Hi all, for parents that does not have much balance in their CPF (not hitting minumum sum, and not even reaching 60,000 as per the table above) and now at age of 60, staying in HDB fully paid for. What are the options for them and if they are going to get any payout at all?
CPF Accounts Value thread
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Transfering OA to SA and topping up SA is something more people should do, but unfortunately the advice often gets drowned out by the #returnourcpf crazies
The comparison is done between Jan and Dec of the same year, not the consecutive months. CPF interest is calculated monthly, but credited and compounded annually in December.
I must admit, I used to be one of those ignorant believer until recently
Only this year I’ve managed to clear off my student loan fully and started reading up on what to do with my free cash going forward.
I see....I thought cpf interest is credited monthly like banks, that explains thanks!
i wonder what you are tanking bbc for. did he answer your question?
you mentioned that it is more worthwhile to go on the pension scheme if you live to 76.5. did he tell you when it is more worthwhile for ers?
there is no even a single number in his post.
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They can top up with their own cash, or you can top up for them (and get tax deductions for that at the same time). Also check their CPF account for any balance OA and SA and move them over into the RA.
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme
$60k is a good target to aim for first to fully enjoy the additional interest.
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I would probably still go for the monthly pension even if it's not escalating. If combined with escalating ERS, you should be pretty much well set for the rest of your life. If you like escalating (which is a good idea, inflation isn't going to go away), then you should definitely go for ERS to maximize your escalating life annuity, because outside of CPF Life there aren't anyone offering this, at least not in Singapore.
BBCWatcher
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I'd take the monthly payout given the parameters you've described. That's a very good pension. Since the pension is not escalating you will need to add a solution to combat inflation. One simple way to do that is to hold some of the payout back in reserve and to save/invest it prudently. And one place you could park that inflation reserve from your payout is in...CPF. If you're not working you can top up your CPF accounts (OA/SA/MA) by $37,740 per year. Once your MA hits the Basic Healthcare Sum, and from age 55 (which age 62 certainly is), CPF turns into a cute little "piggybank" that way, earning >2.5% interest which should run a little ahead of inflation.
I think you should get the Escalating Plan (and preferably from age 70) to help combat inflation without having to jump through hoops. However, how much CPF LIFE to get is the more interesting question. Here's how I'd approach trying to answer that question.
First of all, do you have a spouse or partner? If you do, you and he/she will need to plan for some arrangement that protects your real lifestyles, jointly, for the rest of your lives. If the pension has survivors rights then that'd be helpful. But if it doesn't, and if your spouse or partner doesn't already have his/her own pension, then your spouse/partner should get financial attention to nail down his/her own CPF LIFE annuity stream.
You also need to look at what your real baseline lifestyle needs are, and insure to that level. For example, if your household would be OK with $2,000/month (2019 dollars), but no less than that, then I would make sure that the pension and CPF LIFE annuity streams provide at least that much, and in real terms. (Fixed nominal won't get the job done.) And also for your spouse/partner, as mentioned. "Below this real living standard my household will never fall" ought to be the answer to the question "How much longevity insurance?"
CPF LIFE on its own is never lavish, so it's at least not easy to buy too much of it. However, since you have a pension, it gets a little more interesting. And you also have to decide how reliable that pension is. If it's a pension from the Singapore government for example, I'd say that's very reliable indeed. You should also look into whether age 62 is the mandatory starting age. You might not want to start collecting a pension at age 62. It might also be worth looking into whether you can take a partial lump sum/partial monthly, although again as you've described that particular pension the monthly payout looks very attractive to me.
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AXA's Retire Happy Plus is not a genuine life annuity since the longest term is to age 99, but it does offer 3.5%/year escalation within that term. You can start payouts as late as age 70.
Every insurer seems to miss an important feature, unfortunately. Nobody in Singapore seems to offer a genuine life annuity with joint/survivor rights and CPI-linked escalation -- and fully SRS qualified.(*) You can get life annuities in other countries (such as in the U.S., in U.S. dollars) with all those features, including comparable tax advantaged account qualification.
It's a bit maddening that Singapore's life insurers don't have such great products, but you have to make do with the choices available, unfortunately.
(*) Although the joint/survivor rights might be incompatible with full SRS qualification, and that's something the government should change.
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rrr2015
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ahh thanks! too bad that interest goes to nominee
i hope when they deduct for monthly payout, interest part get deducted first
i hope when they deduct for monthly payout, interest part get deducted first
Yes it's the balance of 161k transferred over a period to his RA. From RA, his monthly payouts came to $71,626.
No action needed. It will be transferred back to Giver's OA within 2 days in my case. Damn fast.Only 'loss' is the interest accrued from the beginning of year to month before death. That interest will go to nominee. The interest gone for good is the interest for the month that money was returned to my OA.
What do you think of Manulife retire ready? There is an option of life annuity, right
Hi dork, bcos I'm in a dilemma... on 1 hand I would like to get my pension as monthly payout till death, on e other hand, I worry on dying early (while receiving monthly payment) and my family will get nothing out of it, and also frown at e fact that it is not escalating. So comes CPF LIFE escalating plan which BBC mentioned with 'remaining' value even if I die early. So I was thinking maybe I shld get my pension in lumpsum (when the time comes) and start building up my cpf towards ERS to get the escalating plan.
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I recently got a quote for this plan, and calculated the IRR at different lifespans and it's... well... mediocre, definitely no where near what CPF Life gives. Assuming 25 years of accumulation until age 65, XIRR is (assuming 4.75% PAR fund performance):
0.88% at 65
1.88% at 70
2.49% at 75
2.93% at 80
3.27% at 85
3.58% at 90
3.87% at 95
4.08% at 100
4.23% at 105
4.34% at 110
If you want the simplicity and worry free, I guess you can go with this.
If you want to DIY your retirement drawdown, you can look into the Safe Withdrawal Rate concept https://www.investopedia.com/terms/s/safe-withdrawal-rate-swr-method.asp
did i not warn you people not to take bbc's post at face value? bbc is a ardent supporter of escalating plan. he keeps on bragging all the advantages of escalating plan. did he mention anything bad about the escalating plan?
do you know that the "remaining" value of the escalating plan does not earn any interest, while the remaining value of the basic plan is earning 4%. did bbc mention this?
did he mention that if you die at 80 (or a bit earlier) the remaining value is negligible, while the remaining value of basic gives you 150k because basic is earning interest.
this is what i meant by numbers. bbc does not support his post with numbers. bbc mislead a lot of people like madguy here.
and this is my advice for you. escalating plan is meant people that worry they die late. for people that worry that they die early, they should avoid escalating plan.
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What’s the expected lump sum payment you will be getting?
And the monthly pension you will be getting if you decided on the pension payout instead.
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Manulife is now the only provider of fully Supplementary Retirement Scheme (SRS) qualified life annuities, and that feature alone makes it worth considering for individuals who have (or could have) a big SRS balance.
Of course none of the private annuities are going to approach CPF LIFE in terms of value for money. And there aren't too many people with >$400,000 SRS balances at age 62+. (It's a little more complicated than that, but that's the oversimplified threshold when fully SRS qualified life annuities can be helpful.)
By the way, Dork32 is planning to die too early and can confidently predict that.
I'll repeat these facts, for they are facts: all CPF LIFE payout plans are fair. Nobody is cheated out of "interest" or anything else with any of them -- they are all based on the same actuaries, same low overheads, same not-for-profit objectives, and same life tables. None of the CPF LIFE payout plans guarantee a bequest. Simply live long enough, and the bequest always falls to zero. Once payouts start, all CPF LIFE payout plans feature decreasing nominal residuals (and faster decreasing residuals when taking account into inflation).
If you want to assure that you leave a bequest (and, better yet, lifetime gifts), then CPF LIFE is an excellent tool to defend your bequest (and lifetime gifts) from your other assets. And the strongest available defense for your bequest and gifts is the CPF LIFE Escalating Plan, ERS level, payouts deferred to age 70.
There is one general exception to the above. If, before age 70 and before you start payouts, you have high confidence you know when you're going to die, and with reasonable precision, then you might be in a position to make a different choice with slightly better results. Deferral to age 70 can make it a little easier to make this assessment if you'd like to try to "game" the life tables.
Madtari, Tangent314 may be able to run some numbers based on what you've described, but that pension you've described looks very fair on the monthly payout side. Same thing: just before you start payouts, if you're in poor health, you might decide to take the lump sum. But if you're in average or better health that monthly payout option looks very, very good to me. You're going to drive yourself crazy if you try to play the "I must always win" game with life annuities. The fact is that most people don't know when they're going to die, but if you make it to 62 then today's typical experience is that you make it well past 80 (male; females even longer). So the pension you describe looks to me like a very, very fair offer. Make the decision when the time comes with the latest information about your personal health status, but in average or better health, the monthly looks great.
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hi madguy, look at tangent. he supports his post with numbers. his post is credible.
i can tell you, i do not agree with many of tangents directions. i do not bang him because he is balanced in his arguments. many of these decisions have no right or wrong answers.
i can tell you, i do not agree with many of tangents directions. i do not bang him because he is balanced in his arguments. many of these decisions have no right or wrong answers.
madguy, you want to put out your lump sum numbers such that we can do some analysis for you? i seriously doubt your maths. there is no such thing as just 76.5 years to break even. you must attached a rate to it. 0% is just not reasonable.
if you are afraid of letting people know your exact sum, you can give us as a proportion of the total amount
eg your lump sum is 400k or you can choose 2k a month,
you can tell us lump sum is 1 mil or you can choose 5k a month
if you are afraid of letting people know your exact sum, you can give us as a proportion of the total amount
eg your lump sum is 400k or you can choose 2k a month,
you can tell us lump sum is 1 mil or you can choose 5k a month
Manulife is now the only provider of fully Supplementary Retirement Scheme (SRS) qualified life annuities, and that feature alone makes it worth considering for individuals who have (or could have) a big SRS balance.
Of course none of the private annuities are going to approach CPF LIFE in terms of value for money. And there aren't too many people with >$400,000 SRS balances at age 62+. (It's a little more complicated than that, but that's the oversimplified threshold when fully SRS qualified life annuities can be helpful.)
By the way, Dork32 is planning to die too early and can confidently predict that.
I'll repeat these facts, for they are facts: all CPF LIFE payout plans are fair. Nobody is cheated out of "interest" or anything else with any of them -- they are all based on the same actuaries, same low overheads, same not-for-profit objectives, and same life tables. None of the CPF LIFE payout plans guarantee a bequest. Simply live long enough, and the bequest always falls to zero. Once payouts start, all CPF LIFE payout plans feature decreasing nominal residuals (and faster decreasing residuals when taking account into inflation).
If you want to assure that you leave a bequest (and, better yet, lifetime gifts), then CPF LIFE is an excellent tool to defend your bequest (and lifetime gifts) from your other assets. And the strongest available defense for your bequest and gifts is the CPF LIFE Escalating Plan, ERS level, payouts deferred to age 70.
There is one general exception to the above. If, before age 70 and before you start payouts, you have high confidence you know when you're going to die, and with reasonable precision, then you might be in a position to make a different choice with slightly better results. Deferral to age 70 can make it a little easier to make this assessment if you'd like to try to "game" the life tables.
do i see any number other than 70? i arrest my case
again no numbers. whether the pension is fair or not depends on
1. payout
2. lump sum
you people seriously want to listen to this guy?
By the way, Dork32 is planning to die too early and can confidently predict that.
it does not matter when dork plans to die,
madguy says that he is worried that he dies young. is this the way to advise people that have this sort of concern?
First, just to confirm my understanding of what u wrote above:
Pension : You are worried your pension pays nothing to your dependents should u die after 62 after u start mthly payout from the pension? Meaning the balance gets forfeited?
You are worried u might not live beyond 76.5 years to gain from the pension. Question: does your pension pay any interest or is a fixed amount for u to draw down until u die. If u survive beyond 76.5 years, u will gain cos the total payouts received will exceed the fixed amount? If it pays until u die, should be a good plan if u can survive beyond 76.5 years?
If above are true, then I think u are right that u should take a lump sum from the pension at 62 as u are likely to lose more than u can gain should u die between 62 to 76.5 years. Provided u can invest the monies to earn a good return. So u are looking at topping up your CPF with the monies?
Next : How old are u now? Already have RA meeting FRS?
U need to have a good understanding of how CPF Life works, the 3 CPF Life Plans available, the minimum and maximum amount u can use to participate in CPF Life, etc
What BBC and what most of this thread had discussed is not complete for u to make the decision. BBC is biased towards escalating plan.
There are 3 CPF Life Plans: Basic, Standard and Escalating. Below brief writely, let me search for the details in another thread so I need not re-write everything here again.
Basic: only 10-20% of RA goes to CPF Life Pool as premium. If u die early, highest amount of monies go to your dependents as compared to the other 2 plans. Eg if u die at 90, the whole amt of premium goes to dependents.
Standard and Escalating: 100% goes into CPF Life Pool as premium. Only unused premium goes to your dependents. If u die after 80 plus (cannot remember the exact figure), nothing is left for dependents.
Amount: FRS, BRS, ERS = u decide the amount in RA which u want to use to participate in CPF Life. If u decided on ERS, then 10-20% of this amount goes to CPF Life Pool as premium, so compared to FRS and BRS, that premium will be much higher. The higher the premium, the more u will lose in terms of the 4% interest paid on the premium which dun belong to u. If u survive long enough, u will get to receive this interest as mthly payout.
Thats all for the time being, simply too much info to discuss here.
(as I prepared this post, dork32 had posted similar comments
)
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