CPF Retirement Sum Scheme

[Mecisteus]

CPF calculator cannot be wrong, I have calculated it before years back.

U have to compound the balance in RA (80%) with 4% interest plus compound the extra interest of 900 pa at 4%. The 20% premium earns no interest. U shld be able to estimate the CPF calculated figures.

If u want to know when u will breakeven, compound the 20% premium with 4% interest to calculate.

I think henry also done it years back and shared his works

I didn't say wrong.

I'm just trying to make sense how the CPF calculator works.

So my estimation is quite close to the CPF numbers.

 

[maple96]

I didn't say wrong.

I'm just trying to make sense how the CPF calculator works.

So my estimation is quite close to the CPF numbers.

not referring to u, u proof him wrong

 

[maple96]

If you have a problem with what I wrote, point out the problem. (You don’t; it’s correct.)

Skip the snide remarks, please.

Already done it with 3 posts, dun wanna waste time anymore, CPF rules have been posted, unless still got people dun understand or confused

 

[Mecisteus]

not referring to u, u proof him wrong

Yeah tangent said cannot calculate.

I was curious so I checked myself.

 

[Mecisteus]

I tried on Excel.

It seems that from age 55 to 65, the RA is earning 4% only ???

Then with that RA number, I can roughly estimate the bequests to match with the numbers from CPF Life.

The reason why I said I can only estimate because the RA is supposedly to earn up to 6% depending on balances.

So I am just using a single interest rate of 4.5% in my formula to estimate the bequests.

 

[Toni90]

What you said is ridiculous!
CPFB already made it very clear that from age 55 to 65, you earn 6% on RA amount <$30k, 5% on $30k-$60k, and 4% above $60k. We are never going to dispute this!

What I suspect based on my calculation is that the Bequest at Age 65 calculated by CPF Life Online Calculator includes an insurance premium of about 5.5% that has been deducted instantly! However, CPFB never told us about this?

By deducting about 5.5% of the RA at Age 65, I am then able to get the average Bequest figure calculated by CPF Life Online Calculator! And for CPF Life Standard Plan, the Bequest calculation difference is only about $1000+, so pretty accurate!
However, for CPF Life Basic Plan, the same didn't work because the figure is too far away!

U can email CPF to ask. Complain here for what?

 

[Mecisteus]

What you said is ridiculous!
CPFB already made it very clear that from age 55 to 65, you earn 6% on RA amount <$30k, 5% on $30k-$60k, and 4% above $60k. We are never going to dispute this!

What I suspect based on my calculation is that the Bequest at Age 65 calculated by CPF Life Online Calculator includes an insurance premium of about 5.5% that has been deducted instantly! However, CPFB never told us about this?

By deducting about 5.5% of the RA at Age 65, I am then able to get the average Bequest figure calculated by CPF Life Online Calculator! And for CPF Life Standard Plan, the Bequest calculation difference is only about $1000+, so pretty accurate!
However, for CPF Life Basic Plan, the same didn't work because the figure is too far away!

Uncle,

1) There is no such thing as 5.5% insurance premium deduction.

2) For Standard, don't need any Excel. It's a straight linear calculation. You get back ALL premiums less payouts upon death. Simple as that.

3) My bequests estimates for CPF Life Basic from 65 onwards are quite close to the CPF Calculator.

4) My only dispute is the interest rate from 55 to 65 which is a flat 4% only.

 

[The_Davis]

What you said is ridiculous!
CPFB already made it very clear that from age 55 to 65, you earn 6% on RA amount <$30k, 5% on $30k-$60k, and 4% above $60k. We are never going to dispute this!

What I suspect based on my calculation is that the Bequest at Age 65 calculated by CPF Life Online Calculator includes an insurance premium of about 5.5% that has been deducted instantly! However, CPFB never told us about this?

By deducting about 5.5% of the RA at Age 65, I am then able to get the average Bequest figure calculated by CPF Life Online Calculator! And for CPF Life Standard Plan, the Bequest calculation difference is only about $1000+, so pretty accurate!
However, for CPF Life Basic Plan, the same didn't work because the figure is too far away!

do you have black n white from cpf on this insurance premium?

 

[Mecisteus]

4) My only dispute is the interest rate from 55 to 65 which is a flat 4% only.

The effective interest is slightly above 4% for a RA balance >>> 60k.

So I take back the dispute.

 

[Toni90]

I am doing back-testing to find out what are the hidden costs in CPF Life!
If you are so eager to know why, please go email CPF to ask.

U never dared to email CPF, right? After thousands and thousands of complain here.

 

[algo1]

Started this thread in April last year.
Checked with CPF then, and was told we can request for 20 years payout so think it would be automatically approved (maybe too naive).

Checked with CPF again this week and was told can request (but it does not mean that they will approve -New rules from the reply seen in another thread).

Looks like we have to ll suck thumb

May I know which thread?

 

[oceanicmanta]

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

Really surprised extra interest can last that long !

https://dollarsandsense.sg/cpf-life-vs-retirement-sum-scheme-whats-difference/

Quote:
"# 5 Lifelong Payouts
Another important difference between the two retirement schemes is that CPF LIFE offers the security and peace of mind that regardless of how long we live, we will continue receiving our monthly payouts.

On the Retirement Sum Scheme, our monthly payouts only last until our Retirement Account balances are exhausted. Based on the RA interest rate of 4%, our funds can last up to age 85. However, as we earn an additional 1% p.a. on the first $60,000 and an extra additional 1% p.a. on our first $30,000, payouts under the Retirement Sum Scheme may last until about age 95."

 

[maple96]

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

Really surprised extra interest can last that long !

https://dollarsandsense.sg/cpf-life-vs-retirement-sum-scheme-whats-difference/

Quote:
"# 5 Lifelong Payouts
Another important difference between the two retirement schemes is that CPF LIFE offers the security and peace of mind that regardless of how long we live, we will continue receiving our monthly payouts.

On the Retirement Sum Scheme, our monthly payouts only last until our Retirement Account balances are exhausted. Based on the RA interest rate of 4%, our funds can last up to age 85. However, as we earn an additional 1% p.a. on the first $60,000 and an extra additional 1% p.a. on our first $30,000, payouts under the Retirement Sum Scheme may last until about age 95."

Just copy from CPFB website

Never just trust articles without verification! Remember all calculations are estimates with underlying assumptions. U must understand the rules (and formula) and what are the underlying assumptions, such as balance in RA at start and in each year till 95, actions u take over the future years on your accounts, etc

 

[oceanicmanta]

I have not done a real calculation but intuitively I really doubt the extra 2% interest on first $30k and extra 1% interest on another $30k only (remember, it is not extra 1% or 2% on entire RA sum!) can allow you to last your payout for another 10 years (from 85 to 95)!

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"

I just found this 2016 case where the "default" RSS payout was til 128 years old !!
https://www.todayonline.com/voices/retirement-payouts-cpf-board-replies

CPF uses "default RSS payout duration" here ...

 

[tmkedmw]

Few years back, the default RSS payout duration in the RSS calculator is 20 years.

More recently, don't know since when, the default becomes 30 years. PEA is 65, so 30 years duration stretch it to 95 years old.

Claiming that the additional interest prolongs payout duration to age 95 is really csb. IMHO it is more to obfuscate the default duration being revised from 20 to 30 years.

 

[The_Davis]

actually rss can choose number of years for payout or not?

 

[SKenny]

Few years back, the default RSS payout duration in the RSS calculator is 20 years.

More recently, don't know since when, the default becomes 30 years. PEA is 65, so 30 years duration stretch it to 95 years old.

Claiming that the additional interest prolongs payout duration to age 95 is really csb. IMHO it is more to obfuscate the default duration being revised from 20 to 30 years.

Many people I spoke to share the same understanding.

It appears that the CPF goal post has shifted yet again without proper communication with its members

 

[henrylbh]

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)!

Why give hypothetical numbers?

The last cohort under RSS was those born btw Jul 1957 and 1 Jan 1958. The then min sum was 139k and the payout is 1,240 pm. With the additional and extra additional interest, the payout of 1,240 pm from age 65 would deplete the RA by age 88 years 7 months.

 

[henrylbh]

Few years back, the default RSS payout duration in the RSS calculator is 20 years.

More recently, don't know since when, the default becomes 30 years. PEA is 65, so 30 years duration stretch it to 95 years old.

Claiming that the additional interest prolongs payout duration to age 95 is really csb. IMHO it is more to obfuscate the default duration being revised from 20 to 30 years.

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?

 

[henrylbh]

I just found this 2016 case where the "default" RSS payout was til 128 years old !!
https://www.todayonline.com/voices/retirement-payouts-cpf-board-replies

CPF uses "default RSS payout duration" here ...

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.