Let's assume these figures are still correct. OK, now let's apply some straightforward "time value of money" logic....
In order for the CPF LIFE Basic Plan to be an acceptable choice for comparison you must be willing to live for the rest of your life on $1,345/month fixed nominal. (There's actually a "burble" when the amount goes down a bit, but let's assume it doesn't for simplicity.) So let's pick the CPF LIFE Standard Plan but then take all dollars above the Basic Plan's $1,345/month payout and plow them straight back every month into your CPF Retirement Account. (At FRS level you're allowed to do that for the rest of your life. The ERS isn't constraining.) I'll exclude whole month interest discrepancies and bonus interest oddities for these purposes and assume straight/naive 4.0% p.a. interest.
OK, so here's what we get as the approximate figures, and I'll carry this calculation into another couple age brackets. (I'm not sure why they stopped at 90 since gobs of Singaporeans live past 90.)
Table 1A: Full Retirement Sum + Standard Plan + Commence payment at age 65 + monthly plowback of all dollars above the Basic Plan level
| Age Member passes on | Bequest Left Behind |
| 70 | $179,894 |
| 75 | $107,301 |
| 80 | $39,699 |
| 85 | $46,578 |
| 90 | $65,141 |
| 95 | $87,726 |
| 100 | $115,204 |
Yes, that's correct! The "crossover" point for the bequest is between ages 85 and 90. And this approach (Standard Plan, plowback all dollars above the Basic Plan payout level)
guarantees a bequest -- and an
escalating bequest starting no later than age 80.
Is this comparison fair? Absolutely it's fair! You're holding monthly income constant at $1,345/month. If you're not willing to do that then the Basic Plan is inoperable -- you have to dismiss it out of hand. So what do you do with the extra $128/month? That's up to you, but obviously you could save it every month straight back into your CPF Retirement Account where it earns 4.0% interest. The CPF Board then recomputes your CPF LIFE payouts every July, and that $128/month actually grows every July. But you keep plowing the excess all back, every penny above $1,345/month. And this is the result you get, approximately anyway.
Now, if you're an "ERS pegger," i.e. you're going to jam as many dollars as you possibly can into your CPF Retirement Account every time the ERS is raised, from age 55 for the rest of your life, then you cannot plow back any further dollars into your CPF Retirement Account. That's a different scenario, and the interest rate/yield assumption (4.0% in this example) would be different. Also, age 65 payout start modeling is weird. That's the non-default, and everyone knows (or should know) by now that if you're going to play games like these you'd never start payouts any earlier than age 70. At the very least you'd model age 70 plus one other payout starting age.
Disclaimer: To reiterate, these figures are
approximate. They're probably overstated a little since getting the calculation exactly correct is quite difficult. Simple/naive 4.0% interest isn't actually how it works. But the principles are sound.
