CPFlife vs inflation

[tszkitc]

I got estimate $2650 in year 2036. How much does it worth in today's value???
Many thanks.

 

[BBCWatcher]

I got estimate $2650 in year 2036. How much does it worth in today's value???

We don't know yet. It depends on what the inflation rate is between now and 2036.

But let's suppose the average inflation rate is 2.0% per year and there are 12 years of inflation between now and then. (There could be 11 depending on whether you're looking at the beginning or end of 2036, but let's try 12.) Here's the formula:

2023 dollars = $2,650 ÷ (1+0.02)^12 =~ $2,090

 

[chaiscool]

Present value from DCF, ftw haha
https://www.investopedia.com/terms/d/dcf.asp

 

[chong18]

How to use the CPF life estimator if you are not yet 55? I will be 55 in year 2034, and I estimate the FRS will be around 300k by then. What is the estimated payout if I choose standard vs basic plan for FRS?

 

[BBCWatcher]

How to use the CPF life estimator if you are not yet 55? I will be 55 in year 2034, and I estimate the FRS will be around 300k by then. What is the estimated payout if I choose standard vs basic plan for FRS?

You can pretend you're 55 now and use a higher initial RA balance than today's Full Retirement Sum. Then remember to deflate the 2034/2049 Singapore dollars back to 2023/2024 Singapore dollars so you're able to interpret them better.(*) Also bear in mind neither the Standard nor Basic Plans will do anything to combat inflation, so the real purchasing power of your CPF LIFE income stream would progressively decline at whatever the future rate of inflation is. That's another problem that you'll need to solve. (The CPF LIFE Escalating Plan would help a lot.)

(*) It would be immensely helpful if the CPF Board did this for you in the Estimator at least using a 2.0%/year inflation assumption. But they don't, so you'll have to deflate future dollars manually.

 

[tszkitc]

How to use the CPF life estimator if you are not yet 55? I will be 55 in year 2034, and I estimate the FRS will be around 300k by then. What is the estimated payout if I choose standard vs basic plan for FRS?

DBS digital bank app got estimate function.

 

[Oldnerd79]

How to use the CPF life estimator if you are not yet 55? I will be 55 in year 2034, and I estimate the FRS will be around 300k by then. What is the estimated payout if I choose standard vs basic plan for FRS?

Same age as you. I estimate FRS payout (basic plan) to be around 1.7k pm in today's value if starting payout at 70yo. Dunno if my estimation is accurate though. Inflation is hard to predict.
1.7k in today's value is just enough for my basic expenses. Outside of CPF life I will only have about 800-900k Cash/investments+SA+SRS combined. I think that's enough to have a decent lifestyle even if I just draw down the interest every year without touching the capital. Will rent out spare rooms to supplement my retirement income. Only draw down capital as and when necessary, hopefully can last till I surrender IC.

 

[d5dude]

Its simply impossible to know. Cumulative inflation in SG (according to the CPI) in the last 20 years is ~53%, or ~2.2% per year. If you assume the same inflation then $2650 in 2036 is worth about $2000 in today's money.

 

[bombshell]

CPF life shld be like extra income to enjoy only.
I believe the main problem with SG is that many people are asset rich, cash poor. Schemes like HDB lease buyback needs to be offered to the main population so that people can en-cash the remaining lease of their homes, still have a guaranteed roof over their heads and not die with a million dollar worth of assets.

 

[fly1111]

We don't know yet. It depends on what the inflation rate is between now and 2036.

But let's suppose the average inflation rate is 2.0% per year and there are 12 years of inflation between now and then. (There could be 11 depending on whether you're looking at the beginning or end of 2036, but let's try 12.) Here's the formula:

2023 dollars = $2,650 ÷ (1+0.02)^12 =~ $2,090

Ur inflation rate of 2% is very questionable…

 

[royalmix]

CPF life shld be like extra income to enjoy only.
I believe the main problem with SG is that many people are asset rich, cash poor. Schemes like HDB lease buyback needs to be offered to the main population so that people can en-cash the remaining lease of their homes, still have a guaranteed roof over their heads and not die with a million dollar worth of assets.

Spot on! I love your first statement!

 

[andyhtc]

Go for ERS + Basic is safer.

You will get a payout of $2.1k from the age of 65 or $2.8k from the age of 70.

This should be sufficient for most retirees.

 

[sohguanh]

Go for ERS + Basic is safer.

You will get a payout of $2.1k from the age of 65 or $2.8k from the age of 70.

This should be sufficient for most retirees.

Once again short life ppl above does not apply becuz you not yet reach 65 bye bye liao. If you go Mandai Crematorium see other dead ppl picture they put birth and die date you can count they die at what age.

 

[andyhtc]

Once again short life ppl above does not apply becuz you not yet reach 65 bye bye liao. If you go Mandai Crematorium see other dead ppl picture they put birth and die date you can count they die at what age.

I would be happy to hit 80. Ideally, I like to hit 85 and above.

 

[reddevil0728]

Once again short life ppl above does not apply becuz you not yet reach 65 bye bye liao. If you go Mandai Crematorium see other dead ppl picture they put birth and die date you can count they die at what age.

Yes that’s a given? And goes without saying?

since There’s age criteria?

maybe more accurate to say doesn’t to anyone who doesn’t meet the age criteria

 

[sohguanh]

I would be happy to hit 80. Ideally, I like to hit 85 and above.

First you need go check your father and mother side all live how long. Second you check your blood group follow father or mother. Then you can estimate you live how long.

 

[andyhtc]

First you need go check your father and mother side all live how long. Second you check your blood group follow father or mother. Then you can estimate you live how long.

My blood group is the same as my mother.

The good part is my maternal grandfather lived until the late 80s.

The bad part is he had dementia after 80...

 

[BBCWatcher]

Your elders lived more of their years (and more of their critical formative years) in a more health hostile, less medically favorable environment. Life expectancies at birth and at older ages have steadily increased. If you’re going to make any reasonable longevity forecast it must take these favorable mortality risk factors into full account.

Moreover, you cannot choose a 50th percentile mortality assumption and have a viable retirement plan. If your retirement financial plan is designed to fail about 50% of the time then you don’t have a good plan. Exactly which longevity percentile you choose is up to you, but to be reasonable it‘s got to be somewhere in the 9Xth percentile. Do you want a 10% risk your plan will fail solely due to longevity? 5%? 1%? 0.2%? Up to you, but personally I like reliable plans.

 

[andyhtc]

To beat inflation consistently for the man in the street, keep working or have kids to give you allowance (not guaranteed).

If not, one just has to accept that the payout will get eroded over time and have to spend wisely.

A larger payout based on the ERS should be fine but FRS will be a bit tricky.

It also helps if one moves to a lower cost country to retain the spending power.

 

[Spirax]

CPF life are zero interest, rather gov should have option to opt in/out