FRS or ERS?

[WeiHan]

If you have enough fund in CPF, which retirement scheme FRS or ERS will you choose?

Take 2022 for example, ERS will be 288K while FRS is 192K. that is only a difference of less than 100K but the monthly withdrawal after 65yo is $2400 for ERS but for FRS is $1400. The downside for choosing ERS over FRS will be that 55yo, the amount of cash one can withdraw from CPF will be lesser, thus one will have lesser money to enjoy from 55yo to 65yo.

 

[yoongf]

Must choose ERS at 55?

I am planning to choose FRS at 55, then come closer to 63... if ERS still looks attractive, then top up to ERS before 65.

If you have enough fund in CPF, which retirement scheme FRS or ERS will you choose?

Take 2022 for example, ERS will be 288K while FRS is 192K. that is only a difference of less than 100K but the monthly withdrawal after 65yo is $2400 for ERS but for FRS is $1400. The downside for choosing ERS over FRS will be that 55yo, the amount of cash one can withdraw from CPF will be lesser, thus one will have lesser money to enjoy from 55yo to 65yo.

 

[a4973]

If you have enough fund in CPF, which retirement scheme FRS or ERS will you choose?

Take 2022 for example, ERS will be 288K while FRS is 192K. that is only a difference of less than 100K but the monthly withdrawal after 65yo is $2400 for ERS but for FRS is $1400. The downside for choosing ERS over FRS will be that 55yo, the amount of cash one can withdraw from CPF will be lesser, thus one will have lesser money to enjoy from 55yo to 65yo.

I believe that one can use cash to top up to ERS thus still keeping the OA and SA funds in their respective accounts right?

 

[BBCWatcher]

Must choose ERS at 55?

No, you’re not required to do that. Of course the disadvantage is you won’t earn 4.0% interest compounded annually on the additional funds, which then rolls into an attractive life annuity. If you’re reliably doing better than that, OK, but it looks quite attractive to me.

 

[yoongf]

Thanks for the clarification..

Does topping up to ERS at 55 vs topping up at 64, affect the monthly payout?

CPFLife website gives a range without much clear explanation.

No, you’re not required to do that. Of course the disadvantage is you won’t earn 4.0% interest compounded annually on the additional funds, which then rolls into an attractive life annuity. If you’re reliably doing better than that, OK, but it looks quite attractive to me.

 

[BBCWatcher]

Does topping up to ERS at 55 vs topping up at 64, affect the monthly payout?

Yes. The monthly payout is lower the longer you wait to make the ERS top up. The ERS is likely to increase by about 3%/year, and RA interest on these top ups is 4%/year. Thus the earlier you make this top up, the more time the attractive interest is able to work for you, and the interest outruns the ERS increases.

Also please note you’re allowed to top up your RA again, to the new ERS, every time it’s raised — for the rest of your life if you wish. RA interest doesn’t count against the ERS limit. So if you want to peg your RA up against the ERS, all the time, starting from your 55th birthday month, you can.

 

[cal3135]

Diffn of $670 betw ERS vs FRS, u may have quoted wrongly.

An option be SA shield & RA=FRS for the flexibility to withdrawal from SA if u need the cash from 55y onwards ...

If you have enough fund in CPF, which retirement scheme FRS or ERS will you choose?

Take 2022 for example, ERS will be 288K while FRS is 192K. that is only a difference of less than 100K but the monthly withdrawal after 65yo is $2400 for ERS but for FRS is $1400. The downside for choosing ERS over FRS will be that 55yo, the amount of cash one can withdraw from CPF will be lesser, thus one will have lesser money to enjoy from 55yo to 65yo.

xs HardwareZone Forums app

 

[WeiHan]

Diffn of $670 betw ERS vs FRS, u may have quoted wrongly.

An option be SA shield & RA=FRS for the flexibility to withdrawal from SA if u need the cash from 55y onwards ...

xs HardwareZone Forums app

After reading the SA thread after I started this thread, I came to a different understanding. The breakeven for any scheme, be it ERS or FRS is beyond 80 years old. The interest of 6% in RA is only paid from 55yo to 65yo beyond which no interest will be accrued. I conclude it is more of buying insurance if one live too long beyond 82 yo. Otherwise, if one can earn a 3-4% interest on his own, the return may not be lower than putting money in RA.

After balancing, I find that i 'll still stick with FRS but shield my SA and put back money into SA after 55yo and collect 4% interest rate beyond that. Excess beyond maximum limit of SA can be put in OA to continue enjoying 2.5% interest rate.

 

[qhong61]

If you have enough fund in CPF, which retirement scheme FRS or ERS will you choose?

Take 2022 for example, ERS will be 288K while FRS is 192K. that is only a difference of less than 100K but the monthly withdrawal after 65yo is $2400 for ERS but for FRS is $1400. The downside for choosing ERS over FRS will be that 55yo, the amount of cash one can withdraw from CPF will be lesser, thus one will have lesser money to enjoy from 55yo to 65yo.

FRS........

 

[dork32]

After reading the SA thread after I started this thread, I came to a different understanding. The breakeven for any scheme, be it ERS or FRS is beyond 80 years old. The interest of 6% in RA is only paid from 55yo to 65yo beyond which no interest will be accrued. I conclude it is more of buying insurance if one live too long beyond 82 yo. Otherwise, if one can earn a 3-4% interest on his own, the return may not be lower than putting money in RA.

After balancing, I find that i 'll still stick with FRS but shield my SA and put back money into SA after 55yo and collect 4% interest rate beyond that. Excess beyond maximum limit of SA can be put in OA to continue enjoying 2.5% interest rate.

first: there is no 6% interest. it is 4% + 900

second: despite us saying so many times, you still want spread lies that cpf life does not give interest after 65

third: i have mentioned. since you do not like cpf life, then you should down grade all the way to brs.

fourth: the break even is not 80. at 80, you annuity hits 0 for standard. there is no bequest from 80 onwards. and if there is a breakeven, you must be comparing it with something else, which you also did not mention.

fifth: i have also mentioned the disadvantage of oa. oa is forever behind sa. i will not withdraw my sa because of 4% interest. it means, i cannot withdraw my oa. like that might as well put inside ra to puff it up to ers. at least still got chance to touch the money and also it earns higher interest. and if you really love your oa so much that you do not want to withdraw, you can vc your cpflife payout back into the oa + sa

 

[GrandJedi]

Does it make more sense to go with ERS + basic plan rather than FRS + standard plan? Which combination is a better plan financially assuming monthly payout amount is not that important.

 

[BBCWatcher]

Does it make more sense to go with ERS + basic plan rather than FRS + standard plan? Which combination is a better plan financially assuming monthly payout amount is not that important.

More information required. What are your objectives?

One of the few clear facts is that the CPF LIFE Basic Plan is never better for the CPF member him/herself. The Basic Plan always provides a lower monthly payout than the Standard Plan while the member is still alive. And it doesn't offer the 2%/year escalation feature that the Escalating Plan provides. The only thing the Basic Plan can do is maintain a higher residual for somewhat longer from (only) the CPF Retirement Account.

You have 3 basic "knobs" you can adjust with CPF LIFE:

1. The principal (input value). The principal can be the Basic Retirement Sum (with property pledge/charge), the Full Retirement Sum, the Enhanced Retirement Sum at age 55, the Enhanced Retirement Sum at age 55 plus top ups to every new Enhanced Retirement Sum thereafter, or something in between (example: FRS+25%). The higher and earlier the input principal, the higher the monthly payout amount and residuals (for any/every age when residuals apply).

2. Age when payouts start. That can be the month you turn age 65, the month you turn age 70, or any time in between. The longer you wait to start payouts the higher your monthly payout and the higher the residuals (for any/every age when residuals apply).

3. The payout plan. That can be the Standard Plan, the Escalating Plan, or the Basic Plan. The Standard Plan provides a higher monthly payout for life but a lower residual than the Basic Plan (for any age when there's a residual). The Escalating Plan is essentially the Standard Plan but with a 2%/year lifetime slope applied, the only payout plan that provides any defense against inflation.

That's it, really! Exactly how to set those knobs depends on what goals you're trying to achieve. FWIW in my household we'll be at the ERS at our respective 55th birthdays (both my spouse and I), we expect to top up to the new ERSes each time the ERS is raised, we'll defer payout start to age 70 (the default actually), and we'll most likely choose the Escalating Plan when the time comes if we're in decent or better health at that time (age 69+). We're doing well financially, so the best option for us is to maximize the asset protection, longevity insurance, and inflation defense aspects of CPF LIFE. So that's our plan, and we've already prepared well for these "knob" settings.

 

[Okenba]

The most money you can squeeze into RA is never just ERS itself.
It is ERS, and an annual top-up to the new ERS.
Eg. ERS for 2023 is $298,200.
ERS for 2024 is $308,700. ($10,500 more than 2023.)
ERS for 2025 is $319,500. ($10,800 more than 2024.)

So if you are 55 this year, you put in $298,200 into your RA in 2023.
You top it up by an additional $10,500 in 2024.
And another $10,800 in 2025.
If you do this every year until 70yrs old, you can easily squeeze in more than $600k in your RA.
And your payouts can be more than $4k/mth.

This doesn't mean that everyone who can should go ERS.
If you don't need that much constant 'income' each month, and you can earn more in other financial vehicles, then one might decide to place the money in the higher earning vehicle.

 

[BBCWatcher]

The most money you can squeeze into RA is never just ERS itself.
It is ERS, and an annual top-up to the new ERS.
Eg. ERS for 2023 is $298,200.
ERS for 2024 is $308,700. ($10,500 more than 2023.)
ERS for 2025 is $319,500. ($10,800 more than 2024.)

So if you are 55 this year, you put in $298,200 into your RA in 2023.
You top it up by an additional $10,500 in 2024.
And another $10,800 in 2025.
If you do this every year until 70yrs old, you can easily squeeze in more than $600k in your RA.
And your payouts can be more than $4k/mth.

You can continue topping up your RA to each new ERS not only until age 70 but for the rest of your life if you wish.

This doesn't mean that everyone who can should go ERS.
If you don't need that much constant 'income' each month, and you can earn more in other financial vehicles, then one might decide to place the money in the higher earning vehicle.

Maybe, but it's also a great way to protect assets. The yield on assets you don't get to keep is -100%.

 

[sohguanh]

The most money you can squeeze into RA is never just ERS itself.
It is ERS, and an annual top-up to the new ERS.
Eg. ERS for 2023 is $298,200.
ERS for 2024 is $308,700. ($10,500 more than 2023.)
ERS for 2025 is $319,500. ($10,800 more than 2024.)

So if you are 55 this year, you put in $298,200 into your RA in 2023.
You top it up by an additional $10,500 in 2024.
And another $10,800 in 2025.
If you do this every year until 70yrs old, you can easily squeeze in more than $600k in your RA.
And your payouts can be more than $4k/mth.

This doesn't mean that everyone who can should go ERS.
If you don't need that much constant 'income' each month, and you can earn more in other financial vehicles, then one might decide to place the money in the higher earning vehicle.

Not trying to discredit your analysis but a lot of such calculation posts assume reader has long life. For ppl with family history of short lives (say gone before age 70) than all such topping up don't make much sense actually.

Seldom read of post suggest to readers on how to faster use finish your cpf monies assume you die before age 70 in this forum. For such I need surf other forums for creative ideas indeed.

 

[BBCWatcher]

Not trying to discredit your analysis but a lot of such calculation posts assume reader has long life. For ppl with family history of short lives (say gone before age 70) than all such topping up don't make much sense actually.

It does not assume(s) that. If you were to die before age 70 and have not started CPF LIFE payouts then your CPF nominee(s) receive every penny plus attractive interest. You can also spend almost all of your other wealth however you wish, including giving it away, secure in the knowledge that you cannot outlive your savings if your life lasts longer than you expect or if courts or creditors seize your wealth.

 

[fr33d0m]

Not trying to discredit your analysis but a lot of such calculation posts assume reader has long life. For ppl with family history of short lives (say gone before age 70) than all such topping up don't make much sense actually.

Seldom read of post suggest to readers on how to faster use finish your cpf monies assume you die before age 70 in this forum. For such I need surf other forums for creative ideas indeed.

it is ERS coupled with basic plan....

 

[Guojing88]

Nowadays with all these scams, ers may be a much better deal

 

[Hotsnow]

It does not assume(s) that. If you were to die before age 70 and have not started CPF LIFE payouts then your CPF nominee(s) receive every penny plus attractive interest. You can also spend almost all of your other wealth however you wish, including giving it away, secure in the knowledge that you cannot outlive your savings if your life lasts longer than you expect or if courts or creditors seize your wealth.

I think if you passed on before CPF Life started payout. Your CPF nominee only get back whatever money you put into RA without the interests gained from age 55 to 65(or whatever age u intend to start CPF Life payout).

 

[BBCWatcher]

I think if you passed on before CPF Life started payout. Your CPF nominee only get back whatever money you put into RA without the interests gained from age 55 to 65(or whatever age u intend to start CPF Life payout).

No, that’s incorrect.