CPF Retirement Sum Scheme

[Toni90]

The last cohort under RSS got 1240 from age 65 based on the then min sum of 139k. Without extra interest, the RA would exhaust in about 20 years. But the extra interest would stretch 1240 by about 3 years plus.

So how could the default be 30 years subsequently when there is no more RSS after the last cohort born before 1958?

Maybe they count the longest case when people only have 60k in RA?

 

[akwl88]

My father's default payout was $297 pm. The default payout was based on his RA balance when he was age 55.

Even after topping up his RA to 100k plus, he continued to receive the default payout of 297 (or 3,564 per year which is less than the interest earned in his RA) That means his RA balance will continue to grow and never exhaust as he ages

Instead I applied on his behalf for higher payout and he got 2,204 pm. On hindsight, I should not have changed default payout of 297.

how to change the default payout?

 

[henrylbh]

Maybe they count the longest case when people only have 60k in RA?

not sensible guess.

If there is really a change of rule, then it's possible that topping up above the min sum may be calculated to stretch payouts over 30 years, when there is a request for higher payout than the default payout over 20 years.

 

[henrylbh]

Thanks for independently confirming that the extra interest can only extend RSS payout by 3+ years only.

Don't thank me too soon.

If a person has say 40k at age 64, the extra interest could extend the payouts by 8 years (from age 65 to age 93 plus)

 

[henrylbh]

This Jan2019 article also highlighted that extra interest could extend RSS payout til 95 yo !

Really surprised extra interest can last that long !

but there are 2 recent real life examples where CPF giving that as the reason for the extension beyond 20 years RSS payout til age 90+ ...

From CPF FB reply, these extra interest "gave the member 8 extra years of payouts"

8 extra years or to 95yo is not absurb if you see the facts of each case. See comments in

https://forums.hardwarezone.com.sg/money-mind-210/cpf-top-up-parents-60s-5923655-2.html Post #23

 

[cscs3]

According to that news of yours, the RSS payout was till 128 years old because of additional voluntary RA top-up!

Here, we are talking about default CPF RSS payout without additional voluntary RA top-up, which is supposed to be 20 years only starting from 65 years old!

I am able to just do a simple calculation to prove that the RSS story given about the additional 2% and 1% interest can extend payout by 10 years is just fictional:

Assume you have $181,000 at age 55.
Then, you would have $281,702 at age 65.
If your RA gets paid 4% p.a. and to be paid out in 20 years, your monthly payout will be = $1707 p.m. (NOTE: This is so much higher than CPF Life Basic and CPF Life Standard!!!)

Now, we were then told that you will get additional 2% on first $30k and 1% on next $30k, so over the years, you get additional = $81,184 at end of 20 years period.
Number of Years your payout can get extended = $81,184 / $1707 / 12 = 3.96 years!

Ok, so my calculations show that the additional interest can only extend payout by about 4 years (and not 10 years as claimed)!

Not to forget first 30K is 5% interest.

 

[henrylbh]

Not to forget first 30K is 5% interest.

You also forgot first 30k is 6%, next 30k is 5% and 4% for amount above 60k?

 

[Toni90]

Ok. So CPF tell the truth. Just fail math people here can not figure out how it happened. Every time like this.

 

[maple96]

Ok. So CPF tell the truth. Just fail math people here can not figure out how it happened. Every time like this.

Spot on! CPFB unlikely to be wrong. Either u fail maths or made wrong assumptions!

A few of us here had written to CPFB for clarifications on various matters and CPFB took the feedback and improved information on their website to make things clearer. Now there are much more info and clearer explanations (FAQ) at the website

 

[henrylbh]

Ok. So CPF tell the truth. Just fail math people here can not figure out how it happened. Every time like this.

I failed maths most of the time. I go blur with formula in statistics

For RSS balance in the spreadsheet that I presented I did it the hard way, row by row from age 55 to 100 plus

 

[snowblaze]

My parent is going to hit 65 in few years, but he does not hit the requirement of having $60,000 in your Retirement Account currently.

Do you guys think i should top up cash to his RA account six months before my parent reaches the payout eligibility age?

Also, should i further top up cash till $90,500 for the basic retirement sum? personally am very cash stripped too.

 

[BBCWatcher]

My parent is going to hit 65 in few years, but he does not hit the requirement of having $60,000 in your Retirement Account currently.

There’s no such requirement, not as you’ve stated it anyway.

Do you guys think i should top up cash to his RA account six months before my parent reaches the payout eligibility age?

Why 6 months before? Why not now, or at least $7,000/year for the tax relief?

Also, should i further top up cash till $90,500 for the basic retirement sum? personally am very cash stripped too.

I don’t think we have enough information, so “What’s the plan?” How is this early 60s parent getting by, how will he/she get by for the rest of his/her days, and what’s the overall financial picture of this parent and your family? CPF is super terrific for solving (or at least improving) late stage “Oh S**T! I’m in trouble!” financial situations in one’s golden years, but I think we need a bit more information.

 

[Squaredot]

I failed maths most of the time. I go blur with formula in statistics

For RSS balance in the spreadsheet that I presented I did it the hard way, row by row from age 55 to 100 plus

but u figured out cpf 101 much better than many of us

 

[snowblaze]

There’s no such requirement, not as you’ve stated it anyway.

Oops I wanted to say my parent would need $60K to opt for CPF Life.

I don’t think we have enough information, so “What’s the plan?” How is this early 60s parent getting by, how will he/she get by for the rest of his/her days, and what’s the overall financial picture of this parent and your family? CPF is super terrific for solving (or at least improving) late stage “Oh S**T! I’m in trouble!” financial situations in one’s golden years, but I think we need a bit more information.

Thanks for replying. Hmm the plan is for my parent to get into CPF life so that my parent would have monthly $ till my parent leaves this world. Having said that, I am not sure if CPF would allow my parent to opt for CPF life as my parent only has around $30K in RA now (63 years old now). I do not mind topping up cash to help my parent.

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[yoongf]

No minimum amt required to join CPF Life.

The 60k figure relates to auto joining the scheme. If dun hv 60k, can opt in at age 65.

1958 is a milestone birth year. The rules slightly different for those born earlier. But still can opt in.

https://blog.moneysmart.sg/budgeting/cpf-life-payout-plan-minimum-sum/#who

 

[BBCWatcher]

Oops I wanted to say my parent would need $60K to opt for CPF Life.

Yoongf replied to this part.

Hmm the plan is for my parent to get into CPF life so that my parent would have monthly $ till my parent leaves this world. Having said that, I am not sure if CPF would allow my parent to opt for CPF life as my parent only has around $30K in RA now (63 years old now). I do not mind topping up cash to help my parent.

I think that's a great idea. The returns on CPF Retirement Account top ups/CPF LIFE payouts are superb especially at this level. If you can spare at least $7,000 to make a deposit into your parent's Retirement Account (credited within this month), and get some tax relief in the process, it's hard to beat that.

But what does the family's wealth look like right now? For example, is this parent living alone in a fully paid 5 room HDB unit adjacent to Lavender MRT station with 85 years of remaining leasehold? Anything in your parent's Ordinary or Special Accounts?

No minimum amt required to join CPF Life.

The 60k figure relates to auto joining the scheme. If dun hv 60k, can opt in at age 65.

1958 is a milestone birth year. The rules slightly different for those born earlier. But still can opt in.

Even if this parent was born earlier opting into CPF LIFE is probably wise. There are potential extra rewards available, but we'll get to that.

 

[THEMIKOS]

Got an aunt who is 61 this year, born 1959.

Her CPF statement (paper one sent on jan for 2019 accounts) reads as this:

OA: 11k
SA: 3k
MA: 57k
RA: 37k

In the statement it also states that she is enrolled for CPF life standard plan with a payout of $840-$918 from 65 onwards.

Now i do not understand how come with a RA balance of 37k she can get such a monthly payout. Did the payout calculation at CPF website and it stated $274 or something similar i can’t recall.

Called CPF to enquire about this as my aunt keeps mentioning she needs to top up anoter $40k to meet her minimum sum of $155k. She is thinking of selling her house to achieve this which i told her she need not. So CPF replied that my aunt is enrolled in CPF Life’s standard plan and that the payout cannot be calculated via the website’s calculator as she is from the 1959 batch. Was advisd to write in using her Singpass and seek answers.

Now i am quite confused as i thought once u turn 55, funds from OA and SA will be transferred to RA up to FRS and once u hit 65, CPF life will start based on the payout u choose at 64.5 years old. Can someone correct my understanding please? And can the suggested payout of $840-$918 be trusted or should my aunt just take it with a pinch of salt? How was this amount derived? TIA.

 

[BBCWatcher]

....Called CPF to enquire about this as my aunt keeps mentioning she needs to top up anoter $40k to meet her minimum sum of $155k. She is thinking of selling her house to achieve this which i told her she need not. So CPF replied that my aunt is enrolled in CPF Life’s standard plan and that the payout cannot be calculated via the website’s calculator as she is from the 1959 batch. Was advisd to write in using her Singpass and seek answers.

Now i am quite confused as i thought once u turn 55, funds from OA and SA will be transferred to RA up to FRS and once u hit 65, CPF life will start based on the payout u choose at 64.5 years old. Can someone correct my understanding please? And can the suggested payout of $840-$918 be trusted or should my aunt just take it with a pinch of salt? How was this amount derived? TIA.

The first "batch" of CPF LIFE participants had their premium deducted up front. If she checks her past statements she'll probably see that premium deduction in the year she celebrated her 55th birthday.

By the way, if she doesn't need the $11K of OA as OA (as liquid funds) then she might want to consider transferring some or all of those dollars into her RA where they'll do better than 2.5%/year. She's also free to add cash to her RA if she wishes. It really just depends on what her cash is doing otherwise and how much of it there is (how much liquidity she has and needs). Yet another possibility is an "all three account" Voluntary Contribution, and she's in a rather good position for that since most of a VC will land in her OA and SA (since her MA is almost full), whereupon they'll be liquid and earning >2.5% interest. VCs must fit within the CPF Annual Limit of $37,740, so if she has compulsory contributions as well then they'll reduce the amount of her VC.

 

[THEMIKOS]

The first "batch" of CPF LIFE participants had their premium deducted up front. If she checks her past statements she'll probably see that premium deduction in the year she celebrated her 55th birthday.

By the way, if she doesn't need the $11K of OA as OA (as liquid funds) then she might want to consider transferring some or all of those dollars into her RA where they'll do better than 2.5%/year. She's also free to add cash to her RA if she wishes. It really just depends on what her cash is doing otherwise and how much of it there is (how much liquidity she has and needs). Yet another possibility is an "all three account" Voluntary Contribution, and she's in a rather good position for that since most of a VC will land in her OA and SA (since her MA is almost full), whereupon they'll be liquid and earning >2.5% interest. VCs must fit within the CPF Annual Limit of $37,740, so if she has compulsory contributions as well then they'll reduce the amount of her VC.

Thank u for replying.

 

[_death_god]

Hi guys, my father is going to reach 65 in 1 month and will be receiving his RSS of about $103x/monthly. He currently have FRS in his RA.

The qn I want to ask is that is it better if he convert to CPF life?
With CPF life, the amount that he will be getting under the standard plan is $976-$1031 (from CPF Life Calculator).

Isnt it clearly the better option to switch to CPF life from RSS since CPF Life can last him for lifetime, whereas RSS will only stop at roughly 85-90?

Is there any things that I missed out, since its no brainer to switch to CPF Life?