CPF LIFE Standard Plan or LIFE Basic Plan

[a4973]

hello everybody
i have not come across an in depth discussion about the factors one considers when deciding on LIFE Standard Plan or LIFE Basic Plan.
though i have read up on CPF website but TBH if i have to decide now i am unsure how to make that decision.
would like to hear from people of age that have already decided & in the plan as well as those that are not of age yet but may have opinions from family member's experiences.

thanks

 

[elnewbie]

Rule of thumb: If you have dependents, go for the Basic plan. The bequest amount is much higher compared to the Standard plan.

The difference between these 2 plans is about $100 per mth.

 

[a4973]

Rule of thumb: If you have dependents, go for the Basic plan. The bequest amount is much higher compared to the Standard plan.

The difference between these 2 plans is about $100 per mth.

+elnewbie
thanks for chiming in
the difference of $100 per mth you refer to is the monthly payout to me is about $100 lower on Basic vs Standard?

 

[a4973]

at this link https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life#Item1534
the table shows *Payout figures are estimates, based on the CPF LIFE Standard Plan and computed as of 2017.
i can't seem to find information on payout figures for LIFE Basic Plan

 

[elnewbie]

Correct....

+elnewbie
thanks for chiming in
the difference of $100 per mth you refer to is the monthly payout to me is about $100 lower on Basic vs Standard?

 

[elnewbie]

There's another book from CPF, "when you turn 55". It's mentioned somewhere there.

at this link https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life#Item1534
the table shows *Payout figures are estimates, based on the CPF LIFE Standard Plan and computed as of 2017.
i can't seem to find information on payout figures for LIFE Basic Plan

 

[a4973]

Rule of thumb: If you have dependents, go for the Basic plan. The bequest amount is much higher compared to the Standard plan.

The difference between these 2 plans is about $100 per mth.

i have dependents so going with your rule of thumb to go for Basic plan.
with this in mind, how would one rationalize whether to continue with 7K cash to SA top ups bearing in mind cash top ups are locked (reserved) in at 55 withdrawal.

 

[elnewbie]

The answer to your question below depends on a few factors:

1. Current SA balance
2. Age
3. Tax bracket. If your tax bracket is too low, it really doesn't make sense to do this, unless you are really after the 4% risk free return.

By the way, you are aware that such topups can only increase your monthly payouts after age 65 ?? You can't withdraw these topups in lump sum nor be withdrawn in lieu of the property pledge.

i have dependents so going with your rule of thumb to go for Basic plan.
with this in mind, how would one rationalize whether to continue with 7K cash to SA top ups bearing in mind cash top ups are locked (reserved) in at 55 withdrawal.

 

[The_Davis]

Go for the one with higher bequeast

 

[apatheticme]

i have dependents so going with your rule of thumb to go for Basic plan.
with this in mind, how would one rationalize whether to continue with 7K cash to SA top ups bearing in mind cash top ups are locked (reserved) in at 55 withdrawal.

You have not provided enough information about your income (contribution + tax bracket), current state of your CPF accounts and how long you have till you are 55.

For example, if by not doing Retirement Sum Top Ups, do you believe that you will have more than your projected FRS (another unknown, different people expect it to grow at different rates) at 55? If so then the rationalization is just that this is tax relief + good interest rates + no additional monies is being locked up at 55 (assuming you are choosing FRS).

 

[SBC]

Mid-40s now. SA has crossed FRS.

Wise to stick with STANDAND option?

 

[a4973]

You have not provided enough information about your income (contribution + tax bracket), current state of your CPF accounts and how long you have till you are 55.

For example, if by not doing Retirement Sum Top Ups, do you believe that you will have more than your projected FRS (another unknown, different people expect it to grow at different rates) at 55? If so then the rationalization is just that this is tax relief + good interest rates + no additional monies is being locked up at 55 (assuming you are choosing FRS).

1. Current SA balance = 166K
2. Age = 52+
3. Tax bracket = 3.5%
my intention is to keep SA at FRS every year till my 55th from either OA or cash top ups.
my cash is only earning about 1.3% or thereabouts from FD , Higher yield savings account , short term bank promos
please advise
thanks

 

[elnewbie]

a4973,

Wah lao, your current SA balance already at FRS, you can't do anymore SA topups.

And your tax bracket so low, not much incentives even if you were to do so.

The next thing you can consider is that upon reaching 55, you can do RA top ups to the ERS level, but such topups don't get tax benefits and furthermore, cannot be withdrawn in lump sum so think carefully.

If you have excess cash, and have previously used CPF to buy property, can do an OA capital repayment to get 2.5% returns.

Else, how much is your monthly income and how many months bonus did u get last year ? Am asking as if it's below the AL threshold limit, you can do VC to all 3 accounts.

 

[dork32]

a4973,

Wah lao, your current SA balance already at FRS, you can't do anymore SA topups.

And your tax bracket so low, not much incentives even if you were to do so.

The next thing you can consider is that upon reaching 55, you can do RA top ups to the ERS level, but such topups don't get tax benefits and furthermore, cannot be withdrawn in lump sum so think carefully.

If you have excess cash, and have previously used CPF to buy property, can do an OA capital repayment to get 2.5% returns.

Else, how much is your monthly income and how many months bonus did u get last year ? Am asking as if it's below the AL threshold limit, you can do VC to all 3 accounts.

you are good in your analysis.

to me, the best is oa at 2.5%

 

[dork32]

my intention is to keep SA at FRS every year till my 55th from either OA or cash top ups.

sa interest on 166k is 4k a year. more than enough to keep it at frs. if not enuf, ma interest will spill over to keep it there.

you still kena 3.5% tax means you still got salary. this also contribute to your sa.

 

[dork32]

a4973,

Else, how much is your monthly income and how many months bonus did u get last year ? Am asking as if it's below the AL threshold limit, you can do VC to all 3 accounts.

monthly income must below 6k. his tax bracket is only 3.5%

 

[BBCWatcher]

The next thing you can consider is that upon reaching 55, you can do RA top ups to the ERS level, but such topups don't get tax benefits and furthermore, cannot be withdrawn in lump sum so think carefully.

The top-ups (and interest on the top-ups) cannot be withdrawn in lump sums, but the contributions "underneath" those top-ups often can. And the more your top-ups, the more of those compulsory contributions you might be able to withdraw in lump sums, if/when desired. Let me illustrate....

Let's suppose A4973 has topped up his/her Special Account by $35,000 (5 annual contributions of $7,000 each) already, and the rest of the contributions were compulsory contributions associated with work in Singapore. At age 55, A4973 decides to top up his/her Retirement Account by another $35,000. Then, at age 65 (or 70, or anywhere in between), A4973 decides to participate in CPF LIFE at the Full Retirement Sum (FRS) level. That's no problem. $70,000, plus interest, won't come close to the FRS, and the rest (above FRS and accrued interest) can be withdrawn in lump sum(s) if desired.

Yes, it's true that SA/RA top ups (and interest on those top ups) must be paid out in the form of CPF LIFE lifetime annuity payments. (Which is still real money!) But to some extent at least the top-ups can "squeeze out" compulsory contributions and make them available for lump sum withdrawals, if desired. It just depends on the situation.

By the way, another option is to top up a qualified family member's account -- "qualified" in this case meaning that the top up would qualify for tax relief. See here for details.

And another option, if you're below the CPF Annual Limit and if your Medisave Account has not reached the Basic Healthcare Sum (BHS), is to top-up your Medisave Account.

 

[chopra]

think dork32 and a few others analysed previously.

a big big function is estimating one's lifespan. how to, lol.
the "breakeven" is 94yo iirc.

my short take. if u dun plan to give ur dependants (really..by then they will be in their mid 40s to 70s) any $, jus go standard. yolo.

 

[a4973]

think dork32 and a few others analysed previously.

a big big function is estimating one's lifespan. how to, lol.
the "breakeven" is 94yo iirc.

my short take. if u dun plan to give ur dependants (really..by then they will be in their mid 40s to 70s) any $, jus go standard. yolo.

so in short if i dont think i can "break even" by reaching 94 BUT i do want to bequest as much as possible to my dependents then i should go for Basic?
i just read on CPF website there is going to be an Extended LIFE plan launching in 2018. any ideas , guesses how it is going to work?

 

[BBCWatcher]

i just read on CPF website there is going to be an Extended LIFE plan launching in 2018. any ideas , guesses how it is going to work?

CPF has announced there will be a 2% annual increase option for payouts from 2018. That's a useful feature and one I would recommend for many/most beneficiaries.

If your sole aim is to maximize bequests then you should also defer CPF LIFE payouts as long as possible, to age 70. You should also make a CPF nomination, at any age, so that your heir(s) avoid probate costs.