CPF SA

[dork32]

If there is no bequest left, then whatever interest rate doesn’t matter.. no? When the basic sum runs out with interest, the annuity then kicks in etc... but no need to know the mechanism behind I feel? Because it’s not like we can alter the mechanism. We can only decide which plan we want with which payout... not say u have a choice to tell them I want annuity to kick in first and leave my other 80% intact etc

this is what i meant all the while. it is when the bequest runs out that the complicated calculations of xirr needs to be done.

maybe you and me are different. some people can accept the xirr black box, the cpflife estimator black box. i would like to know how these numbers are determined.

I am able to calculate xirr without the xirr function with pen, paper and calculator (it will be very tedious though). that is i know the maths behind it. i dont blindly accept black box functions.

 

[dork32]

First thing, you need to add the interest earned from age 55-65. Currently for RA, that will generally be 6% on the first $30k, 5% on the next $30k and 4% on the rest. That would bring the $181,000 up to $278,730 for the annuity at age 65. If you want confirmation of this, look at the bequest chart from CPF, you will see at age 65 it is not $181k but between $250-300k.

Next, for Standard, the bequest each year is equal to the invested amount less any payments made. In other words, payments+bequest will be equal what you put in, or 0% IRR (until exhausted).

I would estimate payments of $1,430 or $17,160 per year in this scenario (because of the higher interest in RA earlier). That means the bequest runs out right after you turn 80 (same as the bequest chart shows) and after that the IRR% should be roughly 2.5% by 86, 3.1% by 88, 3.6% by 90, 4% by 92 and 4.5% by 95.

although the number are wrong, kaypoh is not wrong to start his calculations at 55. this was done by some unfair mod sometime ago.

in fact starting at 55 is relevant to many of us. this is because we have a decision to make at 55: ers, frs or brs. you will have to look at the irr from 55onwards. if the overall numbers looks ok. you may want to pump more in at 55.

starting at 65 also has it advantages. it confirms that standard do not receive any interest in that the xirr is 0 for the first 15 years. it confirms how lousy the scheme is in the early years. if you start at 55, this number will be averaged out by the interest from 55 to 65

 

[BBCWatcher]

it confirms that standard do not receive any interest in that the xirr is 0 for the first 15 years. it confirms how lousy the scheme is in the early years. if you start at 55, this number will be averaged out by the interest from 55 to 65

You could take the portion of the Standard Plan payout above the Basic Plan payout (the delta), reinvest it in something, and generate secondary (but quite real) net returns. In short, IRR comparisons only get you so far.

 

[dork32]

You could take the portion of the Standard Plan payout above the Basic Plan payout (the delta), reinvest it in something, and generate secondary (but quite real) net returns. In short, IRR comparisons only get you so far.

two points to counter this rubbish argument

1. yes. so smart. know how to invest your money. if the investment is so good, why waste time on the cpf life. might as well as go for brs, quickly take out everything and invest is the whatever fantastic product.

2. to decide which is a better, cpf life or bbc investment, i will want to compare. if cpf life is better, i will choose basic, if bbc is better, i will take all out and put it to bbc. how do we compare again? long live irr.

irr is one great investment tool. now bbc wants to rewrite text books.

 

[dork32]

You could take the portion of the Standard Plan payout above the Basic Plan payout (the delta), reinvest it in something, and generate secondary (but quite real) net returns. In short, IRR comparisons only get you so far.

bbc will want to rebut everything i state. he is like wat wp mentioned. oppose of the sake of opposing.

 

[dork32]

one more thing the socalled delta is only 100+ a month. tell which wonderful investment tool allows investment of 100 a month at 65. probably some of those lousy insurance scheme.

 

[maple96]

bbc will want to rebut everything i state. he is like wat wp mentioned. oppose of the sake of opposing.

"Leopard cannot change its spot"

 

[BBCWatcher]

1. yes. so smart. know how to invest your money. if the investment is so good, why waste time on the cpf life. might as well as go for brs, quickly take out everything and invest is the whatever fantastic product.

If you’re going to compare two or more alternatives in any serious, credible way, then you’d obviously want to assess the cash flow differences. Static IRR-based comparisons don’t capture this important detail.

The Basic Plan offers a certain cash flow. If you want a higher cash payout every month, the Standard Plan offers that. To offer an honest, accurate view of returns you have to assign some non-zero value to the higher payout increment. That’s only fair and reasonable.

one more thing the socalled delta is only 100+ a month. tell which wonderful investment tool allows investment of 100 a month at 65. probably some of those lousy insurance scheme.

There are very reasonable choices. For example, a member could plow the deltas straight back into CPF. They would then be either AMPs or increases in CPF LIFE payouts and residuals. (Then these progressively higher deltas are also plowed back in. Thus these deltas all end up going to your residual, which is interesting because it means the Standard Plan will always maintain some residual — an escalating one if you live long enough — at a Basic Plan equivalent payout level.) A member could alternatively plow the deltas into a bond fund such as MBH via FSMOne’s Regular Savings Program or POSB Invest-Saver. But either way there are some IRRs here, controlling for equal payout amount — which is only fair since the Basic Plan would not be a valid choice if it didn’t provide sufficient monthly income. So you take the difference between the payout streams, reinvest that difference, then compare IRRs and residuals.

 

[maple96]

Now all the rubbish maths and opinions start flying around?

Who wrote the rubbish maths?

Who wrote all the rubbish opinions?

Who wrote rubbish opinions suggesting factors/criteria which will help u choose the right CPF Life Plan but never share how they apply those factors/criteria to make their own choice of CPF Life Plan and why they choose which plan?

Why are these considered rubbish opinions?

1. Based on their own personal situation/circumstances?
2. Based on what they know only?
3. Based on what they dunno?
4. Based on their own conscious and subconscious assumptions?
5. Always want to craft a standard mould to fit everyone into their one and only one perfect route to rome!

akan datang

Now all the opinions start flying again? What else u dunno what u dunno?

 

[celtosaxon]

You could take the portion of the Standard Plan payout above the Basic Plan payout (the delta), reinvest it in something, and generate secondary (but quite real) net returns. In short, IRR comparisons only get you so far.

Valid point. IRR and it’s date exact cousin XIRR are internal rates of return, that means it calculates the returns in a vacuum, without considering anything external such as the opportunity costs of taking the lower payment.

I had dismissed this because the difference didn’t seem material, but I should do the math. I believe the highest risk free rate of return available should be used in this case.

 

[maple96]

There are very reasonable choices. For example, a member could plow the deltas straight back into CPF. They would then be either AMPs or increases in CPF LIFE payouts and residuals. (Then these progressively higher deltas are also plowed back in. Thus these deltas all end up going to your residual, which is interesting because it means the Standard Plan will always maintain some residual — an escalating one if you live long enough — at a Basic Plan equivalent payout level.) A member could alternatively plow the deltas into a bond fund such as MBH via FSMOne’s Regular Savings Program or POSB Invest-Saver. But either way there are some IRRs here, controlling for equal payout amount — which is only fair since the Basic Plan would not be a valid choice if it didn’t provide sufficient monthly income. So you take the difference between the payout streams, reinvest that difference, then compare IRRs and residuals.

"lang ni zi yu far hui"

So is your above proposal (oops taken from another discussion thread, someone else's idea) better than your previous hardsell to choose your one and only one perfect route to rome, ie the Escalating Plan?

 

[celtosaxon]

bbc will want to rebut everything i state. he is like wat wp mentioned. oppose of the sake of opposing.

Nobody has all of the knowledge. The whole point of this forum to learn and share. Making points and counterpoints is valuable, let’s not take it personally. If we can prove things mathematically, or using other evidence, we can uncover valuable insights that all of us can benefit from. In this case, the opportunity cost of lower payments can be calculated. Will it result in anything significant? Let’s see.

 

[dork32]

If you’re going to compare two or more alternatives in any serious, credible way, then you’d obviously want to assess the cash flow differences. Static IRR-based comparisons don’t capture this important detail.

The Basic Plan offers a certain cash flow. If you want a higher cash payout every month, the Standard Plan offers that. To offer an honest, accurate view of returns you have to assign some non-zero value to the higher payout increment. That’s only fair and reasonable.

nobody argues that standard gives a higher payout. i have mentioned. cpf is another investment tool. cash flow is never a problem for me. i am looking for good returns.

if the delta of 100 makes a hell of a difference in your life, go ahead and get it. i will not go into it.

 

[maple96]

nobody argues that standard gives a higher payout. i have mentioned. cpf is another investment tool. cash flow is never a problem for me. i am looking for good returns.

if the delta of 100 makes a hell of a difference in your life, go ahead and get it. i will not go into it.

He always tell forumers here dun play games or become poor/destitute, now what games are he teaching, to defeat his Escalating Plan?

 

[dork32]

There are very reasonable choices. For example, a member could plow the deltas straight back into CPF. They would then be either AMPs or increases in CPF LIFE payouts and residuals. (Then these progressively higher deltas are also plowed back in. Thus these deltas all end up going to your residual, which is interesting because it means the Standard Plan will always maintain some residual — an escalating one if you live long enough — at a Basic Plan equivalent payout level.) A member could alternatively plow the deltas into a bond fund such as MBH via FSMOne’s Regular Savings Program or POSB Invest-Saver. But either way there are some IRRs here, controlling for equal payout amount — which is only fair since the Basic Plan would not be a valid choice if it didn’t provide sufficient monthly income. So you take the difference between the payout streams, reinvest that difference, then compare IRRs and residuals.

this is ultimate. you choose standard, take out 100 more to put into amp to earn 4% while your principal of hundreds of thousands is not earning anything. why not just leave in basic and the principal earn the 4%?

second is fsmone and investsaver is so good, then we should start 65,get the money out and put it into these tools. why are you telling people to keep it till 70 to withdraw? then you will have the full 1.3k to reinvest. contradictions after contradictions

i am not arguing about 65 or 70 drawdown. i believe to each its own. you can invest well, draw down at 65 and start investing. you cannot, leave it to 70.

 

[dork32]

Nobody has all of the knowledge. The whole point of this forum to learn and share. Making points and counterpoints is valuable, let’s not take it personally. If we can prove things mathematically, or using other evidence, we can uncover valuable insights that all of us can benefit from. In this case, the opportunity cost of lower payments can be calculated. Will it result in anything significant? Let’s see.

fully agree. you see maple coming in time and again to bomb me. did i shoot back. yes, i do make mistakes. when people point it out, i am ok.

but bbc just wants to drive his crazy ideas into everyone. he just hits out even if there is no argument to it. eg there is no argument that irr for basic is better. he just want to argue that it is not

and just in case you want to know, there is a formula for reinvestment rate for irr. it is called mirr.

and for your information. xirr is not the cousin for irr. it is the same thing. xirr allows cash flow at variable intervals. irr allows cash flow at fixed interval. the maths behind it is exactly the same.

 

[SkyNinja]

U all crunch so much numbers for what?

Simple tip is max out SA and max out MA as early as possible. Enjoy the fruits at age 55.

 

[dork32]

U all crunch so much numbers for what?

Simple tip is max out SA and max out MA as early as possible. Enjoy the fruits at age 55.

crunch number for two reasons.

one. to evaluate the system. if it is good, give some points to the garmen. if it is bad deduct points.

two. there are choices along the way. to evaluate which choice best suits me.

max out sa will be a good choice if you have lots of spare cash. there are a lot of things that money can buy at young age.

 

[Kaypohji]

Ya cash is needed to start family etc
Even for investment, I think can take a bit more risk when younger for higher returns

crunch number for two reasons.

one. to evaluate the system. if it is good, give some points to the garmen. if it is bad deduct points.

two. there are choices along the way. to evaluate which choice best suits me.

max out sa will be a good choice if you have lots of spare cash. there are a lot of things that money can buy at young age.

 

[celtosaxon]

this is ultimate. you choose standard, take out 100 more to put into amp to earn 4% while your principal of hundreds of thousands is not earning anything. why not just leave in basic and the principal earn the 4%?

second is fsmone and investsaver is so good, then we should start 65,get the money out and put it into these tools. why are you telling people to keep it till 70 to withdraw? then you will have the full 1.3k to reinvest. contradictions after contradictions

i am not arguing about 65 or 70 drawdown. i believe to each its own. you can invest well, draw down at 65 and start investing. you cannot, leave it to 70.

It’s always good to validate our instincts. I have completed two simulations, investing the difference between Basic and Standard at a compounded 2% and 4% rate. Both add a small fraction of a percent, but not enough to move the needle. I don’t think anyone was expecting that it would.

I think we can all agree that the combination of payments and bequest from the Basic plan generates the highest rate of return on the original principle invested in the annuity for the 2 out of 3 members who don’t make it to age 90. That doesn’t mean everyone should choose Basic. And it doesn’t mean highest rate of return is the only thing that matters in the decision of which plan to choose.

There are many nuances, but take a simple case of an unmarried or widowed person... they may not care about the bequest at all, and would prefer higher payments during their lifetime. In fact, it might be better for them to have a “no bequest plan” with even higher payments.