that, for most (though not all), expenses tend to decrease as they age.
You can make a reasonable assumption about future real spending needs for a basic, dignified lifestyle. But it won’t be zero. And this assumption really won’t matter much because CPF LIFE income alone can never support a lavish lifestyle. Participation is capped at the ERS. And it’s never like “cooties” (if that slang makes sense). It’s always at least reasonable. There’s no way you can approach a CPF LIFE spending level/lifestyle with personal savings and a reasonable Safe Withdrawal Rate (SWR).
3. Many individuals are competent enough to gradually shift from risky investments to low-risk options like SSBs, bonds, or fixed deposits as they grow older.
But you must plan for the possibility your future self won’t be. It’s unrealistic to forecast you’ll always be sane and competent. Dementia is obviously possible.
If someone has Dementia, they need a caretaker not a escalating plan.
Both would be really helpful, even essential. Otherwise the caretaker shifts to part time then no time. Nobody is going to take care of you on fixed nominal income as the years march on.
Maybe there should be a plan that starts with -50% and increase by 5% per year, and starts payout at 75.
That’d be nice, but we do the best we can with the choices available. A CPI-E linked life annuity would be even better. Or CPI+1%.
I'm very much for a policy to optionally start payout at 75.
You can kind of/sort of simulate that option if you start payouts at age 70 (the default) and immediately redeposit the first 60 payments in your RA. Provided you have room below the ERS.
Suppose expected longevity is 85…
Expected longevity is you’ll beat the odds, or very nearly so at least. That’s what everyone (except those in actual poor health) has to
plan for if they have a reasonable plan.
…if payout starts at 65, CPF LIFE pays for 20 years.
But if payout starts at 75, CPF LIFE pays for 10 years, also interests accumulate for 10 more years. That might mean that payouts will more than double, much increasing the quality of life for those who choose to start payout at 75! LOL!
Sure, and some systems/countries provide that option. This one doesn’t, although you can simulate it in many cases.
Most insurance policies take into account of gender.
Not most countries’ national/public longevity insurance programs. Not most traditional group corporate pensions either. (It’d be illegal in many countries if they did.) CPF LIFE is fairly peculiar in that respect. Great for men, less great (though still great) for women. CPF LIFE is peculiar in a few ways, and that’s one of them.
