FRS or ERS?

[BBCWatcher]

then u go for BRS lor since u know u gona die earlier else lugi.

Yes, and also consume more money sooner and give more money away sooner. Also, defer CPF LIFE payouts until age 70 (the default). If CPF LIFE is such a "bad deal" then you'll minimize that bad deal for the shortened lifespan you expect. Indeed, if you were to die at age 68 for example you don't even get any CPF LIFE payouts if you haven't started them.

 

[magicming]

CPF Life penalize ppl who got short life and I posted this quite a few times already. They just assume average is most ppl live longer so policies are designed based on that. They do not cater options for ppl who have short life especially those with family history of short lives. We get the shortened end of the stick very rugi. Don't spew crap like your monies can give offspring spend that is separate topic IMO.

I agree with you it’s not fair. And most people lose. And short life people lose more. And I also agree the give off spring thing is rather “deceptive”. I don’t fall for it either.

But OVERALL, it’s not too bad. And as I have the extra money, I did ERS, to buy some peace of mind. Also this peace of mind will cost more outside of CPF LIFE.

 

[magicming]

Yes, and also consume more money sooner and give more money away sooner. Also, defer CPF LIFE payouts until age 70 (the default). If CPF LIFE is such a "bad deal" then you'll minimize that bad deal for the shortened lifespan you expect. Indeed, if you were to die at age 68 for example you don't even get any CPF LIFE payouts if you haven't started them.

Yes. This is correct idea. If we believe we are short life people and will die by 70, then don’t ever start CPF life payouts. Then all your money is still totally yours in the RA. And all the interest still yours. Not part of pool. So your CPF beneficiaries get everything. Sooo, it seems CPF LIFE does not put short life people at a disadvantage. Except that everyone is forced to put at least BRS into RA, and can’t take out to spend on oneself. So, yes, it does disadvantage poorer people more in that sense.

 

[BBCWatcher]

...So, yes, it does disadvantage poorer people more in that sense.

Well, zero income people don't have any compulsory CPF contributions at all. And many lower income people are self-employed, only have compulsory MediSave contributions, and don't end up with substantial (or any) SA/RA balances when they reach age 55+ since their MediSave balances never really get beyond the Basic Healthcare Sum.

Moreover, 4+% interest feeding into an actuarially fair life annuity isn't a bad deal for someone living paycheck to paycheck. Quite the opposite. Typically these individuals would otherwise have to work until they drop dead (at any age, even an early one) — and that's assuming they can work until drop dead age. There's also the fact the employer matching part of CPF contributions effectively raises total compensation. How much depends on relative wage elasticities, but there's "some" effective increase. This increase is hugely important to low and moderate wage workers, and in particular it helps them better afford housing in Singapore.

 

[dork32]

I agree with you it’s not fair. And most people lose. And short life people lose more. And I also agree the give off spring thing is rather “deceptive”. I don’t fall for it either.

can explain why giving your kids is deceptive?

the way you post, it is likely you dont have kids

 

[sohguanh]

then u go for BRS lor since u know u gona die earlier else lugi.

Do u have any contingency plans if u live past let say 70yo how?

As discussed in earlier post. Euthanasia is illegal in Spore. Commit suicide is a crime in Spore. So next best feasible option is accident.

 

[dork32]

I think he meant lose out on the “10%” paid to the pool.

the 10% paid to the pool is still your money. it is the interest on this 10% that is lost

you can do you calculations. you take this 10% of interest. the rest is still earning interest. overall, because of this 10% deduction, your interest is less. but there is still interest. there no loss, win less yes, but no loss

 

[dork32]

take 300k in your ra

if you are on basic 30k is in pool. your 270K will still earn 4% + 900 = 11700. you still win 11.7k

if you dont have to give to pool, your 300k earns 4% + 900 = 12 900. you win 12.9k a year, you win more. where got loss?

 

[magicming]

Well, zero income people don't have any compulsory CPF contributions at all. And many lower income people are self-employed, only have compulsory MediSave contributions, and don't end up with substantial (or any) SA/RA balances when they reach age 55+ since their MediSave balances never really get beyond the Basic Healthcare Sum.

Moreover, 4+% interest feeding into an actuarially fair life annuity isn't a bad deal for someone living paycheck to paycheck. Quite the opposite. Typically these individuals would otherwise have to work until they drop dead (at any age, even an early one) — and that's assuming they can work until drop dead age. There's also the fact the employer matching part of CPF contributions effectively raises total compensation. How much depends on relative wage elasticities, but there's "some" effective increase. This increase is hugely important to low and moderate wage workers, and in particular it helps them better afford housing in Singapore.

I mean the less well off, who die at 70 or so, who are “forced” to leave BRS in RA and can’t take out to spend on themselves. I think there are some posters here who suggest they are in this situation. The super poor of course not affected. The rich also don’t care much. As this RA thing is just a small part of their assets. And generally beneficial to them. But overall I AGREE with you.

 

[BBCWatcher]

....if you dont have to give to pool, your 300k earns 4% + 900 = 12 900. you win 12.9k a year, you win more. where got loss?

Who's offering this option? Yes, that's a rhetorical question.

You don't "lose" anything either when a hypothetical alternative offer doesn't actually exist. Comparisons between two or more alternatives must always be based on actual, existing, available, selectable alternatives.

There are alternatives to CPF LIFE. They're called (other) life annuities. You can buy them, and there are several of them available for sale in Singapore. A couple years ago I tried compiling a list of them. Anyone/everyone is most welcome to compare them with CPF LIFE then choose the best alternative for themselves.

 

[sohguanh]

I mean the less well off, who die at 70 or so, who are “forced” to leave BRS in RA and can’t take out to spend on themselves. I think there are some posters here who suggest they are in this situation. The super poor of course not affected. The rich also don’t care much. As this RA thing is just a small part of their assets. But overall I AGREE with you.

There are two groups in this issue. One group is my monies I want to spend on myself as much as possible. One group is I want to leave more or so called bequest to my offspring. So depend you belong to which group your posts will argue in which direction. Conflict arises when one group "force or persuade" the other group to accept their point of view. For me I don't like that poster persuasion click Ignore lor. Make my life better for the day and future.

 

[BBCWatcher]

I mean the less well off, who die at 70 or so, who are “forced” to leave BRS in RA and can’t take out to spend on themselves.

The CPF Board offered an option in this situation: the CPF LIFE Income Plan. This payout plan offered the very highest monthly payouts in current dollars — even higher than today's Standard Plan, also with no escalation. And there was zero residual. It turned out this plan was unpopular. Members effectively voted. ("Be careful what you wish for.")

I think there are some posters here who suggest they are in this situation.

I wonder about that.

 

[magicming]

can explain why giving your kids is deceptive?

the way you post, it is likely you dont have kids

It is like what u post. Only the capital sum goes to beneficiaries. The interest on CPF Life amount goes to the pool. That’s why u suggest choosing basic. YOU have clearly not been deceived.

But if don’t read carefully, we may think the interest amount also can go to beneficiaries.

At first I thought it was this way. Only after two YEARS, then I understand the real meaning. And of course I later come to hardwarezone which confirms that my original interpretation was wrong.

For me, I think CPF LIFE not bad. That’s why I did ERS. And I will choose standard at 65.

 

[BBCWatcher]

There are alternatives to CPF LIFE. They're called (other) life annuities.

Elaborating a bit on this, what (mostly) isn't allowed is burdening the country (and the government) with your individual risk of elder destitution, whatever that risk is. Basic longevity insurance is (mostly) compulsory. Likewise, basic hospitalization insurance (MediShield Life) is compulsory. Among younger cohorts long-term care insurance (CareShield Life) is compulsory, too.

If you own a HDB flat then HDB fire insurance is compulsory. Own a private automobile? Car insurance is compulsory.

In Singapore you're not allowed to transfer all your personal risks onto society at large — and onto general taxpayers. And if you want to make the argument that all or most longevity risks should be borne by the government and general taxpayers then I'm going to disagree with you. More importantly so is the government. That policy question is well settled.

If you're going to make any viable argument about how CPF LIFE should be better or different it must start with satisfying the core policy goal: how to prevent elder destitution risks from becoming too substantial burdens on the government and on the public at large. It cannot start from, "Oh, gee, longevity insurance sucks and nobody should be required to have it." Sorry, no, that's not a viable, rational argument.

 

[magicming]

There are two groups in this issue. One group is my monies I want to spend on myself as much as possible. One group is I want to leave more or so called bequest to my offspring. So depend you belong to which group your posts will argue in which direction. Conflict arises when one group "force or persuade" the other group to accept their point of view. For me I don't like that poster persuasion click Ignore lor. Make my life better for the day and future.

Thanks. For me I don’t mind what people post, just chit chat. I agree with you. So I try to see things from different perspectives. The poorer person, the richer person etc. And I also clearly say what I have done/will do and why. Of course I don’t expect or persuade any one to follow me. I just thot share the info may be helpful for others.

 

[dork32]

There are two groups in this issue. One group is my monies I want to spend on myself as much as possible. One group is I want to leave more or so called bequest to my offspring. So depend you belong to which group your posts will argue in which direction. Conflict arises when one group "force or persuade" the other group to accept their point of view. For me I don't like that poster persuasion click Ignore lor. Make my life better for the day and future.

i am going for basic, but i am certainly no desperate to bequest anything to my kids. but i rather give my money to my kids that to strangers. i am not forcing anyone to accept my view. but when you state you lose money if you go ers, that is completely wrong. it is a fact. it is not a view.

 

[BBCWatcher]

By the way, I can't think of any other country that offers any meaningful residual in its comparable compulsory longevity insurance program.

Let's suppose for example you spend a working life contributing to the U.S. Social Security system via payroll taxes. In 2023 the "earning cap" is US$160,200, and the employee/employer combined tax rate for the Social Security portion is 12.4%. So that's US$19,864.80 (annual maximum, 2023) that goes into the Social Security part of the U.S. system. Social Security then consists of disability, survivors, and retirement insurance benefits. So it's not all retirement. But let's suppose you contribute hundreds of thousands of U.S. dollars into the system during your working career...and then you die on your 62nd birthday. I'll also assume here (just to keep it simple) that you die single with no prior marriages. In this situation you and your heirs get...zero. Well, OK, if you have a qualified survivor he/she might receive a one-time death benefit of US$255. But that's it. There is no residual. It's a pure insurance program.

It's also a 12.4% tax rate (for the Social Security portion) instead of 37% (inclusive of OA and MA). Residuals can be expensive. Yet both approaches solve the core policy goal....

....So that's an option if you'd like to make that particular program design argument. Hypothetically it would be mathematically possible to reduce the compulsory CPF contribution rate in exchange for making CPF LIFE a pure longevity insurance program, not a program that guarantees that payouts+residual will equal or exceed the entry amount for all participants. Would you take that deal if it were on offer? I suppose it's on offer: you can go work in some other country for most or all of your career.

"Oh, but it gets better." Unless you vest in the U.S. system you get no retirement benefits no matter how long you live. The minimum requirement to "vest" is "nontrivial" contributions within at least 10 calendar years, inclusive of treaty country contributions. If you work in the U.S. for 5 years, return to Singapore, and work in no social security treaty countries then "tough luck." You do not qualify for retirement benefits, and there is no refund. Hypothetically we could do that here in Singapore. Specifically, foreign workers could be required to contribute to a revised CPF LIFE program, and they could qualify for benefits after 10 years of contributions. Fewer than 10 years? Zero benefits. Anyone support that idea?

 

[dork32]

Thanks. For me I don’t mind what people post, just chit chat. I agree with you. So I try to see things from different perspectives. The poorer person, the richer person etc. And I also clearly say what I have done/will do and why. Of course I don’t expect or persuade any one to follow me. I just thot share the info may be helpful for others.

you going for ers means ers is better than frs. this is a view. because there are advantages and disadvantages to ers. forcing your view onto people is asking everyone to go for ers.

 

[magicming]

you going for ers means ers is better than frs. this is a view. because there are advantages and disadvantages to ers. forcing your view onto people is asking everyone to go for ers.

I certainly do not force. I just share what I did and why. I even think I may have been WRONG to do ERS. (That’s why I stopped topping up every year.) But no choice. Already done. All this I have frankly shared. Just info. And mostly tentative. I seldom suggest that others do any particular action. It’s up to them. But I share reasons that we should all consider.

 

[BBCWatcher]

you going for ers means ers is better than frs.

Well, the ERS is better than the FRS in the same way and measure that the FRS is better than the BRS, right? Let's use the CPF LIFE Estimator for reference and with these assumptions: male, born in 1968 (age 55 now), Standard Plan. OK, here we go with the projected monthly payout amounts at age 65:

BRS: $850
FRS: $1,600 (+$750)
ERS: $2,360 (+$760)

I think there's a rounding "error" in there since the CPF LIFE Estimator evidently rounds to the nearest $10 increment, but the basic point is that BRS→FRS (+$99,400 in your RA at age 55) increases your age 65 CPF LIFE monthly payout (Standard Plan) by about $750. And then adding another $99,400 increases your payout by the same increment. So that +$99.4K is equally productive whether you're going from the BRS to FRS or from the FRS to the ERS. More generally, every dollar above minimum mandatory is equally productive.

Anyway, if you think the "upgrade" to FRS (which is voluntary for anybody with a house, really) is a good enough deal then further upgrades, up as a high as the ERS if you wish, are exactly the same deal. Since my household's view is that the FRS is a good deal then we logically view the ERS as also a good deal (since it's the same deal, with equal productivity). And since we're fortunate that we can easily afford the ERS(*) we're taking the deal. One spouse already has, and the other plans to.

(*) And this is really the key. If you can't afford the ERS, or FRS+25% (for example), OK then. You stop at some point below the ERS. But the FRS is merely a default, not an obligation. You can go lower or higher. You should go higher if you can afford it and if you view the BRS to FRS increment as a good deal.