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

[ELKYme]

From the chart it’s clear that for those who’s health is “questionable”, should be choosing basic.

If you’re one of the above like me, what are your chances of outliving the national average (male:80.7)?

https://www.singstat.gov.sg/find-da...ulation/death-and-life-expectancy/latest-data

I was wondering if I were to compare the total payout for each plan; here the total is defined as the cumulative monthly payout + bequest received when one passed on for each year after payout started.

So I used the CPF estimator with the amount of $264K in RA at age 55, start receiving payout at 65, use the lower of the payout range for both monthly amount and bequest, here is the chart I produced:

At the end of age 65 (received payout for 1 year), the person passed on, the respective amounts are:

Escalating: $18,852 + $381,826 = $400,678
Basic: $21,900 + $381,394 = $403,475
Standard: $24,036 + $381,572 = $405,430

The point when all three plans are about the same amount, it is actually at the end of 89 years old, after receiving payout for 24 years.

Escalating: $603,696 + $0 = $603,696
Basic: $547,500 + $57,682 = $605,182
Standard: $600,900 + $0 = $600,900

Both escalating and standard no longer has bequest that is why it is $0.

Since we do not know when we will die, for current cohort, the estimated life-span is 85 years old, Basic would be the best plan since one is likely to receive the most cumulative amount?

Just thinking aloud. Should my method is wrong, please point out for me. Thanks.

The assumptions are that we all know the effect of inflation, CPF Life is not the only source of retirement income, we just want to see which one has the best "value" based on current regime.

 

[maple96]

First off, FRS isn’t mandatory as it is also possible to opt for BRS and pledge your property.

ERS too, is optional, believe papermate’s question is whether to place FRS or ERS into RA account.

Actually I dun want to answer u, but wrong facts I have to

FRS is mandatory if u have the monies in OA/SA. Because u write "opt", u dun have the option, wrong word used by u.

Only after the transfer from OA/SA to RA, then u can opt for BRS by pledging your property and withdraw the monies from RA.

U ask papermate what is his/her question.

 

[ELKYme]

My dear friend....you can do “investments” with funds in both OA/SA right before you’re 55.

Don’t act smart.

Actually I dun want to answer u, but wrong facts I have to

FRS is mandatory if u have the monies in OA/SA. Because u write "opt", u dun have the option, wrong word used by u.

Only after the transfer from OA/SA to RA, then u can opt for BRS by pledging your property and withdraw the monies from RA.

U ask papermate what is his/her question.

 

[maple96]

My dear friend....you can do “investments” with funds in both OA/SA right before you’re 55.

Don’t act smart.

I said I dun want to answer u, let others correct u lor

 

[maple96]

Actually, CPF does allow you opt out of CPF LIFE if you have an alternative life annuity meeting certain basic standards. But that's a separate issue. I'm just asking an even easier question: what private escalating life annuity is available that only needs to plug the Standard Plan's inflation gap -- what the name of the product is, and what the math is for that product that makes it compelling/interesting to buy. You can still use the CPF LIFE Standard Plan as part of your inflation fighting plan (the part that doesn't fight inflation but, from a few of its dollars, could fund inflation fighting), as long as you've got something realistic, viable, and a comparatively better value to combat inflation if it isn't the CPF LIFE Escalating Plan. So...what's the plan? That's my question, and it's a simple one. Name the product, and sketch out the math.

Nobody has answered this simple question yet.

I found your answer to your own question but u need to provide the maths:

I think we can simply list all the private life annuities sold in Singapore, and then anyone/everyone can go comparison shopping. Here's what I think is a complete list, in alphabetical order by carrier:

Aviva MyLifeIncome
Etiqa ePREMIER eternity presto
Manulife RetireReady
NTUC Income Guaranteed Life Annuity
Tokio Marine Retirement GIO
Tokio Marine Retirement PaycheckLife

Did I miss any?

Some special features to note:

1. The NTUC and Manulife products are fully SRS qualified. They are currently the only two financial products that let you stretch the tax benefits of the Supplementary Retirement Scheme beyond the normal 10 year withdrawal window, something that can be quite useful to those with big (or planning big) SRS balances.

2. Tokio Marine's Retirement PaycheckLife offers a joint/survivor option, a great feature to protect a couple as a couple.

3. NTUC and possibly one or two others offer a guaranteed escalating payout, necessary to combat inflation.

4. Etiqa offers the earliest available payout start date (I think a very young child could start receiving payouts), while Manulife and NTUC are able to defer payouts the longest.

 

[JuniorLion]

Ntuc Guaranteed Life Annuity provides escalating pay out.

 

[tangent314]

At the current numbers, the Escalating Plan is a poor proposition.

I am very good at delaying gratification (yearly top ups to SA, SRS) but I will never ever select Escalating plan unless they improve it to something that makes financial sense

Think of it from the point of view from the actuarial scientists. They have to make sure that the system is sustainable. Their job is to calculate a payout schedule to make sure that the money that is paid out is not higher than the money that is put into the pool.

You can't have an escalating payout schedule that starts off with the same monthly payout as the flat payout schedule, if that is what you really want. Obviously the starting payout has to be lower in order for the system to be sustainable. How much lower depends on the life tables.

Currently the mean life expectancy for Singaporeans at age 65 is 21. On average, anyone age 65 now will pass away at age 86. However, studies have shown that median life expectancy is about 3 years higher than mean (meaning 50% of people will live to age 89), and the mode is about *7* years higher. Meaning there will be a lot of people aged 65 today that will pass away at age 93.

At age 93, the escalating plan payout will be 37% higher than the standard plan payout. The pool has to be able to support all these people, and this is something we need to take into perspective.

 

[henrylbh]

First off, FRS isn’t mandatory as it is also possible to opt for BRS and pledge your property.

ERS too, is optional, believe papermate’s question is whether to place FRS or ERS into RA account.

FRS is mandatory. At 55 your SA followed by OA will be pushed automatically into RA to meet FRS. Then you have the choice to opt for BRS (with sufficient property pledge) and withdraw the excess any time (from RA) or top up RA to ERS by cash or transfer CPF..

 

[ELKYme]

Hmmm...Other than the min bal. of 20K for OA and 40K for SA, the rest can be used for investments. Must we liquidate our investments to make FRS at 55?

FRS is mandatory. At 55 your SA followed by OA will be pushed automatically into RA to meet FRS. Then you have the choice to opt for BRS (with sufficient property pledge) and withdraw the excess any time (from RA) or top up RA to ERS by cash or transfer CPF..

 

[henrylbh]

Hmmm...Other than the min bal. of 20K for OA and 40K for SA, the rest can be used for investments. Must we liquidate our investments to make FRS at 55?

Of course you can just leave 20k in OA and 40k in SA for CPF to automatically push them into RA without liquidating your investments at 55.

 

[JuniorLion]

Think of it from the point of view from the actuarial scientists. They have to make sure that the system is sustainable. Their job is to calculate a payout schedule to make sure that the money that is paid out is not higher than the money that is put into the pool.

You can't have an escalating payout schedule that starts off with the same monthly payout as the flat payout schedule, if that is what you really want. Obviously the starting payout has to be lower in order for the system to be sustainable. How much lower depends on the life tables.

Currently the mean life expectancy for Singaporeans at age 65 is 21. On average, anyone age 65 now will pass away at age 86. However, studies have shown that median life expectancy is about 3 years higher than mean (meaning 50% of people will live to age 89), and the mode is about *7* years higher. Meaning there will be a lot of people aged 65 today that will pass away at age 93.

At age 93, the escalating plan payout will be 37% higher than the standard plan payout. The pool has to be able to support all these people, and this is something we need to take into perspective.

I am perfectly cognizant of this. While their objective is to make it sustainable, it does not tie in with mine.

 

[maple96]

Ntuc Guaranteed Life Annuity provides escalating pay out.

"good things" dun last

"Guaranteed Life Annuity has been withdrawn for new submission as of 23 November 2018. It is still available to policyholders who want to exercise the annuity option in their policies (if applicable). Only immediate annuity is available."

dunno is it really good, never look at it

 

[ELKYme]

Thanks Bro. Actually it’s for discussion sake only lah....for my case, I’ve already decided to place ERS from the onset (@55).

On another note, anyone has any idea what is the payout difference between:
1) At 55, place ERS amount in RA.
2) At 55, place FRS first, than RSTU the full ERS into RA right before 65?

Of course you can just leave 20k in OA and 40k in SA for CPF to automatically push them into RA without liquidating your investments at 55.

 

[maple96]

Thanks Bro. Actually it’s for discussion sake only lah....for my case, I’ve already decided to place ERS from the onset (@55).

On another note, anyone has any idea what is the payout difference between:
1) At 55, place ERS amount in RA.
2) At 55, place FRS first, than RSTU the full ERS into RA right before 65?

U see, I was right by not answering him, he is just waiting for opportunity to launch a personal attack, I made the mistake helping him, mod should take action

 

[Toni90]

I don't know how to put without sounding like a primary school math teacher.

In order to have 6 people living beyond 75, you need to have say 10 people living from 65 up to 75.

If you only have 4 people managing to live from 65 to 75, where do you find 6 people to live beyond 75? The most you have is 4.

People who lived beyond 75 also lived from 65 to 75....logically. But people who lived to 75 may not continue to live for much longer.

If the below probability does not make sense, then what makes (sense)?

Confirm you failed probability. There is totally no sense in the way you using it. Waste time continue with you. Pls go reading other people's post to get the idea of how to use age and number with CPF Life.

 

[ELKYme]

Take action for?

My apologies, how did I personally attack you?

No point being so aggressive my friend, we are all here to learn and share.

U see, I was right by not answering him, he is just waiting for opportunity to launch a personal attack, I made the mistake helping him, mod should take action

 

[maple96]

Take action for?

My apologies, how did I personally attack you?

No point being so aggressive my friend, we are all here to learn and share.
Pls read my comments: U are the one who is aggressive who launch first attack at me in another thread

My dear friend....you can do “investments” with funds in both OA/SA right before you’re 55.

Don’t act smart.

U posted the above just to attack me with "in red", but not interested in the answers. U know very well what u wrote in another thread launching a personal attack at me just because I corrected u in a post here, I can read u wanted revenge because of that.

Anyway I accept your apologies, and will not respond to your post in future. Tx

 

[ELKYme]

And I showed you how to get around it didn’t I?

Let’s be cordial to one another even if we have differing opinions.

Friendly advise, you won’t learn much if anything at all if you think you know everything.

U posted the above just to attack me with "in red", but not interested in the answers. U know very well what u wrote in another thread launching a personal attack at me just because I corrected u in a post here, I can read u wanted revenge because of that.

Anyway I accept your apologies, and will not respond to your post in future. Tx

 

[maple96]

And I showed you how to get around it didn’t I?

Let’s be cordial to one another even if we have differing opinions.

Friendly advise, you won’t learn much if anything at all if you think you know everything.

Can u explain what u mean by showed you how to get around it?

U shld take the advise yourself as u are the one who thinks u know alot. young man. I am old enough and know enough of CPF Life to manage my retirement. I am here to read more and kill some time

Ok this is the end of our discussion

 

[ELKYme]

Ready my question to Henry for the answer (#169).

Glad that you can manage your retirement, Let’s stop this bickering so that ideas on both plans can continue to be discussed. It’ll be beneficial to readers still contemplating on either plan.

Can u explain what u mean by showed you how to get around it?

U shld take the advise yourself as u are the one who thinks u know alot. young man. I am old enough and know enough of CPF Life to manage my retirement. I am here to read more and kill some time

Ok this is the end of our discussion