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

[maple96]

again there is no right or wrong to this.

to me, even if my kids do not need my money, i prefer to give it to them rather than to the lifelong income fund. 140k (On FRS dying at 80) is seriously not a small sum.

My friend is rich, chose standard plan cos CPFB key message is “if u dun have dependents choose standard, if u have dependents choose Basic” . He has 2 graduate children, a lawyer and accountant. He thinks they are doing well so do not need to depend on him. After I explained to him how CPF life works, he said the same thing as dork32 ie prefer to leave the monies to his family than support other people. He tried to change his plan, I guess it is too late. A consolation for him is his mum is now more than 100 years old

Another friend, no dependents, also used the CPFB key message to decide and chose standard plan. After he had a better understanding of how CPF Life works, he managed to change it to Basic.

 

[Mecisteus]

There are some poor people who can't even meet the FRS.

These elderlies are lucky if they have caring and supportive children.

There is a minority that is lonely and trying hard making ends meet.

For this group of people who has little money in RA, it doesn't make sense for them to settle for a lower payout.

They need to eat now to survive the future.

 

[maple96]

My relative asked me which plan should be choose. I have limited knowledge of CPF Life at that time, so used CPFB key message to help him make the decision.

He has a son still in Uni, his mthly pay not much. So I suggested he choose standard plan as survival is more important, then in future when his son graduate he should be more independent. He chose standard plan and got a "bonus" from the govt.

Now I know how CPF life works, I regretted my suggestion, but I cannot help him

 

[Mecisteus]

Your relative is still considered well to do.

Whatever plan, he will still be alright.

 

[maple96]

I shared this in another thread, now I write for TS (thread starter) benefit:

What does the term "bequest" in CPF Life mean or refer to?

"Bequest" means/refers to the monies which will be refunded to the CPF member should he/she exit the CPF Life Plan earlier than expected.

How is this refund amount computed?

CPF Life Basic Plan (80% RA + 20% CPF Life Premium)

= RA monies (include compounded 4% +2% extra interest)+ Unused CPF Life Premium (exclude interest of 4%)

CPF Life Standard/Escalating Plan (0% RA + 100% CPF Life Premium)

= Unused CPF Life Premium (excluded interest of 4% +2% extra interest).


If u can see the difference in formula above, u will understand why bequest amt under Basic is higher than Standard/Escalating Plans

Exit CPF Life Plan - u can read the CPF website for the various circumstances u can exit CPF Life Plan, one of which is death.

 

[BBCWatcher]

we all know that inflation is real. we know that it is going to hit our purchasing power.

OK....

is cpf life escalating plant the only solution to combat inflation?

What realistic alternative do you propose? As you consider possible alternatives to combat inflation, here are the facts you must respect:

None of the CPF LIFE payout plans assure any bequest.

All CPF LIFE payout plans feature decreasing bequests (and in nominal terms) as soon as payouts start.

The only CPF LIFE payout plan that combats inflation is the Escalating Plan. The Standard and Basic Plans offer only decreasing real value payouts.

All CPF LIFE payout plans are actuarially fair.

All CPF LIFE payout plans are the best value, Singapore dollar denominated life annuities available anywhere.

CPF LIFE is a program offered by the AAA-rated Singapore government, and AAA is the highest sovereign credit rating available.

CPF LIFE is uniquely heavily Singapore tax advantaged.

CPF assets are uniquely well protected against creditors and court judgments.

....OK, with those facts in mind, what's the realistic alternative to combat inflation?

 

[Mecisteus]

You don't need to see any formula. You just need to understand the basics.

If payout is 0, it means there is no CPF Life = No longevity insurance. But too bad, zero payout is not an option.

If there is some payout, the CPF Life aka longevity insurance aspect kicks in. Like any other form of insurance, some "premiums" have to be used up. Since less "premiums" are used up, you can expect higher bequest.

If are expecting more payout, that means you are relying more on the longevity insurance aspect to hedge for future long life. You should expect to pay more premiums, thus lowering bequest amount.

So your decision boils down to whether you believe in the insurance or not.

If you are rich, I guess you don't need the insurance. Taking the basic plan is preferred. But some, don't mind the insurance.

If you are poor, like those who are singles, living on a rented HDB and working as security, the basic plan is definitely not a good option. The standard or escalating plan is ideal depending on the situation.

 

[maple96]

is cpf life escalating plant the only solution to combat inflation?

.

I agree, there other better ways to combat inflation, those are my secrets which I will not share here, tho some hints have been dropped

 

[maple96]

You don't need to see any formula. You just need to understand the basics.

Not everyone know or understand what is basic or have common basic understanding

If payout is 0, it means there is no CPF Life = No longevity insurance. But too bad, zero payout is not an option.


If there is some payout, the CPF Life aka longevity insurance aspect kicks in. Like any other form of insurance, some "premiums" have to be used up. Since less "premiums" are used up, you can expect higher bequest.

Not true, u pay less premiums, bequest can also be zero. Less premiums used up is not the only contributor to the higher bequest amt, u are not reading/understanding my formula! This proves my point your understanding of basics is different from what CPF Life has

The other major contributor to the bequest amt is the compounded 4%+2% interest! :s13;


If are expecting more payout, that means you are relying more on the longevity insurance aspect to hedge for future long life. You should expect to pay more premiums, thus lowering bequest amount.

U mean higher mthly payout hedge for future long life only? Bequest can also be zero

Lower mthy payout is also to hedge for future long or short life! It hedge for short life also !

So your decision boils down to whether you believe in the insurance or not.

Whether is basic or standard/escalating plans, all believe in insurance :13:

If you are rich, I guess you don't need the insurance. Taking the basic plan is preferred. But some, don't mind the insurance.


If you are poor, like those who are singles, living on a rented HDB and working as security, the basic plan is definitely not a good option. The standard or escalating plan is ideal depending on the situation.

???

see my comments above

 

[BBCWatcher]

If you are rich, I guess you don't need the insurance.

Life annuities are very popular among wealthy people. For example, lots of wealthy families set up trust funds for their children and grandchildren, often structured as lifetime payouts, frequently joint/survivor. Some wealthy Singaporeans are topping up some lucky Singaporean newborns' Special Accounts to the Full Retirement Sum for similar motivations.

 

[chiapabuay]

If so, those with kids better choose the plan that allows bequest, so they can get the leftover if pass away.

Don't know when one will die in accident- knock down by escooter, car, etc. Cannot predict one's life.

Get money out can don't use all up. Keep in FD. Wonder if inside CPF account no more cash, can ask for comcare help?

Hahaha ! high tech death e-scooter, exploding phones batteries, selfies....

 

[dork32]

OK....


....OK, with those facts in mind, what's the realistic alternative to combat inflation?

i did not argue that escalating is good against inflation. notice i put this in my previous post.

but inflation is not the only thing that i am concerned about. there are other factors.

there is the cost to escalating plan: you have to live till 93 before it is better than standard. if lky, with all the exercise and specialized health care, can only live till 89, i am not sure if many of us can survive to 93.

 

[Toni90]

i did not argue that escalating is good against inflation. notice i put this in my previous post.

but inflation is not the only thing that i am concerned about. there are other factors.

there is the cost to escalating plan: you have to live till 93 before it is better than standard. if lky, with all the exercise and specialized health care, can only live till 89, i am not sure if many of us can survive to 93.

U got all the number wrong. Don’t know why fail math people always talk a lot.

 

[dork32]

U got all the number wrong. Don’t know why fail math people always talk a lot.

so what is wrong

 

[dork32]

U got all the number wrong. Don’t know why fail math people always talk a lot.

if you use the cpf life estimator,

you will realize that it will take you 12.5 years (at 77.5) for the escalating to match the payout of standard.

but if you are standard you will still be way ahead at 78 because your payout is much higher than escalating before that period.

so if you ignore the time value of money, it will take you another approx 12.5 years(age 90) for escalating to match the total sum of standard.

if you factor in the time value of money (at 4%), because standard collects a larger sum first, you will add a few more years to the break even.

93 seems like reasonable number

 

[dork32]

U got all the number wrong. Don’t know why fail math people always talk a lot.

henry loves to do this

whack all the numbers onto a spreadsheet.

you can ask henry if i am very far away, when i quote 93.

 

[Toni90]

if you use the cpf life estimator,

you will realize that it will take you 12.5 years (at 77.5) for the escalating to match the payout of standard.

but if you are standard you will still be way ahead at 78 because your payout is much higher than escalating before that period.

so if you ignore the time value of money, it will take you another approx 12.5 years(age 90) for escalating to match the total sum of standard.

if you factor in the time value of money (at 4%), because standard collects a larger sum first, you will add a few more years to the break even.

93 seems like reasonable number

Your 12.5-12.5 years equal sum is wrong one. If u don’t believe me can put on Excel to see it by your own eyes. If u still don’t understand why it wrong can screenshot your Excel. then people here will tell u where your math fail.

 

[oceanicmanta]

Your 12.5-12.5 years equal sum is wrong one. If u don’t believe me can put on Excel to see it by your own eyes. If u still don’t understand why it wrong can screenshot your Excel. then people here will tell u where your math fail.

@Toni what is your computed "breakeven" point for total sum of payout between basic vs escalating ?

 

[dork32]

Your 12.5-12.5 years equal sum is wrong one. If u don’t believe me can put on Excel to see it by your own eyes. If u still don’t understand why it wrong can screenshot your Excel. then people here will tell u where your math fail.

i was working on 171k in ra at 55 and withdrawal at 65 on a male

i did not use excel to get my 12.5 years. i use cpf life estimator to get my 12.5 years. you not happy go complain to cpf. it is either tony fail maths or cpf fail maths. i rather believe that cpf pass and tony fails

 

[dork32]

Your 12.5-12.5 years equal sum is wrong one.

dork can make mistake in calculation. nobody is interested in dork's calculation
toni can make mistake in calculation. nobody is interested in toni's calculation
cpf calculation is vetted over and over again before being published. if there is mistake, it will be an big issue. many people will be interested. if cpf cant count, is it still safe for them to take charge of billions and billions dollars.

then again, if cpf cant count, they will just mention that we cant count and are not aware of their formulae