CPF Life Plan - Standard, Basic, Escalating --- which one better ?

[BBCWatcher]

With due respect, what Dork32 is describing is a very partial analysis, within a vacuum. You most likely have other sources of wealth and income, and what you should be trying to do is reliably achieve certain life goals (including financial goals) considering your total household wealth and income, leveraging each tool for what it's best able to contribute toward your goals. If you pretend that Bucket A, Bucket B, and Bucket C are independent variables, and then you try to optimize each bucket separately, you're probably going to miss the mark, maybe even a lot.

The one thing (the only thing) CPF LIFE is particularly good at is providing a retirement income for the rest of your life, however long it lasts. That's the unique, defining characteristic of a life annuity, particularly a high quality sovereign life annuity. There's nothing else in Singapore dollars that can do that, at least not anywhere near as well as CPF LIFE can. Most probably everything else you have -- all other wealth and income -- is most definitely not guaranteed to last as long as you last. So how do you want to "play the game"? Do you want to pretend that CPF LIFE is "just another account"? I wouldn't and don't plan to. You could treat it like the longevity insurance it is and use it as a tool within your broader toolbag to more reliably and effectively achieve particular goals. It's up to you.

So, what can you do better/easier when you're armed with a life annuity, particularly if you maximize the longevity insurance aspects of that life annuity? Well, one thing you can do is give away much more of your wealth (or even all of it) much earlier, when it can do much more good and bring much more happiness and success. If a grand niece has a Stanford University tuition bill to pay, she doesn't have to wait until you die (and after the admission offer is rescinded anyway) when she might inherit some residual wealth. You can just give her the money, NOW, and she gets to attend Stanford and profoundly change her life -- and you get to see it. For example.

It's quite peculiar to me that lots of people complain about how CPF limits their liquidity when CPF LIFE (well deployed) is the single most powerful financial tool in Singapore to increase elder liquidity in the form of lifetime gifts, making it much more possible for retired individuals to be more generous sooner. Having the flexibility to be generous now is...well, it's wonderful, truly. It's happiness spreading, and there ought to be more happiness in Singapore.

 

[BBCWatcher]

To be clear, while I disagree with Dork32 in terms of how to approach CPF LIFE, he is taking a reasonably common approach. I believe his view is fundamentally that he wants to maximize "yield certain" from CPF LIFE for himself and his heir(s). He is not concerned about longevity-related risks, and he'd choose zero (or less) longevity insurance if he could. It's not how I roll, but I can understand the argument.

I take a different view, and it's probably from a different situation. (Situations vary. I've provided enough clues about mine.) If I could eke out a few more dollars from CPF LIFE for myself and my heirs, it wouldn't make any material difference. Nobody would be any happier if there's $3,000 (or whatever) more residual from CPF -- there is just no way that sort of number will matter in that way, and of course it wouldn't be guaranteed anyway. What might make a difference is greater protection against the longevity risks. In particular, my future self could do something crazy, or something really weird could otherwise happen in terms of asset losses or the urgent need to convey assets. The only thing CPF LIFE can do for me is to protect against that class of risks, the longevity risks. I like having a high quality sovereign -- or better yet a couple -- defending my real lifestyle for however long I last. It's liberating. Meanwhile, I've already started giving away wealth.

 

[dork32]

with due respect bbc analysis is trash.

he kept on emphasizing that 2% increase per year is good. did he mention anything bad about it?

no. he is a one track pony. he wants to fight inflation, at whatever cost. i have mentioned this many times. this is wrong. if the cost of fighting the insurance is too high, then forget it. Find some other ways to fight it. do not stick to this one lousy method.

second bbc say, because you have chosen escalating, you will have your future secured. you could give all your fortune to kids and make them very happy. This is trash and my god there are people that believe in this trash. comparing the payout at 90, you have 1240 vs 1480. if you are on 200k at 70. for a difference of payout of 240 you give everything away? you are in deep deep trouble if you have this 240 less? because of the 240 more a month you become more aggressive in your investment. this is trash.

bbc says none of the schemes guarantees a bequest. you get nothing if you live long enuf. i can tell you the same thing escalating does not guarantee a 2% payout., you do not get it high payout if you do not live long enuf.

bbc says cpf life is not a good bequest tool. on frs today, the bequest of basic is 120k if you die at 80. this is a very bad? to me it is very good already. and am i desperate to leave a bequest? no, i spend my own money. if i finish spending, my kids get nothing. if i dont finish spending, they get what is left. wat is wrong with this concept.

look at bbc's post there are no supporting numbers. people are asking questions because they are unsure what the numbers are like. nobody wants to hear trash grandmother stories.

 

[dork32]

To be clear, while I disagree with Dork32 in terms of how to approach CPF LIFE, he is taking a reasonably common approach. I believe his view is fundamentally that he wants to maximize "yield certain" from CPF LIFE for himself and his heir(s). He is not concerned about longevity-related risks, and he'd choose zero (or less) longevity insurance if he could. It's not how I roll, but I can understand the argument.

you are so wrong.

yes i maximize my yield. but does that mean i will not buy longevity insurance.? i will buy longevity insurance, if the price is right, not at any price.

going for holiday, i will buy insurance if the price is reasonable. if the price is exorbitant, then forget. i will take the risk

 

[dork32]

It's quite peculiar to me that lots of people complain about how CPF limits their liquidity when CPF LIFE (well deployed) is the single most powerful financial tool in Singapore to increase elder liquidity in the form of lifetime gifts, making it much more possible for retired individuals to be more generous sooner. Having the flexibility to be generous now is...well, it's wonderful, truly. It's happiness spreading, and there ought to be more happiness in Singapore.

look at this para, full of grandmother stories but no numbers to support it.

who ever says elder liquidity is not important. does it mean that i have to sacrifice all my current liquidity to enhance it?

 

[BBCWatcher]

There's absolutely no need to be rude. We simply disagree.

 

[celtosaxon]

I would suggest a simpler approach:

Rather than looking at which payment plan is better, look at how much retirement income you need.

Starting with that number you can then work backwards to see which LIF payment plan best meets your needs.

Everyone needs income in retirement, and LIF payments are the best tool for that job. Having that income secured enables you to confidently increase the equity exposure on your remaining wealth, maximizing the potential legacy you can leave to loved ones.