CPF Accounts Value thread

[dork32]

I think I might have given the wrong impression, the pension clause did state that if I were to die in the 1st year while on monthly payment, there is certain value for bequest. but it is as good as none since anytime after that, it will be 0. and below you probably mean at 2.5% interest rate, my lumpsum should be able to last for 18.4 years instead of month as compared to me drawing monthly payout right?

the other thing is do you need to use 65k a year at 62 yo? if you can reduce your drawings, the money can last a bit longer.
if you draw 50k a year it will last you 26 years
40k per year = 36 years
23k per year = forever and ever

or you can choose any amount you would like to withdraw. i consider this another advantage.

hi bbc, at 23k per year, it is called confirm bequest at 950k. i am striving to hit this.

 

[BBCWatcher]

2.5% is very achievable.

Only if you have a heck of a big Ordinary Account (plus accrued interest) housing repayment opportunity at age 62 that can handle a $950,000 lump sum....

....And at 2.5% the monthly payout is still the better deal for those with average or better health.

you can pay back the amount withdrawn + interest.

Right, but $950,000 is a lot, and that opportunity is for any/all cash, not just pension lumpsum buyouts. Once used, it’s no longer an opportunity.

not only that, you can vc.

Only at a $37,740 per year pace, and not necessarily from age 62. $37,740 is a lot less than $950,000. Granted, when the time comes the $37,740 will probably be a higher figure, but $950,000 is a lot. Also, you only get to spend the Annual Limit once. If Madtari has excess cash also, then that’s a happy problem to have but some of those dollars aren’t going to be able to take advantage of this opportunity.

Anyway, the bottom line is that, based on what we know today about current financial conditions and life expectancies, the monthly payout is the better financial deal for those in average or better health.

....Now, who cares, it’s ~20 years into the future and not even a vested benefit yet.

 

[madtari]

I agree that it will help to provide a sense of healthiness, but it is still a huge risk to take. accidents could happen, cancer or other illness could come in years after retirement.

What I would do if I were in your shoes:
Get a comprehensive health checkup at age 62, and decide whether to take lumpsum or not.

 

[madtari]

agreed. as I mentioned, if I can leave the pension principal untouched and live on the interest of it, theoretically it can last forever.

the other thing is do you need to use 65k a year at 62 yo? if you can reduce your drawings, the money can last a bit longer.
if you draw 50k a year it will last you 26 years
40k per year = 36 years
23k per year = forever and ever

or you can choose any amount you would like to withdraw. i consider this another advantage.

hi bbc, at 23k per year, it is called confirm bequest at 950k. i am striving to hit this.

 

[BBCWatcher]

I agree that it will help to provide a sense of healthiness, but it is still a huge risk to take.

No, it’s really not.

If your health check at age 62 (or later?) is average or better, on average you’ll lose about $260,000 (future dollars) based on your chosen 2.5% interest rate if you take the lump sum. That’s a big average penalty for taking the lump sum. You’re gambling that you’ll die MUCH earlier than most 62 year olds. That’s a gamble, for sure.

Oddly enough if you take the lump sum you have some greater incentive to drink heavily, to smoke, not to exercise, and to fail to look both ways before you cross the street. If you take the monthly you have more incentive to stay healthy and safe (and still have fun; depression is bad too). I would consider the latter to be a bonus.

And did I mention that it’s amazing you’re worrying about this decision some 20 years before you have to make it, and without even having vested in this pension? I agree with JL: get a health exam when the time comes, then make a decision.

 

[JuniorLion]

agreed. as I mentioned, if I can leave the pension principal untouched and live on the interest of it, theoretically it can last forever.

You can't leave forever, though.

 

[dork32]

Oddly enough if you take the lump sum you have some greater incentive to drink heavily, to smoke, not to exercise, and to fail to look both ways before you cross the street. If you take the monthly you have more incentive to stay healthy and safe (and still have fun; depression is bad too). I would consider the latter to be a bonus.

why do you want to equate vices to money. many of us have accumulated hundreds of thousands or millions. do you see us indulging in vices?
the fact that madguy can get a 1 mil pension, you can assume that he knows how take care of his money
this is even more adsurb. rich people cross streets without looking

 

[dork32]

You can't leave forever, though.

if you die, this 23k can be given your wife. if your wife dies, it can be given to your kids. if your kids die, it can be given to your grandkids. if your grandkids.....

this even better than the dual dont know what annuity bbc mentioned. it is perpetual.

but what is the catch? payout reduces from 65k to 23k

 

[Mecisteus]

The pool gets interest, and RAs get interest. There's absolutely no difference there -- you're not "losing interest."

I ran some numbers already.

Just to let you know. There is a big difference. Let me summarise for you.

Assuming same BRS for both Standard and Basic Plans at age 65,

Basic Plan
10-20% of RA = AP1 -> Annuity Pool
80%-90% of RA = RA1 -> This is the money being used for draw downs till age 90.

Both Annuity Pool and RA are earning interests
If you die at age 75, you will get AP1 (without interests) + RA1 (with interests)

Standard Plan
100% of RA = AP2 -> Annuity Pool

AP2 is much much more than AP1. This is the money that will be returned back to you without interests. That explains the huge difference in bequest.

Q What happens if I choose the CPF LIFE Standard Plan?
A When you join the CPF LIFE Standard Plan, we will deduct all the savings in your Retirement Account as the annuity premium at the point of policy issuance. The premiums deducted will be paid into the Lifelong Income Fund. You will receive monthly payouts from the Lifelong Income Fund from your payout start age for as long as you live.

Q What is a bequest?

A A bequest is the money that you leave to your beneficiaries after your death.

Under the CPF LIFE plans, we will refund all your unused annuity premium (without interest) and Retirement Account savings, if any, after your death.

We will pay any refund into your CPF account. This will then be paid to your beneficiaries along with your remaining CPF savings.

 

[Mecisteus]

To illustrate the effects of interests and no interests, try this:

Assume $200k balance at age 55 for a person born June/1978

300k at age 65

For a standard plan, the bequest will go to 0 at age 80.

If you die at age 65 to 80, your cumulative payouts (monthly + bequest) = $300k!

For a basic plan,

If you die at age 65 to 80, your cumulative payouts (monthly + bequest) is increasing at a decreasing rate because of the non-linear interests.

 

[maple96]

Now got people repeating what I wrote, long time ago, about why bequest amt for Basic is higher than Standard/Escalating, ie what forms the bequest or refund of unused premium + RA balances. Bequest is just another word used to refer to refund of CPF Life monies should u die earlier than expected.

BBC obviously never pass his basic maths to under this basic concept.

He also never understand why a person might die. He only believe being healthy or having longevity genes will prolong his life. He dun understand what is murphy's law! There are many causes of death, even to a person who is healthy and have longevity genes.

RA monies earn you 4%+2% interest for those with Basic Plan. CPF Life earn u 4% but belong to the pool, that interest only paid to u as mthly payout if u survive beyond 90. If u defer payout till 70, it only means a bigger premium will be paid to the CPF Life pool, u see the rest of the effect yourself!

CPF Life premium earn u 4%+2% interest for those with Standard and Escalating Plan, but those monies belong to the pool, only paid to u as mthly payout if u survive long enough.

So what are u losing if u choose Standard and Escalating Plan should u die earlier than expected? It is a gamble or lottery (using BBC words) to expect to get those interest back plus more if u survive long enough!

 

[Mecisteus]

Now got people repeating what I wrote, long time ago, about why bequest amt for Basic is higher than Standard/Escalating, ie what forms the bequest or refund of unused premium + RA balances. Bequest is just another word used to refer to refund of CPF Life monies should u die earlier than expected.

Last time you a sound a bit yaya and I didn't really think carefully.

After dork repeated about interests and no interests only then I try to run some numbers. And also digged information about CPF Life.

 

[maple96]

Last time you a sound a bit yaya and I didn't really think carefully.

After dork repeated about interests and no interests only then I try to run some numbers. And also digged information about CPF Life.

Thats because u were never involved in the discussion and never do your research for basic understanding

 

[BBCWatcher]

I’ll repeat these truths, for they are truths: (1) none of the CPF LIFE payout plans guarantee any bequest — simply live long enough, and all of the payout plans fall to zero bequest; (2) once payouts start, all of the CPF LIFE payout plans feature progressively diminishing nominal bequests (that decrease even faster in real terms due to inflation); (3) dead bodies are incapable of spending any money.

CPF LIFE is simply not designed to deliver bequests itself — it’s very poorly designed for that purpose. It is well designed, especially with the Escalating Plan started at age 70, to defend a bequest (and, better yet, lifetime gifts) from other assets.

 

[SBC]

I’ll repeat these truths, for they are truths: (1) none of the CPF LIFE payout plans guarantee any bequest — simply live long enough, and all of the payout plans fall to zero bequest; (2) once payouts start, all of the CPF LIFE payout plans feature progressively diminishing nominal bequests (that decrease even faster in real terms due to inflation); (3) dead bodies are incapable of spending any money.

CPF LIFE is simply not designed to deliver bequests itself — it’s very poorly designed for that purpose. It is well designed, especially with the Escalating Plan started at age 70, to defend a bequest (and, better yet, lifetime gifts) from other assets.

All the new schemes that end with Life or Care are designed to help Gov themselves. Better to think in dept to help ourself.

 

[BBCWatcher]

All the new schemes that end with Life or Care are designed to help Gov themselves.

No, not in any reality-based world, but thanks for playing.

Better to think in dept to help ourself.

Yes, this part I’ll agree with, assuming “ourself” includes your loved ones since money has zero value to dead bodies. So if you want the most powerful, most potent tool from CPF LIFE for best assuring a particular bequest to your loved ones — or, better yet, lifetime gifts to them — then that’ll be the Escalating Plan preferably starting from age 70 and at ERS level, assuming you’re in average or better health and have no particular insight into beating the life tables (in terms of dying too soon). This strongest available tool from this particular program will stand the best chance of defending your bequest (or, better yet, lifetime gifts) from your other assets.

 

[SBC]

No, not in any reality-based world, but thanks for playing.


Yes, this part I’ll agree with, assuming “ourself” includes your loved ones since money has zero value to dead bodies. So if you want the most powerful, most potent tool from CPF LIFE for best assuring a particular bequest to your loved ones — or, better yet, lifetime gifts to them — then that’ll be the Escalating Plan preferably starting from age 70 and at ERS level, assuming you’re in average or better health and have no particular insight into beating the life tables (in terms of dying too soon). This strongest available tool from this particular program will stand the best chance of defending your bequest (or, better yet, lifetime gifts) from your other assets.

Supporting this CPF Life scheme. Topped up my MA to $57,200 on 1st Jan.

 

[Mecisteus]

I’ll repeat these truths, for they are truths: (1) none of the CPF LIFE payout plans guarantee any bequest — simply live long enough, and all of the payout plans fall to zero bequest; (2) once payouts start, all of the CPF LIFE payout plans feature progressively diminishing nominal bequests (that decrease even faster in real terms due to inflation); (3) dead bodies are incapable of spending any money.

CPF LIFE is simply not designed to deliver bequests itself — it’s very poorly designed for that purpose. It is well designed, especially with the Escalating Plan started at age 70, to defend a bequest (and, better yet, lifetime gifts) from other assets.

1) Life is about making choices and you consider the likelihood of events to make an informed decision. Death at age 65 to 80 is more likely than living past 100. So your decision should center around the more likelihood of event.

2) The numbers showed that if you happen to die earlier under a Standard plan, you are VERY VERY much worst off. I have calculated myself.

If you are on Basic and you happen to live longer life, you are little worse off. I have not done calculations on this part yet. I see if I can share any.

3) The amount is not guaranteed but there is DEFINITELY a guarantee of a bequest. This is with 100% certainty. Your bequest cannot suddenly go from $200k to ZERO for a certain age.

 

[madtari]

I agree with you on this one with both hands. That's y I disagree with BBC for saying I will stand to lose 260k should I choose lumpsum over monthly payout for my pension. We can't really be sure how long will we live until. But if i live till 100, I will stand to lose more than 260k one can also argue that.

1) Life is about making choices and you consider the likelihood of events to make an informed decision. Death at age 65 to 80 is more likely than living past 100. So your decision should center around the more likelihood of event.

2) The numbers showed that if you happen to die earlier under a Standard plan, you are VERY VERY much worst off. I have calculated myself.

If you are on Basic and you happen to live longer life, you are little worse off. I have not done calculations on this part yet. I see if I can share any.

3) The amount is not guaranteed but there is DEFINITELY a guarantee of a bequest. This is with 100% certainty. Your bequest cannot suddenly go from $200k to ZERO for a certain age.

 

[maple96]

I am going repeat what I wrote many times in other CPF Life related threads:

Insurance plays with your greed and fear, your psychology.

How I view the 3 CPF Life Plans:

Those with extreme fear and greed will opt for Escalating Plan because it is designed to "cater" to inflation by giving u an annual payout which increase by 2% each year (your extreme fear of inflation). Because u think it will increase by 2% pa forever, you will ultimately be getting more mthly payout than any other plans, thus u will make more money from your CPF Life premium if u survive long enough (extreme greed) compared to other plans.

If u defer your payout start age to 70, you will be getting more mthly payout (extreme greed), so u hope to make more money faster. Another category is those who might plan to give up their PR status, so deferring till 70, they make the most from CPF, and quite without joining CPF Life before they turn 70 - extreme greed!

Those with some fear and greed will opt for Standard Plan because it has the highest mthly payout.

Those who hope to lose less money from this scheme will opt for Basic Plan and start at age 65. I am in this category.