CPF SA Shielding hack - RIP (Obsolete)

[henrylbh]

If really not enough govt also wont leave you to die. So don't worry too much. Just do the best you can to save while you can. 5-rm flat rental income + CPF life payouts as a single you should be better off than many ppl already.

Ha ha gov may not even know what's happening to you unless there is samaritan to push your case or you die till smelly to get noticed and there will be more such cases in future.

 

[aurvandil]

Oh please, it's not like that at all. That's a bold assertion. Where's your evidence that the CPF Board's actuaries are being "too pessimistic" (in longevity insurance terms)?

Apologies if I am not being clear.

A negative expectations game is one where the player is expected to lose. A good example of these are the games people play in casinos. Another good example is the 4D/TOTO many people like to buy.

In this case, most people can expect to lose playing the game (CPF Life) with CPF Board. This hypothesis is based on the life tables published by DOS. We are still in the early days of CPF Life so the empirical evidence for this hypothesis is not in as the majority of the first cohort have not reached end of life. It will become clear in 10 to 20 years when we see large surpluses in CPF Life. The large surpluses come from deceased CPF members who lost in their game against CPF.

In the highly unlikely event that the CPF actuaries got it wrong and there is a large deficit in CPF Life, the nuclear option will be to adjust payouts.

 

[BBCWatcher]

A negative expectations game is one where the player is expected to lose. A good example of these are the games people play in casinos. Another good example is the 4D/TOTO many people like to buy.

In this case, most people can expect to lose playing the game (CPF Life) with CPF Board.

No, you're just wrong about this. How is sustaining a higher standard of living every month for life (compared to a safe withdrawal rate from one's own, non-insurance pooled assets) losing?

This hypothesis is based on the life tables published by DOS. We are still in the early days of CPF Life so the empirical evidence for this hypothesis is not in as the majority of the first cohort have not reached end of life. It will become clear in 10 to 20 years when we see large surpluses in CPF Life. The large surpluses come from deceased CPF members who lost in their game against CPF.

Well you've just got a bad hypothesis. Nobody who even half seriously understands this stuff would ever naively use Singapore's life tables such that they assume Singaporeans alive today will have the same lifespans that dead Singaporeans experienced — that improvements in longevity have screeched to a sudden halt. The skill is in projecting how much longer people alive today will live, not whether they will live longer. They will live longer, absent some "black swan" event even bigger than COVID. And we know with high confidence there's even more in the pipeline. For example, we know approximately how many women (mostly women) will not die prematurely due to vaccine preventable cancers (such as a large percentage of cervical cancer) thanks to the HPV vaccine that was introduced in Singapore several years ago. (But boys can benefit from this vaccine, too!)

In the unlikely event the CPF Board's actuaries are too pessimistic (in insurance terms) their error is likely to be small, will be detected relatively quickly, and will mean slightly higher payouts than currently estimated.

In the highly unlikely event that the CPF actuaries got it wrong and there is a large deficit in CPF Life, the nuclear option will be to adjust payouts.

It's not just highly unlikely it's impossible if you're convinced (and correct) they're too pessimistic.

But OK, let's assume for sake of argument the CPF Board's actuaries are no fun, no party animals, and they're too stingy in their payout calculations. So what does that mean in practical terms? It means that the internal interest rate for CPF LIFE might be the equivalent of 3.96% instead of 4.00% (plus bonus interest), for example. Because it'll be something along those lines. OK, so do you want to lose sleep over 4 basis points? Is this difference going to affect your decisions? It's still an incredible (near guaranteed) floor rate!

There are many things in this world you could worry about. Most of them aren't worth worrying about. Focus on the ones that are, then see what you can do to address those.

 

[aurvandil]

Well you've just got a bad hypothesis.

I go Genting regularly with my friends. Every time we go, I tell them my hypothesis is that we will likely lose money. Despite me being right many times, they almost never believe me. They always cite the times when I was wrong and they left with winnings.

Genting has this nice system where if you clock a certain amount of play, they will comp you a free room. The exact amount is never advertised but it is not difficult to determine the empirical threshold where you will be awarded the room you want. The expected loss from the amount of required play is usually less than the cost of the room itself. The strategy I therefore deploy is to limit my play to the amount for the free room and then stop. in this way, I enjoy a positive expectations game and beat the house.

For anyone who wants to listen, CPF Life is a negative expectations game. I cannot prove it at this point in time but I am fairly confident I am right in the same way I am right about losing money gambling at Genting. If you want evidence of this, you will need to wait 10 to 20 years and see if CPF Life has large surpluses or deficits.

in light of the recent removal of SA shielding, there has been a lot of advice going round suggesting people should put even more money into CPF Life. This is bad advice. You cannot improve the odds of a negative expectations game by increasing your bet. If you do so, you will only end up losing more.

If you believe that CPF Life is a negative expectations game, then your optimum strategy is to put in the bare minimum via the BRS scheme. This is similar to the strategy I deploy at Genting where I play the bare minimum to get the free room. Draw out the maximum amount possible and consult a good financial planner on how best to deploy the money to meet your retirement needs.

 

[royalmix]

I dun know what you are grumbling, mumbling or rattleing about but I obviously know you dun understand what I am talking about or disagreeing with you!

There are obviously major differences in the 3 CPF Life Plans but you generalised it and continue to insist there are no major differences, except for Basic Plan. So I suggest the audience do their own due diligence, do the maths themselves to see how CPF Life works by age band, eg for Basic Plan:

1. CPFB will stream out payouts from RA until age 90 when it will become zero
2. Then stream out your CPF Life Premium until it becomes zero, about age 93 thereabouts
3. Then stream out your CPF Life Premium interest until it becomes zero, about age 95 thereabouts
4. Then stream out from the CPF Life Pool, you are living on other peoples' monies

If you die before 90, your bene get back RA balance + #2
If you die after 93, your bene get nothing

So do your own calculations if you want to know the details for the Standard Plan and Escalating Plan!

It is a fact that so long you cannot live enough, you will be contributing most, if not all, of the interest "credited" for the CPF Life Premium you contributed to the pool.

I will choose CPF Life Basic, and the above summary clearly show the age when interest will be contributed to the Pool to help others.

If you choose Standard or Escalating Plan, you are also contributing all your extra interest earned on your combined CPF Balances, not just the interest on the premium.

We are all contributing to the future of Singaporeans who live longer than us.

Of course if you have long life, you will be enjoying those monies in the Pool others contributed. Then you huat ah, so long you still having a good quality of life! Congrats to you!

 

[BBCWatcher]

Royalmix, you're missing a very important part. The Safe Withdrawal Rate (SWR) from a conservative or even fairly risky investment portfolio generates a much lower income stream than what CPF LIFE provides. You need much more wealth to achieve the same level of retirement income, with only a few reasonable and typical assumptions. That's true for everyone from payout start, and even in the long run-up to payout start because you've got to amass much more wealth to achieve the same income level (and associated real lifestyle).

I go Genting regularly with my friends....

You're drawing some sort of comparison between a casino (and in Malaysia no less) and high quality sovereign longevity insurance? Really?

 

[aurvandil]

You're drawing some sort of comparison between a casino (and in Malaysia no less) and high quality sovereign longevity insurance? Really?

Probability is probability. The numbers don't lie.

 

[BBCWatcher]

Probability is probability. The numbers don't lie.

What does that even mean?

You are certain to die at some point, and you have probabilities of death on particular days. You don't have to visit a casino for that particular probabilistic reality. So what are you going to do about it? You really only have two basic choices when it comes to assuring a particular lifestyle for the rest of your days (and gifts if you wish). One is to try and amass enough savings (and make investment decisions) to try to assure a particular lifestyle. The other is to pool at least some of this risk. If you do the latter it costs less to achieve a particular lifestyle, including gifts, if the longevity insurance is at least decent. CPF LIFE is way better than decent.

Good luck!

 

[aurvandil]

What does that even mean?

If the CPF Life is so good, they wouldn't have to make it mandatory.

All they needed to do is show the amount of subsidy they are putting in and how the payout significantly exceeds the amount that a person puts in.

If they did this, I am very sure there will be a mad scramble to voluntarily max out the amount that a person can put in.

The reason they are not doing this is because the probability and the numbers do not allow them to do this.

 

[highsulphur]

If the CPF Life is so good, they wouldn't have to make it mandatory.

All they needed to do is show the amount of subsidy they are putting in and how the payout significantly exceeds the amount that a person puts in.

If they did this, I am very sure there will be a mad scramble to voluntarily max out the amount that a person can put in.

The reason they are not doing this is because the probability and the numbers do not allow them to do this.

have it occurred to you that CPL Life is good precisely because it is mandatory? The law of large numbers and the fact that it is non-profit should rightfully make it one of the best annuity available.

 

[royalmix]

Royalmix, you're missing a very important part. The Safe Withdrawal Rate (SWR) from a conservative or even fairly risky investment portfolio generates a much lower income stream than what CPF LIFE provides. You need much more wealth to achieve the same level of retirement income, with only a few reasonable and typical assumptions. That's true for everyone from payout start, and even in the long run-up to payout start because you've got to amass much more wealth to achieve the same income level (and associated real lifestyle).

You are obviously here to mislead! I am just explaining about how CPF Life works. It is mandatory to have! Just live with it, make your own right choice of Plans and amount!

 

[aurvandil]

have it occurred to you that CPL Life is good precisely because it is mandatory? The law of large numbers and the fact that it is non-profit should rightfully make it one of the best annuity available.

It is a natural law in Singapore that if Singaporeans put in $1 but get back $2, there is no need to make it mandatory. A good example of this is HDB BTO. No need mandatory but forever over subscribed.

 

[BBCWatcher]

If the CPF Life is so good, they wouldn't have to make it mandatory.

By that impeccable logic feeding babies (a reasonable duty of care for children) wouldn't be mandatory.

have it occurred to you that CPL Life is good precisely because it is mandatory? The law of large numbers and the fact that it is non-profit should rightfully make it one of the best annuity available.

Precisely.

The other policy choice is for taxpayers to provide cash incomes to all elder Singaporeans who've exhausted their savings — and to have more elder Singaporeans with much lower living standards as they desperately try to avoid exhausting their savings. Would anyone prefer that Singapore? Would you prefer a 15% GST and 7 percentage point higher income tax rates, for example? Along with not building at least one of the new MRT lines, hiking university tuition and public hospital costs, and a few other cuts to public spending on other services? Would you prefer that package?

Or would you prefer what you have now: a huge amount of flexibility to decide your retirement spending and gift giving provided you buy at least the barest minimum amount of longevity insurance (the BRS, if you can afford it) to defend taxpayers against the risks they'll have to bail you out if you come up short? (And defend you too, by the way — to let you safely spend and/or give more in your retirement.) Longevity insurance that's far and away the lowest cost longevity insurance for every retirement income level you choose?

I pick Door #2. Fortunately it's the one we have.

 

[BBCWatcher]

You are obviously here to mislead!

What specific part of my post do you disagree with?

Reasonable safe withdrawal rates (SWRs) from one's own investment portfolio are lower than what CPF LIFE monthly payouts provide. And I've already posted the math behind that simple statement of fact. You can safely afford to spend and/or give away more money when more of your retirement income is grounded in CPF LIFE payouts. If you don't want to spend and/or give away more in retirement, OK, then buy less CPF LIFE.

 

[aurvandil]

I pick Door #2. Fortunately it's the one we have.

This is looking at things at a policy perspective rather than from the benefit of CPF Life to an individual.

In wanting to meet these policy objectives, you seem to be conceding that CPF Life needs to be a negative expectations game so that we won't have to raise taxes, GST etc to meet the retirement needs of the elderly poor in Singapore.

 

[royalmix]

It is a fact that so long you cannot live enough, you will be contributing most, if not all, of the interest "credited" for the CPF Life Premium you contributed to the pool.

I will choose CPF Life Basic, and the above summary clearly show the age when interest will be contributed to the Pool to help others.

If you choose Standard or Escalating Plan, you are also contributing all your extra interest earned on your combined CPF Balances, not just the interest on the premium.

We are all contributing to the future of Singaporeans who live longer than us.

Of course if you have long life, you will be enjoying those monies in the Pool others contributed. Then you huat ah, so long you still having a good quality of life! Congrats to you!

I merely explained how CPF Life works! And you disagreed!

 

[RedsYWNA]

Are the calculations in the article correct? Thoughts?

https://www.drwealth.com/the-return-for-ra-is-4-08-but-the-return-for-cpf-life-is-not/

 

[aurvandil]

Are the calculations in the article correct? Thoughts?

https://www.drwealth.com/the-return-for-ra-is-4-08-but-the-return-for-cpf-life-is-not/

The key point that you have to live to around 90 to see the discontinued SA yield of 4.0% is correct.
Based on the latest life tables published by DOS, the probability of living to 90 if you are male is 22.7%.

 

[vsvs24]

https://www.todayonline.com/singapo...nternal_sharetool_androidphone_29022024_today

SINGAPORE — A recent parliamentary debate has thrust the Central Provident Fund (CPF) Life annuity scheme under the spotlight, with one Member of Parliament (MP) highlighting that when CPF members under the scheme die, the interest earned in their Retirement Accounts do not go to their beneficiaries.

On Monday (Feb 26), Workers' Party MP Louis Chua from the Sengkang Group Representation Constituency cited the CPF Board's website as stating that when CPF members pass away, the interest earned on the CPF Life premiums is not included in the amount that gets paid to beneficiaries after the death of the CPF member.

This is since the premiums are risk-pooled, a fundamental concept behind annuity schemes that enable members to get regular lifetime payouts, even if they live longer lives than expected.

Mr Chua said what this also means is that although the stated interest rate of the Special Account and the Retirement Account is identical, the actual yield earned by the two accounts “could not be more different”.

 

[highsulphur]

https://www.todayonline.com/singapo...nternal_sharetool_androidphone_29022024_today

SINGAPORE — A recent parliamentary debate has thrust the Central Provident Fund (CPF) Life annuity scheme under the spotlight, with one Member of Parliament (MP) highlighting that when CPF members under the scheme die, the interest earned in their Retirement Accounts do not go to their beneficiaries.

On Monday (Feb 26), Workers' Party MP Louis Chua from the Sengkang Group Representation Constituency cited the CPF Board's website as stating that when CPF members pass away, the interest earned on the CPF Life premiums is not included in the amount that gets paid to beneficiaries after the death of the CPF member.

This is since the premiums are risk-pooled, a fundamental concept behind annuity schemes that enable members to get regular lifetime payouts, even if they live longer lives than expected.

Mr Chua said what this also means is that although the stated interest rate of the Special Account and the Retirement Account is identical, the actual yield earned by the two accounts “could not be more different”.

Why are my tax dollars used to fund such discussion?