CPF SA Shielding hack - RIP (Obsolete)

[sohguanh]

3.3k is not much unless I move to JB with another 3k from rental income plus other passive income of 3k

Must see what you eat and use mah. Previously I share I eat porridge and beehoon etc

 

[celtosaxon]

"Introducing the CPF LIFE Partner Plan!"

(I've corrected some figures upthread.)

Ideally, have the following options:

1. Bequest / No Bequest
2. Partner / No Partner
3. Escalating / Non-Escalating

I’m not sure they need to be plans per se.

 

[BBCWatcher]

Let's suppose you're thinking about buying term life insurance to age 65. But it dawns on you that it's possible you could pay all premiums then die 1 day after the policy ends. And now you're freaking out. You can't stop thinking about the financially worst possible outcome possible with term life insurance to age 65.

So does this possibility mean you shouldn't buy term life insurance?

If you answer "Yes," then maybe you don't understand what insurance is for and when it's useful.

Longevity insurance operates on the same basic principle but in reverse. The risk you're trying to mitigate is that you'll outlive your savings, that you'll live too long not too short. So you want to collect more from this insurance when you "lose," when you live too long, or longer. And less when you die soon, or sooner. It's life insurance in reverse, basically.

But here are some fabulous things about CPF LIFE: it's non profit, the risk pool is huge and fair, the actuarial tables are fair, the overheads are low, and the government nearly guarantees a floor rate of 4.0% interest to the system (plus bonus interest). All of these features are absent from private insurance companies. And yet you buy life insurance when you need it, even with private sector profits, overheads, and less favorable risk pools. So why do you freak out when it comes to longevity insurance? Sit down, try to understand it, and take advantage of it. It's really quite useful.

 

[celtosaxon]

Let's suppose you're thinking about buying term life insurance to age 65. But it dawns on you that it's possible you could pay all premiums then die 1 day after the policy ends. And now you're freaking out. You can't stop thinking about the financially worst possible outcome possible with term life insurance to age 65.

So does this possibility mean you shouldn't buy term life insurance?

If you answer "Yes," then maybe you don't understand what insurance is for and when it's useful.

Longevity insurance operates on the same basic principle but in reverse. The risk you're trying to mitigate is that you'll outlive your savings, that you'll live too long not too short. So you want to collect more from this insurance when you "lose," when you live too long, or longer. And less when you die soon, or sooner. It's life insurance in reverse, basically.

But here are some fabulous things about CPF LIFE: it's non profit, the risk pool is huge and fair, the actuarial tables are fair, the overheads are low, and the government nearly guarantees a floor rate of 4.0% interest to the system (plus bonus interest). All of these features are absent from private insurance companies. And yet you buy life insurance when you need it, even with private sector profits, overheads, and less favorable risk pools. So why do you freak out when it comes to longevity insurance? Sit down, try to understand it, and take advantage of it. It's really quite useful.

I think it would be easier to accept if it was done like Social Security (or any other insurance plans) where there is no “balance” for people to see (and lust after).

 

[fr33d0m]

CPF LIFE Basic is probably next… but before they can do that, they have to figure out a way to add joint w/survivor option on the CPF LIFE annuity, otherwise the surviving spouse could face a major income drop.

why so?

joint/survivor will only reduce the payout as the payout is longer. It could be political suicide.

CPF has always advised that couple should try to balance their CPF RA to cater for better coverage.

 

[celtosaxon]

why so?

joint/survivor will only reduce the payout as the payout is longer. It could be political suicide.

CPF has always advised that couple should try to balance their CPF RA to cater for better coverage.

From Standard to Basic can be around a 10% reduction in payout. Private annuities outside Singapore seem to reduce by around 12% for joint/survivor option, depending on the age.

Keep in mind, it is just an option — you can still choose “no partner” if you want the higher payment. How is that political suicide?

 

[henrylbh]

Must see what you eat and use mah. Previously I share I eat porridge and beehoon etc

This morning I ate porridge and plain white beehoon at whampoa market and kopi O .. $1.60+1.20+1.00

 

[celtosaxon]

This morning I ate porridge and plain white beehoon at whampoa market and kopi O .. $1.60+1.20+1.00

I ate oatmeal and made kopi myself at home for less than S$1 in total. Kiam siap hor?

 

[highsulphur]

Difficult. Estate tax always come with gift tax to plug this type of loophole.

Give away now!

 

[highsulphur]

What happens to your RA account when one passes away between 55 and 65? Can get back full for bequest?

 

[BBCWatcher]

I think it would be easier to accept if it was done like Social Security (or any other insurance plans) where there is no “balance” for people to see (and lust after).

Good point. Social Security, for example, just gives you a report with your earnings history and your estimated retirement benefit. There's no "balance." You're just progressively buying more and more of a joint/survivor/spousal life annuity depending on your earning/contribution history. (It's a little more complicated than that, but that's the basic idea.)

why so?
joint/survivor will only reduce the payout as the payout is longer. It could be political suicide.
CPF has always advised that couple should try to balance their CPF RA to cater for better coverage.

It's hard for many couples to do that, and even if they do a terrific job funding both RAs the fact is that household income from CPF LIFE drops by slightly more than half when the older/male spouse (typically) passes on first. That's a problem! When the first spouse dies total household expenses don't drop by more than half. They drop some but not anywhere near that much.

From Standard to Basic can be around a 10% reduction in payout. Private annuities outside Singapore seem to reduce by around 12% for joint/survivor option, depending on the age.

Due to the quirky principal payout guarantee a joint/survivor life annuity (in lieu of a residual) would work particularly well if the principal payout guarantee were traded for the joint/survivor feature.

Keep in mind, it is just an option — you can still choose “no partner” if you want the higher payment. How is that political suicide?

Exactly. There's really only political upside in offering couples/partners a joint payout option. They can decide whether they want to choose that option or not.

 

[BBCWatcher]

What happens to your RA account when one passes away between 55 and 65? Can get back full for bequest?

The full balance, including accrued interest, is paid to your CPF nominees per your nomination.

Exactly the same thing happens after age 65 and up to age 70 if you start CPF LIFE payouts from age 70 (the default).

Once CPF LIFE payouts start the amount distributed to nominees (if any amount) depends on the chosen payout plan, when the member dies, and the pre-payout entry sum. However, the total amount paid out (in monthly CPF LIFE payouts and payouts to nominees, if any) will always be at least as much as the pre-payout entry sum.

 

[JustDoLor]

You confused people

BBC post #1281, he said CPF RA earns 4.08% interest…..

Then you reply BBC at post #1283, You say “But the 4% interest it earns doesn't flow back to one's RA…..”

So initially you are implying the interest earned from RA doesn’t flow back to one’s RA lah

So you basically don’t understand from the beginning lah

After people came out to explain, then suddenly it become your understanding…

And to be clear to other readers, interest flow to the pool is not from RA, is from the annuity premium you paid lah.

Yup, This is my understanding. Interest earned will not flow back to RA account, it will flow to the pool and only be used as payout after 80

 

[KeytoFreedom]

I hit 55yo in mid Dec. So no more SA shielding. I guess they are encouraging more people to top up RA to ERS since the funds in your SA will be transferred to OA if you only do FRS

since you turn 55 in Dec, you can still the SA shielding


Read HWZ Forum Rules!

 

[highsulphur]

since you turn 55 in Dec, you can still the SA shielding


Read HWZ Forum Rules!

for what?

 

[highsulphur]

is there a info-diagram on how CPF life is being funded from 55 onwards for the 3 different plans?

 

[celtosaxon]

since you turn 55 in Dec, you can still the SA shielding


Read HWZ Forum Rules!

Shield… and then watch it flow to OA.

 

[JustDoLor]

You don’t be like parrot hor ….

People started to explain “…after 80…”. And then you also repeat “… after 80” ….

Yup, This is my understanding. Interest earned will not flow back to RA account, it will flow to the pool and only be used as payout after 80

 

[KeytoFreedom]

Shield… and then watch it flow to OA.

sorry did I get it wrong that those who turn 55 this year, their SA accounts will not get closed, correct? only those who turn 55 next year will be affected by the new ruling? or are you saying that even those already 55 and older will be affected and all their SA accounts will be closed as well?


Read HWZ Forum Rules!

 

[Oldnerd79]

sorry did I get it wrong that those who turn 55 this year, their SA accounts will not get closed, correct? only those who turn 55 next year will be affected by the new ruling? or are you saying that even those already 55 and older will be affected and all their SA accounts will be closed as well?


Read HWZ Forum Rules!

Yes everyone older than 55 affected. basically next year onwards only ppl younger than 55 will have SA