CPF SA

[Gitaro]

yes, almost everyone i talk to advised me not to put $ into SA.

Hhaha then you should have spoken with me.I put max into SA and my wife's SA. Now both of us had FRS in RA which was transferred from SA. THere is also a healthy balance in our SA and OA where we can withdraw anytime (55 years of age).

End of the day, to each his own comfort level.

I personally find CPF Life is a good annuity plan. Imagine my wife and I getting close to $3000 a month till we mati, never mind if we have taken out all by the time we mati. Couple with other passive incomes (some more secured,some less) , we can enjoy out twilight years.

 

[crimsontactics]

Even when u retire, u dun spend $2k exactly every month. Probably some days u need more?

If u are not cash+investment rich and only rely on RA payout. What happens if u need more then $2k?

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Just because you have retired doesn't mean you don't need a 6 month emergency fund.

Retirement fund and emergency fund are 2 different things.

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[crimsontactics]

Its restrictive when end of the day u dun have enough cash saving or investments. And rely solely on the RA monthly payout.

www.dennislee.co HardwareZone Forums app

This problem main cause is lack of financial planning liao.

It can also happen if you're 100% into non-CPF.

The main reason for this is that your retirement fund is not big enough for your retirement.

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[crimsontactics]

Hhaha then you should have spoken with me.I put max into SA and my wife's SA. Now both of us had FRS in RA which was transferred from SA. THere is also a healthy balance in our SA and OA where we can withdraw anytime (55 years of age).

End of the day, to each his own comfort level.

I personally find CPF Life is a good annuity plan. Imagine my wife and I getting close to $3000 a month till we mati, never mind if we have taken out all by the time we mati. Couple with other passive incomes (some more secured,some less) , we can enjoy out twilight years.

Even tho I am pro-CPF, I find CPF Life lousier than the CPF RSS version as many of us just don't live that long.

So from a financial perspective, on average we will lose money with CPF Life.

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[crimsontactics]

Life after 40 is very uncertain.

Me 41 this year.

Especially during this covid situation, laying off, retrenchment is very real. Older + highly paid or older or highly paid staff is always first to go.

Ppl below 40 will not think this far cos u rarely see ppl in their 20s or 30s getting retrenched.


Give u a scenario,

Age 45 suddenly got retrenched. OA empty cos all pump to SA. Hdb still got 10-15 years. Where u find cash to top up OA to finance house? Assuming u on hdb loan. Even bank loan u still need to find cash to pay installment.

This situation is real for some out there.

www.dennislee.co HardwareZone Forums app

This one is really about financial planning liao.

If you feel insecure at 40+, you should use your younger years to build a bigger portfolio.

Retirement fund is not the same as emergency fund and both are important.

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[BBCWatcher]

Of course you should maintain reasonable, adequate liquidity. But there's a very, very high cost if you want to maintain unreasonable, excessive liquidity. If your objective is maximum liquidity, with no other considerations, then among other things you should never buy a home, especially not a HDB leasehold. Direct real estate holding is highly illiquid. You cannot even borrow against a HDB leasehold. There are only two ways to tap HDB leasehold equity: (1) sell the unit, or (2) if you qualify, the HDB Lease Buyback Scheme.

Please bear in mind that once your Retirement Account is at least decently funded your OA and SA become a "piggybank" from age 55 onward. (And on your 54th birthday "excess" OA+SA is basically like a 12 month fixed deposit.) Any more dollars that go into OA and SA you can withdraw at any time (in the reverse order). OA at 2.5% interest is currently clobbering every fixed deposit in Singapore, and SA at 4.0% interest is pretty incredible. These assets are also globally well protected from creditors and court judgments. These particular savings are fully liquid from age 55+...AND you're getting an incredible interest rate. What's not to like?

Also please bear in mind that the wealthier your future self is, the more liquidity you can safely tap today. That is to say the harder your savings work (even in a liquidity limited fashion), the more total wealth you have, and more total wealth is obviously quite helpful if you want to spend more. I'll use my household as an example. Here are the current, somewhat or very illiquid assets "in the pipeline," with the minimum penalty free availability ages noted:

1. Age 55: "excess" CPF SA+OA savings
2. Age 59 1/2: some retirement accounts
3. Age 62: Supplementary Retirement Scheme
4. Age 62: sovereign life annuity #1(*)
5. Age 65: sovereign life annuity #2(*)
6. ~Age 67: another long-term account
7. ~Age 71: sovereign life annuity #3(*)

All of these deals are great deals, but they do have liquidity and/or availability restrictions as part of the deal. So if that's my future (it is), am I free to spend more today? Yes, absolutely! I have greater effective liquidity today. Greater total wealth, even if it's arrayed across the future like that, means greater achievable, realizable enjoyment across every age. I recommend it if you're able.

(*) I plan to defer these income streams as long as allowed. Plans can change, of course, but that's the plan.

 

[BBCWatcher]

Even tho I am pro-CPF, I find CPF Life lousier than the CPF RSS version as many of us just don't live that long.
So from a financial perspective, on average we will lose money with CPF Life.

First of all, no, this is an actuarially fair bet. The median experience is engineered to be neutral.

Second, no, not if you understand how to exploit the power of a foundational life annuity from a very reliable provider. Specifically, it gives you the freedom and ability to tweak your savings and investments to be a little more aggressive (and a little higher yielding), increasing total wealth with high probability.

Take a look at my household's pipeline for reference. OK, given that reality, how do you think I can manage my investment allocations today? More powerfully is the answer. It's pretty magical, really. Try some!

 

[Gitaro]

Even tho I am pro-CPF, I find CPF Life lousier than the CPF RSS version as many of us just don't live that long.

So from a financial perspective, on average we will lose money with CPF Life.

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This one I am not too sure. I guess the trade off is perceptual payment with some certainty albeit not inflation proof.

In life, I dont want to calculate to the last dollars if I made or if I lost.
If I cannot consume the amount in my FRS, and the balance is pooled to provide for others who have longer longevity than me, then I take it as a form of national service of returning some to the society. The society from which I grew up and enjoyed the benefits.

 

[crimsontactics]

This one I am not too sure. I guess the trade off is perceptual payment with some certainty albeit not inflation proof.

In life, I dont want to calculate to the last dollars if I made or if I lost.
If I cannot consume the amount in my FRS, and the balance is pooled to provide for others who have longer longevity than me, then I take it as a form of national service of returning some to the society. The society from which I grew up and enjoyed the benefits.

Personally, I prefer the Gov to go back to CPF RSS.

Then after 85 give us $1,200 a month in 2020 terms. If we can live that long, I think reasonable for Gov to step in to fund our remaining years.

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[Kaypohji]

If u live until 80 plus and assume u start cpf payout at 65, I think cpf life still pretty worth it?

And it will also have some remaining left for your children.

Doesn’t sound like a losing deal to me ?

 

[crimsontactics]

If u live until 80 plus and assume u start cpf payout at 65, I think cpf life still pretty worth it?

And it will also have some remaining left for your children.

Doesn’t sound like a losing deal to me ?

You have to live till 90 to break even with CPF Life...

With CPF RSS, you will break even at any age as your RA can be given to your children...

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[chrisloh65]

Previously some people calculated that breakeven is about 86 for CPF standard and 92 for CPF Basic. If you die before those age, you lose money.

You may want to calculate again base on latest figures.

If u live until 80 plus and assume u start cpf payout at 65, I think cpf life still pretty worth it?

And it will also have some remaining left for your children.

Doesn’t sound like a losing deal to me ?

 

[lifeafter41]

Life after 40 is very uncertain.

Me 41 this year.

Especially during this covid situation, laying off, retrenchment is very real. Older + highly paid or older or highly paid staff is always first to go.

Ppl below 40 will not think this far cos u rarely see ppl in their 20s or 30s getting retrenched.


Give u a scenario,

Age 45 suddenly got retrenched. OA empty cos all pump to SA. Hdb still got 10-15 years. Where u find cash to top up OA to finance house? Assuming u on hdb loan. Even bank loan u still need to find cash to pay installment.

This situation is real for some out there.

www.dennislee.co HardwareZone Forums app

Vulnerable is the word here.
Understand where you are coming from.

Been there......

 

[Jordan]

Previously some people calculated that breakeven is about 86 for CPF standard and 92 for CPF Basic. If you die before those age, you lose money.

You may want to calculate again base on latest figures.

I know where you are coming from. We can't really choose when to get sick and eventually go. But just hope the whatever decisions we make today, it won't end up one day yourself need to pick cardboard and beg for money from Govt. If really go before that, then treat it as a bequeath to our future generation. In fact, I intend to top up SA for my two children once I got spare cash. You can't bring the money to your grave anyway.

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[henrylbh]

One thing I learn about cpf is there is no point trying to argue the merits or flaws of it with another person.

Everyone's view is pretty much set

Agree with what you said. But some don't much about CPF and just let it be (to their disadvantage).

 

[Jordan]

1. Age 55: "excess" CPF SA+OA savings
2. Age 59 1/2: some retirement accounts
3. Age 62: Supplementary Retirement Scheme
4. Age 62: sovereign life annuity #1(*)
5. Age 65: sovereign life annuity #2(*)
6. ~Age 67: another long-term account
7. ~Age 71: sovereign life annuity #3(*)

Just out of curiosity, which products did you buy or intend to buy for your life annuity #1, 2 and 3? Think I have to start looking at that too.

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[Kaypohji]

Does breakeven take into consideration of the bequest?

I was using npv to calculate the payout compared to the amount ‘invested’ which is frs. it was a good deal... hmm let me calculate again

Previously some people calculated that breakeven is about 86 for CPF standard and 92 for CPF Basic. If you die before those age, you lose money.

You may want to calculate again base on latest figures.

 

[8zaoyu]

Personally, I prefer the Gov to go back to CPF RSS.

Then after 85 give us $1,200 a month in 2020 terms. If we can live that long, I think reasonable for Gov to step in to fund our remaining years.

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Do not complain. As of this year 2020, the FULL retirement sum is $181k for the current year 55 years olds to draw down monthly pocket allowance from their reaching 65 till the average age of males/females death ages.They have experts in "Actuarial Science" a form of prediction maths ? based on local population how many males or females dying statistics - so that this figure 181k will ALL be given out till their death ages. The interests are collected for long life people. How can govt fund without thinking of taxes, SG is first in the world to have COEs etc, if not everyone have to pay high income taxes, GSTs . Note -The figure 181k FRS increase every year - due to inflation. The old Retirement Sum Schemes is for the oldies, and their salary schemes were much lower then.They/Govt will worry once their Retirement Sums reach say 85 and some may or not have bankrupted in their investments/properties, demented but still living.... No more to draw down if not for CPFLife......

 

[chrisloh65]

Yes, take into consideration of the bequest payout.
The "breakeven" definition they use I think means if you die before 92 years old (for CPF basic), then you do not get all the money that is originally supposed to be yours back.

You can see here for old calculations:

https://make-money-secrets.blogspot.com/2014/08/cpf-life-annuity-return-calculation-for_29.html

https://make-money-secrets.blogspot.com/2014/08/cpf-life-annuity-return-calculation-for.html

CPF Life give their payout and bequest in a range, so above calculations use range, but don't think we can get the high range for payout and bequest right? Should use average then.

Does breakeven take into consideration of the bequest?

I was using npv to calculate the payout compared to the amount ‘invested’ which is frs. it was a good deal... hmm let me calculate again

 

[henrylbh]

If u live until 80 plus and assume u start cpf payout at 65, I think cpf life still pretty worth it?

And it will also have some remaining left for your children.

Doesn’t sound like a losing deal to me ?

For sure. Those who lived till about 80 (with bequest) will have to leave some of their money to those who live above 90.