CPF SA

[BBCWatcher]

With Basic, a larger bequest might allow loved ones to recover money they contributed toward your large medical bills (often the case near EOL).

There’s absolutely no guarantee of that from CPF LIFE, and the residual fades to black every month once payouts start. The simple fact is that CPF LIFE is very poorly designed as a bequest delivery vehicle because it isn’t really designed for that purpose. It could hypothetically be designed for that role by providing a payout plan combined with a guaranteed residual, periodically adjusted automatically for inflation.(*) It doesn’t today. All the payout plan residuals fade once payouts start and fade to black if you simply live long enough.

So if you want to guarantee a particular bequest — or, better yet, lifetime gifts — then I wouldn’t try to use the tool that isn’t well designed to do that. I’d use another tool, then use the CPF LIFE tool to defend that other tool. Or is that too logical and sensible?

This is the tail end of the retirement “smile” - which describes the tendency for higher spend in early retirement (go-go years), lower spend in the middle (slow-go), and higher spend at the end (no-go).

By sheer coincidence there’s a plan for the more difficult half of the smile: the Escalating Plan.

When I read the blogposts outside, their argument against Basic is that kids should take care of themselves... but they never mention the surviving spouse. This is the main consideration in our case, especially pre-90’s since our equity portfolio wouldn't have had as many years to grow.

Right, agreed, which is why I think there should be a “Partner Plan.” However, all the problems of fade-to-black residuals still apply with surviving spouses/partners. The best available way to protect a spouse/partner, I think, is to make sure there’s relative balance in single life annuity income streams if that’s all you’ve got to pick from. And each spouse/partner might make different payout plan decisions depending on age and circumstances.

(*) The CPF Board could hypothetically do this fairly straightforwardly if they allowed you to set aside, for example, up to $20,000 of Retirement Account funds at any time before CPF LIFE payout start as long as the payout amount is still at least FRS level (or BRS level with property pledge), analogous to what’s now allowed with OA when taking a HDB loan. But we have the CPF we have, not that one.

 

[celtosaxon]

Not sure about majority but I am for the idea to give as little to the pool as possible. I would be laughing if I can live until 70.....

I think what you are saying is you want as little longevity insurance as possible.

And as with any insurance, if you can afford to self-insure, the chances are better than 50/50 that you end up with more in the end (otherwise insurance companies wouldn’t make money).

 

[BBCWatcher]

And as with any insurance, if you can afford to self-insure, the chances are better than 50/50 that you end up with more in the end (otherwise insurance companies wouldn’t make money).

Not-for-profit insurance pools with low cost structures (for example, a low cost of capital) are notable exceptions.

Also, I'm not sure why someone who is convinced he/she won't live to see age 70 would worry about the CPF Lifelong Income Fund. Zero dollars go into the CPF Lifelong Income Fund if you die any time before age 70 and simply do nothing. For you, a CPF Retirement Account is a weirdly high yielding (4.0% plus bonus interest) Singapore dollar "bequest bond." If you want a bequest bond, or want more of it, then make a CPF nomination, just keep shoving cash into your CPF RA (except the portion you need to live on), and die approximately on schedule. That all works very well indeed, financially anyway.

 

[celtosaxon]

So if you want to guarantee a particular bequest — or, better yet, lifetime gifts — then I wouldn’t try to use the tool that isn’t well designed to do that. I’d use another tool, then use the CPF LIFE tool to defend that other tool. Or is that too logical and sensible?

I view our equity portfolio as the best weapon against longevity and inflation. If we choose Standard and one spouse is lost in year 15 of our retirement... guaranteed income drops by half, bequest is zero. The surviving spouse now needs to prematurely raid the equity portfolio which could compromise the remainder of their retirement. This doesn’t seem like a desirable outcome.

 

[iceblendedchoc]

This is just like insurance plan. One person cannot live till 70 does not make a impact to the whole company (CPF).

Also, remember if you cannot live till 70. It does not means your money is gone. You family can have it. If you don't have family to enjoy it, let's return this money to the society and those who need it!

Not really.

CPF Life does not act like RSS. CPF Life does retain a % of your money to the pool to society. If you live long, you benefit more, if your life is short, you benefit less in terms of payouts vs money thrown in.

I went to a few CPF seminars talk on CPF Life. The advisor mentioned you win some or lose some in this sort of things. And yes, it is more of a social good.

PAP really very smart , ask all the oldies to fund their own retirement and other oldies like this using mortality rate.

 

[iceblendedchoc]

before this i am not sure. i only know that there are more in hardwarezone that supports than oppose.

the fact that few like the idea of the single annuity cpf life scheme means that most of us are on the same page.

and welcome to the cpf life basic club

I would prefer the RSS scheme over CPF Life but too bad i am not born before 1958. The only way i can join RSS is to have less than 60,000 in my RA. I think that is hard to reach.

 

[iceblendedchoc]

I think what you are saying is you want as little longevity insurance as possible.

And as with any insurance, if you can afford to self-insure, the chances are better than 50/50 that you end up with more in the end (otherwise insurance companies wouldn’t make money).

yup definitely. CPF Life is good for some people generally as they sort of prevent the lowest income not to have some money when they retire. CPF Life is also designed for the lowest income in mind.

I do wish they ramp up some options for people who want something better and bigger than ERS.

 

[BBCWatcher]

I view our equity portfolio as the best weapon against longevity and inflation. If we choose Standard and one spouse is lost in year 15 of our retirement... guaranteed income drops by half, bequest is zero.

No, not quite zero. There is still a bequest (residual) in that event: the additional uplifted payment amount above the Basic Plan payouts that's plowed back into CPF RA. If that's $100/month for 15 years that's $18,000 plus compounded 4.0%/year interest on that plowback. For example. And/or you've got a higher payout amount that's that much more resilient to cash flow issues and at least reduces drawdown of other assets.

"It's a bit more complicated."

Like I said, I'd prefer a "Partner Plan." But that doesn't exist, so.... Well, we'll see. Certainly I'm making sure that both of us have our own, well funded retirement income streams. At the moment I'm thinking of doing something "crazy": topping up to the ERS at 55, topping up again every ERS increase thereafter, deferring to age 70, choosing the Escalating Plan, and plowing back every dollar allowed into the Retirement Account. (Because I don't need the payout or at least don't plan to need it, nor do my heirs, so the highest best purpose it can serve is maximum longevity insurance in character.) But this is not for everyone. Said another way, what's not to like about this very special bond that's yielding 3.X% on its worst day? I'll buy as much as allowed, thanks very much.

The surviving spouse now needs to prematurely raid the equity portfolio which could compromise the remainder of their retirement. This doesn’t seem like a desirable outcome.

Or everyone raids the equity portfolio that much more for those 15 years.

There's no "free lunch" here.

 

[dork32]

No, not quite zero. There is still a bequest (residual) in that event: the additional uplifted payment amount above the Basic Plan payouts that's plowed back into CPF RA. If that's $100/month for 15 years that's $18,000 plus compounded 4.0%/year interest on that plowback. For example. And/or you've got a higher payout amount that's that much more resilient to cash flow issues and at least reduces drawdown of other assets.

look at this para. this is how bbc analyze things.very one sided and very wrong. 100 per month compounded at 4% for 15 years = 18k. wah so much money!!

What he did not mention is that if you are on the basic the bequest is 140k. you still want to believe in bbc? may he should spend more time watching bbc than scamming people here.

anything below age 80, standard and escalating is a total waste of time.

 

[dork32]

Like I said, I'd prefer a "Partner Plan." But that doesn't exist, so....

and he is telling people not to waste time on rss because it does not exist. i dont see any of the politicians suggesting this plan either.

i have already mentioned so many times, every thing has its cost. lets say payout at 65 for frs standard is 1300. if you want the payout to continue as long as either spouse is alive, do you the payout will remain at 1300? it will definitely be less maybe by 100. and remember wat was mentioned if the payout is 100 less. you will be an elderly destitute.

 

[dork32]

NAt the moment I'm thinking of doing something "crazy": topping up to the ERS at 55, topping up again every ERS increase thereafter, deferring to age 70, choosing the Escalating Plan, and plowing back every dollar allowed into the Retirement Account. (Because I don't need the payout or at least don't plan to need it, nor do my heirs, so the highest best purpose it can serve is maximum longevity insurance in character.) But this is not for everyone. Said another way, what's not to like about this very special bond that's yielding 3.X% on its worst day? I'll buy as much as allowed, thanks very much.

you are right. it is a crazy idea. coz it will not work. you cannot put anything you like into the ra. you can only put only the ers increase. ers increase by 4k a year. your escalating payout is close to 2k per month.

take out already of course cannot put back. if you do that then it is defering the payout to 80, 85, 90.

 

[dork32]

let be do an analysis on delaying your payout to 70 vs 65 on a standard plan

tan ooi boon says
payout on ers at 65 is 2400 per month
payout on ers at 70 is 3200 per month

i find the future value of 2400 per month or 28.8k per year for 5 years at a reinvestment rate of 4%. 4% is mentioned by bbc. value at 70 is 156k.

at 70, the difference is payout 800 or 9600 per year. i calculate the present value of this 9600 for many years at also the reinvestment rate of 4%. it will take 27 years for this 9600 to make 156k.

in other words at a reinvestment rate of 4% it takes 27 years for the 800 per month to catch up with the 156k.

27 +70 = 97 years old.

you still want to defer to 70 if you are on standard?

 

[Kaypohji]

This is detailed. Thanks for the numbers

Ya 65 is definitely better

I guess same principle applies across all plans?

Actually why all of u all target frs ? Is it because ers is very hard to reach? Would brs be better than frs ?

let be do an analysis on delaying your payout to 70 vs 65 on a standard plan

tan ooi boon says
payout on ers at 65 is 2400 per month
payout on ers at 70 is 3200 per month

i find the future value of 2400 per month or 28.8k per year for 5 years at a reinvestment rate of 4%. 4% is mentioned by bbc. value at 70 is 156k.

at 70, the difference is payout 800 or 9600 per year. i calculate the present value of this 9600 for many years at also the reinvestment rate of 4%. it will take 27 years for this 9600 to make 156k.

in other words at a reinvestment rate of 4% it takes 27 years for the 800 per month to catch up with the 156k.

27 +70 = 97 years old.

you still want to defer to 70 if you are on standard?

 

[dork32]

This is detailed. Thanks for the numbers

Ya 65 is definitely better

I guess same principle applies across all plans?

Actually why all of u all target frs ? Is it because ers is very hard to reach? Would brs be better than frs ?

a few important point. i took the 2400 and 3200 from a Straits times write. i did not verify the number. this is wat he wrote.
"Take a member who plans to set aside the maximum retirement amount of $288,000 in 2022. If he takes the payout at 65, he will get an estimated $2,400 a month. But if he does so at 70, he will get over $3,200."

second point if you are on basic, delaying to 70 may be a good idea. yes, the payout many years to catch up. but if you are looking at basic, payout is only half the story. the other significant half is bequest. so if the payout is low, bequest is high.

i used to focus solely on the payout for basic, until ocswoodlands told me that i should add the bequest + payout. so if you consider the two together, it could be a wise choice to delay.

one more thing. people on basic is hoping to die before 85. hence bequest is a very important point to us.

 

[Kaypohji]

Hmm actually if that’s the case... would brs even better? Then u leave the remainder in sa to continue to earn 4% fixed. Since the annuity doesn’t really kick in until ur brs drains out so basically u r drawing down from ur basic sum also

i used to focus solely on the payout for basic, until ocswoodlands told me that i should add the bequest + payout. so if you consider the two together, it could be a wise choice to delay.

one more thing. people on basic is hoping to die before 85. hence bequest is a very important point to us.

 

[dork32]

Hmm actually if that’s the case... would brs even better? Then u leave the remainder in sa to continue to earn 4% fixed. Since the annuity doesn’t really kick in until ur brs drains out so basically u r drawing down from ur basic sum also

initially my idea was this is not possible. this is how the thing work

at 55, ra with frs is formed. it draws money from your sa and oa. after it is formed, you can decide on frs or brs. if you choose brs, the cash will be drawn from the ra. it cannot return to your sa.

building on kaypoh's idea, can this thing work?

shield sa and oa before 55 leaving just brs in oa + sa.
at 55 ra formed with brs.
choose brs
unshield and sa is puffed up again.
can this work?

if can this trick may be useful to me.
although i 200k in my oa, my bank loan is 500k. i dont want my oa to be locked into ra coz i can use it to repay my loan. and everyone knows that sa is better than ra after 55.

 

[iceblendedchoc]

a few important point. i took the 2400 and 3200 from a Straits times write. i did not verify the number. this is wat he wrote.
"Take a member who plans to set aside the maximum retirement amount of $288,000 in 2022. If he takes the payout at 65, he will get an estimated $2,400 a month. But if he does so at 70, he will get over $3,200."

second point if you are on basic, delaying to 70 may be a good idea. yes, the payout many years to catch up. but if you are looking at basic, payout is only half the story. the other significant half is bequest. so if the payout is low, bequest is high.

i used to focus solely on the payout for basic, until ocswoodlands told me that i should add the bequest + payout. so if you consider the two together, it could be a wise choice to delay.

one more thing. people on basic is hoping to die before 85. hence bequest is a very important point to us.

THe one in bold is really useful for those choosing BRS and really do not need the payout at 65 so it make sense to delay as long as possible.

 

[dork32]

Hmm actually if that’s the case... would brs even better? Then u leave the remainder in sa to continue to earn 4% fixed. Since the annuity doesn’t really kick in until ur brs drains out so basically u r drawing down from ur basic sum also

my view of basic vs standard is this:

for basic, there is a big emphasis on the total sum in the ra. like wat bbc is advocating about drawing at 70: if i dont draw, i earn 4%. so keeping the ra intact for long period will make the total sum grow and grow. so if i am on basic, i would not be anxious to draw it down to 0.

for standard, there is no point keeping the total sum coz it does not earn interest. so i would want to quickly draw it to 0. it is then that i can benefit from the scheme.

 

[dork32]

building on kaypoh's idea, can this thing work?

shield sa and oa before 55 leaving just brs in oa + sa.
at 55 ra formed with brs.
choose brs
unshield and sa is puffed up again.
can this work?

if can this trick may be useful to me.
although i 200k in my oa, my bank loan is 500k. i dont want my oa to be locked into ra coz i can use it to repay my loan. and everyone knows that sa is better than ra after 55.

to illustrate what i mean:

eg i have 200k oa and 200k sa at 54 and brs is 90k.
i shield 150k oa and 160k sa
so i have oa 50k and sa 40k
ra formed with 90k left.
i choose brs.
i unshield. so i have 150k in oa, 160k in sa and 90k in ra.
oa and sa can be completely after this.

 

[The_Davis]

a few important point. i took the 2400 and 3200 from a Straits times write. i did not verify the number. this is wat he wrote.
"Take a member who plans to set aside the maximum retirement amount of $288,000 in 2022. If he takes the payout at 65, he will get an estimated $2,400 a month. But if he does so at 70, he will get over $3,200."

second point if you are on basic, delaying to 70 may be a good idea. yes, the payout many years to catch up. but if you are looking at basic, payout is only half the story. the other significant half is bequest. so if the payout is low, bequest is high.

i used to focus solely on the payout for basic, until ocswoodlands told me that i should add the bequest + payout. so if you consider the two together, it could be a wise choice to delay.

one more thing. people on basic is hoping to die before 85. hence bequest is a very important point to us.

Good life hack on basic + 70

But the part on hoping to die before 70