CPF SA Shielding hack - RIP (Obsolete)

[chong18]

Don't you have a fully paid for property to liquidate and move into a nursing home. Be prepared before dementia creep in.

That is provided still can sell by then, my HDB is about 15years younger than me. Say I'm 80 and need nursing home, my flat only left 34years lease

 

[BBCWatcher]

Without SA interest or shielding, my projected retirement income will be depleted earlier and at around age 90 I will have nothing left except for CPF life payouts which obviously is not enough even at ERS level.

I'm going to push back on this a bit. The 2025 ERS will be $426,000. You're also allowed to add more funds to your Retirement Account every time the ERS is raised. These added funds still earn the same interest rate SA does (did) and feed into life annuity income on that basis (not for profit, low overheads, fair actuarial curves).

Let's assume a female (to model the lower payouts) turns 55 next year (2025) and somehow (cash, OA) puts $426,000 in her Retirement Account within her 55th birthday month. Then she does nothing else (no further top ups or transfers into RA, which she could do) except start CPF LIFE Escalating Plan payouts at age 70 (the default starting payout age). That'll generate $3,240 dollars (2040 dollars) per month for life, escalating at 2%/year to fight inflation. If you pull that $3,240/month back to 2024 dollars (at 2%/year inflation) that's like $2,360/month in today's dollars. If you have a paid-up HDB flat with a leasehold that runs to age 105+ then $2,360/month isn't too bad, is it? It's not luxurious, but I think it's enough for a basic and dignified lifestyle.

However, if that's not enough, no problem. Just buy more than $426,000 (2025) worth of CPF LIFE. During the 15 year period from age 55 to age 70 you should get 14 more opportunities to add funds to a Retirement Account. Assuming a 3% increase each year that's $12,780 you can add in the first year alone. Moreover, you could extend that window and only spend part of you CPF LIFE payouts from age 70 to 75 (for example), plowing some dollars back into RA (tracking the ERS) to keep boosting payouts.

In other words, if you're concerned about savings exhaustion — and you should be! — just buy more CPF LIFE at age 55 and in some number of years thereafter, and "backload" the payout stream as much as you can (via the Escalating Plan mainly). Bridge to this CPF LIFE package using other assets, invested prudently.

I'm single and will definitely need to be in a nursing home at that age. Can last abit longer if there is SA. Too bad, hope I don't live so long.

CareShield Life payouts would help "top up" your CPF LIFE income in this event. I think that'd make the nursing home math work at least with a modest subsidy (not even the most aggressive subsidies).

My opinion is there shouldn't be any CPF for PRs. However as a concession they can make voluntary contribution to CPF or SRS for tax deductions.

Do that and you make SPRs much more attractive as employees compared to Singaporean citizens. You also increase the burdens on general taxpayers in the future. That's because a big majority of those SPRs become citizens, and those naturalized citizens will have that many more problems with underfunded retirements since they wouldn't have as many years of contributions.

The government has already hugely bifurcated CPF between SPRs and Singaporean citizens. Singaporean citizens routinely get free money deposited into their CPF accounts periodically. SPRs don't. Elderly Singaporean citizens often qualify for matching funds. SPRs don't. SPRs have much greater difficulties using OA dollars for housing. They can't buy HDB BTOs at all (not without a Singaporean citizen in the household) and resale flats only after 3 years, and with lots of other restrictions (like a separate quota hurdle and marriage requirement). They also pay higher ABSD than Singporean citizens. On top of all that their compulsory CPF contribution rates are lower for the first two years.

Also, a lot of SPRs (probably most of them) are the spouses of Singaporean citizens. Whack SPRs and you hurt gobs of Singaporean citizen-based households, too.

In short, CPF is already a fundamentally different (and somewhat less attractive) arrangement for SPRs than it is for otherwise similarly situated Singaporean citizens. There's no repair required here. It's already bifurcated, with more benefits going to Singaporean citizens.

 

[fr33d0m]

Without SA interest or shielding, my projected retirement income will be depleted earlier and at around age 90 I will have nothing left except for CPF life payouts which obviously is not enough even at ERS level. I'm single and will definitely need to be in a nursing home at that age. Can last abit longer if there is SA. Too bad, hope I don't live so long.

CPF LIFE is by no means a substitute for Long Term Care, which should be fulfilled by CareShield, however low it is.

I would suggest to beef up your CareShield if you look at long term care.

 

[chong18]

Ok I'm looking at $3k+ per month (2024 dollars), what I'm saying is this is not enough if I need to stay in a nursing home.

 

[fr33d0m]

My opinion is there shouldn't be any CPF for PRs. However as a concession they can make voluntary contribution to CPF or SRS for tax deductions.

CPF SA/OA/MA is a fair trade for everyone, PRs or citizens before age 55. The funds are locked with limit use and most are credited to low interest OA.

 

[fr33d0m]

Ok I'm looking at $3k+ per month (2024 dollars), what I'm saying is this is not enough if I need to stay in a nursing home.

Separate what's required for payment of nursing home, medical needs as well as living expense.

then cater for them separately. e.g. nursing home with CareShield, medical need with CPF MA and living expense with CPF LIFE.

 

[chong18]

Separate what's required for payment of nursing home, medical needs as well as living expense.

then cater for them separately. e.g. nursing home with CareShield, medical need with CPF MA and living expense with CPF LIFE.

I think i have set aside enough for living and medical expenses but not for nursing home. Care shield life payouts only $6-700 last I checked?

 

[aurvandil]

That is provided still can sell by then, my HDB is about 15years younger than me. Say I'm 80 and need nursing home, my flat only left 34years lease

If you are staying at a nursing home, you can always rent out your HDB instead of selling. The combined CPF Life + rental should be more than enough to cover your nursing home cost.

 

[aurvandil]

I'm going to push back on this a bit. The 2025 ERS will be $426,000. You're also allowed to add more funds to your Retirement Account every time the ERS is raised. These added funds still earn the same interest rate SA does (did) and feed into life annuity income on that basis (not for profit, low overheads, fair actuarial curves).

If you do the math on the current payouts, there is no subsidy in any of the CPF Life schemes. They are all negative expectations game using the current life tables published by DOS.

If life expectancy increases so that everyone lives to 90, there is no promise that the payouts will not be adjusted in the way they recently adjusted Medishield with respect to cancer.

 

[DevilPlate]

If you are staying at a nursing home, you can always rent out your HDB instead of selling. The combined CPF Life + rental should be more than enough to cover your nursing home cost.

same thought but who is gona help to rent it out?
Unless got good relatives around to help manage.

property agent job is to advertise and secure tenant only.
Cleaning, repair, maintenance etc LL goto BKL

I have a better suggestion....can apply for cheap 2rm comcare/flexi BTO and sell away current flat at around 65-70yo

 

[BBCWatcher]

Ok I'm looking at $3k+ per month (2024 dollars), what I'm saying is this is not enough if I need to stay in a nursing home.

That'd be enough to reside at some nursing homes in Singapore.

 

[aurvandil]

same thought but who is gona help to rent it out?
Unless got good relatives around to help manage.

property agent job is to advertise and secure tenant only.
Cleaning, repair, maintenance etc LL goto BKL

I have a better suggestion....can apply for cheap 2rm comcare BTO and sell away current flat at around 65-70yo

There are agents who help elderly landlords do that as part of their paid service.

 

[DevilPlate]

There are agents who help elderly landlords do that as part of their paid service.

few and between.

unless u know them personally....else they may charge like $100-200 for their service alone excluding any maintenance/repair works (trust is an issue too....some may jack up the repair cost for eg.)

 

[BBCWatcher]

If you do the math on the current payouts, there is no subsidy in any of the CPF Life schemes. They are all negative expectations game using the current life tables published by DOS.

I'm not exactly sure what you mean, but the CPF Board's actuaries aren't simply looking at Singapore's life tables and then going on extended vacations. They have to project the future mortality characteristics of participating CPF members. And those trends are favorable (or unfavorable in insurance risk terms). Singaporeans are progressively living longer. The skill involved is figuring out how much longer than the current life tables suggest (which are based on already dead people; you don't know how long people live until they're dead), but longer.

If life expectancy increases so that everyone lives to 90, there is no promise that the payouts will not be adjusted in the way they recently adjusted Medishield with respect to cancer.

As mentioned, they're already forecasting an increase above what the life tables naively suggest. They're probably going to get it spot on, or very nearly so. Actuaries tend to be really good at what they do.

However, let's suppose they're wrong and that enough Singaporeans live even longer lives than they're expecting. There are two options. One is that the payouts could be adjusted. This adjustment will be slight and gradual, because it won't take a lot of adjustment to pull the pool back to equilibrium. The other option (not mutually exclusive) is the government could inject some dollars into the pool. All of which isn't particularly important in context because you don't have any better options available when it comes to longevity insurance. As with so many other aspects of life "you just do the best you can," and CPF LIFE is the best Singapore dollar longevity insurance available.

 

[DevilPlate]

https://www.moh.gov.sg/healthcare-s...idies-for-residential-long-term-care-services

I heard one of my relatives paying less than $1k a mth for nursing home after subsidies.

 

[aurvandil]

I'm not exactly sure what you mean ...

I am dispelling the notion that CPF Life is highly subsidized and most people can expect to pull more out than they put in.

Based on existing life tables, it is negative expectations in the same way that playing blackjack or baccarat in a casino is negative expectations. They have not released their projected life tables taking into account increased longevity so we have no idea if the game is positive expectations using that set of tables. Given the generous amount they are retaining off current payouts, I strongly suspect that the game is still negative expectations using those life tables,

And in the unlikely event that the CPF actuaries get it wrong and CPF Life loses money, there is still the nuclear option of adjusting payouts

 

[chong18]

https://www.moh.gov.sg/healthcare-s...idies-for-residential-long-term-care-services

I heard one of my relatives paying less than $1k a mth for nursing home after subsidies.

If I own a 5-rm flat rented out, don't think will be eligible for a lot of subsidies. If the whole unit rental income can at least cover the nursing home cost then should be fine, at that age I will only need to buy food, medicine, diapers lol probably $2k in today's dollars sufficient.

 

[starlight318]

If I own a 5-rm flat rented out, don't think will be eligible for a lot of subsidies. If the whole unit rental income can at least cover the nursing home cost then should be fine, at that age I will only need to buy food, medicine, diapers lol probably $2k in today's dollars sufficient.

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.

 

[BBCWatcher]

Based on existing life tables, it is negative expectations in the same way that playing blackjack or baccarat in a casino is negative expectations.

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)?

They have not released their projected life tables taking into account increased longevity so we have no idea if the game is positive expectations using that set of tables. Given the generous amount they are retaining off current payouts, I strongly suspect that the game is still negative expectations using those life tables,

Evidence?

And in the unlikely event that the CPF actuaries get it wrong and CPF Life loses money, there is still the nuclear option of adjusting payouts

I'm now suffering from whiplash. You've just claimed the CPF Board's actuaries are being too pessimistic. But suddenly they're too optimistic?

Look, life insurance companies have been around for literally hundreds of years. Actuarial forecasting has been around almost as long. This isn't actually difficult stuff, especially when there's near-universal longevity risk pooling. The CPF Board has a good handle on this. If you want to make bold claims to the contrary you're going to need to provide some solid evidence.

If I own a 5-rm flat rented out, don't think will be eligible for a lot of subsidies.

Plus a CPF LIFE income stream, and you are correct. But you'll fine, even better than fine. You'll get the single room, the nicer hair cuts, and the chocolate under the pillow if you want it. (I'm joking a little, of course, but you should have some money left over to make your nursing home stay a nicer than average.)

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.

Absolutely. Nail down a nice CPF LIFE income stream (preferably escalating), own a modest HDB flat with a leasehold that runs to age 105 (that you can monetize in some way if need be), and you should be fine.

 

[henrylbh]

If I own a 5-rm flat rented out, don't think will be eligible for a lot of subsidies. If the whole unit rental income can at least cover the nursing home cost then should be fine, at that age I will only need to buy food, medicine, diapers lol probably $2k in today's dollars sufficient.

If sublet whole flat, got to forgo lot subsidies and handouts, including monthly S&CC and property tax at 10% of annual value and may still have to pay income tax with no earned income relief. Nevertheless, the net rental income plus CPF payout (based on ERS escalating) should enough. It's only when you start losing your mental faculty and physical abilities and health that cost become prohibitive. That's the agony of living a long life alone. If have adequate insurance, the premium will kill you when you reach 80+ to 90+ at a time when life takes a nose dive every passing year. But best is gong gong (senile/dementia) and knows nothing is truly bliss . My aunty at 92 yo fail to recognise relatives during this CNY. Lucky she got an adopted daughter and a helper and has one room to rent out.