FRS or ERS?

[Okenba]

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).

My understanding is that premium is only paid when you join CPF life. That is, anytime from 65-70.

So what I understand that to mean is that, before joining CPF life, the amount in your RA earning interest belongs to you. If you die before joining CPF life, all of your RA goes to your nominee.

When you join CPF life, 100% of your RA goes to paying the premium (10-20% if Basic Plan). At that point, any interest earned by your premium goes to the pool.

So if you contribute $300k at age 70, that's your premium. And if you die at 75, they will calculate your payout (say 20k/yr, so 100k over 5 years), and then your nominee will get your premium, less payout. (300k-100k=200k)

So there is a loss of interest in that sense.

Having said that, if you took the Basic Plan, and say 20% of your 300k goes to the premium, you will have 60k in CPF life pool, and 240k in your RA. However, your payouts are taken from your RA first.

 

[royalmix]

CPF LIFE Basic Plan is never better for the CPF member him/herself

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.

Everyone's situation is different and BBC shared his situation and what is most beneficial to him. CPF Life Basic Plan is never better for him/wife but is NOT never better for others depending on their objective/situation. BBC is s US Person, he might have many other considerations more important to him such that Basic Plan is never good for him, for eg. US tax considerations (such that delaying payout is best for him with escalating pan), his wife is his only dependent? (we dun know), he has option to return to US before age 70, etc. He had shared his views and choice based on what he views are most beneficial to him, not necessary apply to everyone unless you share exactly his objective/situation.

Just google, many financial "experts" shared on the pros and cons of the 3 CPF Life Plans, most ultimately recommend CPF Life Basic Plan ( based on what I read some years back). So it is important you understand the pros and cons of each CPF Life Plan and make your decision based on your own objective/situation.

For eg, forumer Sohguan shared, his parents passed before 70, that might his major consideration.

FRS or ERS - each person have their own considerations. Some egs: how much spare cash you have, can those spare cash earn more than 4%pa, do you have other sources of retirement income, etc. For eg, my cash is now earning more than 4%pa, I chose to delay topping up CPF, it is a better alternative to Tbills, etc.

 

[BBCWatcher]

BBC is s US Person, he might have many other considerations more important to him….

Nope. My CPF LIFE decisions would be the same in the same or similar circumstances with or without U.S. personhood. I explained exactly why we’re making (and will make) these decisions. There’s no need to hunt for phantom reasons because there aren’t any.

CPF LIFE is in no way U.S. tax advantaged. All interest is taxed every year, including the life annuity share of CPF Lifelong Income Fund interest. Interest is taxed at the highest marginal tax rate, and (since I’m fortunate) with Net Investment Income Tax (NIIT) added. The only conclusion you should draw from a U.S. person and his spouse piling into CPF is that CPF really is attractive. Even with the substantial headwind of U.S. taxation every year(*) he’s piling in. Moreover, we’re piling in even with 3 other high quality sovereign life annuities (pension income streams) expected already. You should interpret these decisions and plans as a big endorsement of CPF because they are.

In my view other well-to-do individuals/households would be well advised to follow the same logic to the same conclusions, at least in general terms.

Our CPF LIFE-related decisions are subject to change, of course. Our circumstances might change, or the rules might change.

(*) Capital gains and qualified dividends are generally taxed at a lower rate.

 

[royalmix]

You should interpret these decisions and plans as a big endorsement of CPF because they are.

Whenever I see any financial "expert" endorsing financing products, the first thing I do is scroll to the bottom of the article for the most important motivation, ie "This is a sponsored article"! Then I discount the whole article which is an endorsement of the product!

Below: If I am rich or well to do, I would have much better other sources of retirement income and annuities, I will not be worried about inflation so I will not need CPF LIfe Escalating Plan nor bigger payouts. CPF Life is mandatory, if I am rich I will the option to opt out or stay on because it is mandatory, full stop. I have a choice to disagree with your view.

In my view other well-to-do individuals/households would be well advised to follow the same logic to the same conclusions, at least in general terms.

 

[royalmix]

CPF Life is mandatory and everyone is given a choice, so choose wisely!

What is the banker's (CPFB) biggest motivation? Their key motivation is to build as big as possible the CPF Life Risk Pool ! How to do that? "Sway" your decisions away from CPF Life Basic Plan towards Standard Plan but better Escalating Plan! Recent changes: every topup to RA must contribute to the risk pool.

My personal view! You can disagree.

This is my final sharing. Good Luck!

 

[BBCWatcher]

Whenever I see any financial "expert" endorsing financing products, the first thing I do is scroll to the bottom of the article for the most important motivation, ie "This is a sponsored article"! Then I discount the whole article which is an endorsement of the product!

I have no affiliation with the Central Provident Fund, the Government of Singapore, the People’s Action Party, any political party in Singapore, or even Santa Claus. I don’t gain anything if you do something different, and I frankly don’t care. I’m just sharing what I’m doing now, what I plan to do, and why I’m doing/planning it — for logical, sensible reasons.

I’ve never received a penny for anything I’ve posted here, not even indirectly. Don’t want to, don’t need to. But I appreciate the information sharing and occasionally learn something in this forum that I can put to good use.

Below: If I am rich or well to do, I would have much better other sources of retirement income and annuities…

No, you really wouldn’t when it comes to annuities. Go compare any Singapore dollar life annuities from high quality life insurers. (I even listed them in a prior post in another thread.) You won’t find any better value per premium dollar than CPF LIFE, and you certainly won’t find any with the asset protection advantages CPF offers.

About the only thing you might be able to do to obtain a competitive second retirement life annuity is to go work in another country long enough to qualify for its national pension. Or marry someone and qualify for spousal and survivor pension benefits that way.

I will not be worried about inflation so I will not need CPF LIfe Escalating Plan nor bigger payouts.

Whether you’re worried about inflation is up to you. But those who plan sensibly and rationally for their retirement futures take inflation into proper account. And they ”stress test” their plans for higher than expected inflation scenarios.

CPF Life is mandatory…

It is not. You’re free to purchase (or otherwise obtain) an alternative life annuity of sufficient size and adequate character then opt out of CPF LIFE. Opting out of CPF LIFE also means opting out of a CPF Retirement Account.

 

[chong18]

Can opt out of CPF life at the last minute like 69 yo 11 months? When exactly will we know the CPF life payout amount? Is it only upon joining CPF life n premium paid into the pool? Even if I want to compare with another annuity product if there is no confirmed numbers how to compare?

 

[BBCWatcher]

Can opt out of CPF life at the last minute like 69 yo 11 months?

Yes, if eligible (have a suitable alternative life annuity). Perhaps by age 69 years 10 months.(*) You must be in receipt of monthly payouts from the alternative life annuity in order to qualify.

As a reminder, fully "opting out of CPF LIFE" means you are opting out of having a CPF Retirement Account, too. No more attractive interest on those CPF LIFE input dollars. There's no "in between." The exemption process involves submitting adequate proof of a suitable alternative life annuity to the CPF Board then, if approved, withdrawing your entire RA balance. (Plus possible SA and OA dollars if your RA has not been adequately funded yet.) Partial opt-outs (and partial withdrawals) are also available if your alternative life annuity is not big enough to support a full opt-out/withdrawal. Details here.

You probably shouldn't opt out of CPF LIFE, but the option is available if you wish and if you have a suitable alternative life annuity.

When exactly will we know the CPF life payout amount? Is it only upon joining CPF life n premium paid into the pool?

You can get an estimate using the online CPF LIFE Estimator. You can also ask the CPF Board for an estimate if the online Estimator doesn't offer the right input parameters for your situation.

The CPF Board reserves the right to adjust CPF LIFE payouts very slightly year to year (or decade to decade) to keep the CPF Lifelong Income fund solvent if the actuaries' forecasts prove too pessimistic or too optimistic.

Even if I want to compare with another annuity product if there is no confirmed numbers how to compare?

Use the CPF LIFE Estimator. If the Estimator doesn't cover your exact situation today then just run a couple estimates that are similar to your situation and extrapolate (or interpolate) to your situation.

(*) I'm not sure whether you can opt-out after CPF LIFE payouts start. Ask the CPF Board if that's your wish. I know that you can opt-out after CPF LIFE payouts start if your Singaporean citizenship or Singapore Permanent Residence is lost or terminated. At that point you can keep receiving monthly payouts or withdraw from CPF LIFE (and receive a computed surrender value). But I'm not sure you can opt out after CPF LIFE payouts start absent a loss of Singaporean status.

 

[dantom04]

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.

Hmmm ..so top up every year is good huh?
So top up 10 yrs to ERS will likely around $110k?
Anyone got calculate this amount will get u how much more per month as compare if u do not top up?

 

[henrylbh]

One of the few clear facts is that the CPF LIFE Basic Plan is never better for the CPF member him/herself.

What is dumb one way thought is that? Whatever plan, someone got to lose for someone to gain for the scheme to be solvent or viable. Not eveybody is or can be a winner as what you think.

What happened if the person dies around 80 yo or even 85 or 90 with other than basic plan. At which age will each of the 3 plans breakeven when interest in the pool is fully recovered? Better that you provide the clue and the person will decide which is better for himself instead of merely saying BP is never better.

 

[BBCWatcher]

Hmmm ..so top up every year is good huh?

Topping up a CPF Retirement Account accomplishes the following good things:

• Boosts CPF LIFE monthly payouts (lifetime retirement income)
• Boosts the CPF LIFE residual (for any/every age when there's a residual)
• Usually shields the top ups (and interest on the top ups, and CPF LIFE payouts) from creditors and adverse court judgments, worldwide
• If the Retirement Account starts below the Full Retirement Sum then the top up(s) may qualify for tax relief

Of course the cost is the cash (what it could be doing otherwise, for example buying beer that you drink now instead of more beer later). And there's a reduction in liquidity when you shift liquid cash into a life annuity.

So top up 10 yrs to ERS will likely around $110k?

We don't know, but it'll be a bit more than that if the ERS increases at about 3% per year. And 10 years isn't the limit. You can top up a CPF Retirement Account for the rest of your life if you wish.

Anyone got calculate this amount will get u how much more per month as compare if u do not top up?

The CPF LIFE Estimator can run various scenarios (applying a little bit of knowledge).

 

[BBCWatcher]

What happened if the person dies around 80 yo or even 85 or 90 with other than basic plan.

Same answer: that now dead person will have definitely been worse off under the CPF Basic Plan while he/she was living. And the dead person is no better or worse off thereafter. The person is dead.

Less income per month is less income per month. The Basic Plan always pays a lower monthly amount than the Standard Plan (for equal Retirement Account balances at payout start). That's true for every monthly payout for the entirety of the member's life.

Other people may or may not benefit from a CPF LIFE Basic Plan selection, but the member him/herself definitely cannot.

At which age will each of the 3 plans breakeven when interest in the pool is fully recovered? Better that you provide the clue and the person will decide which is better for himself instead of merely saying BP is never better.

That's not what I wrote. The member (the CPF Retirement Account holder) is never better off with the Basic Plan. That's a 100% true statement. Also true: other people (not the member) may or may not be better off if the member selects the CPF LIFE Basic Plan.

 

[iceblendedchoc]

the opting out given is as good as a Japanese "Yes" , which is often caveated.

Yes, you can opt out but you must jump through loops of fires !

 

[henrylbh]

CPF Life is mandatory and everyone is given a choice, so choose wisely!

This is my final sharing. Good Luck!

It is not. You’re free to purchase (or otherwise obtain) an alternative life annuity of sufficient size and adequate character then opt out of CPF LIFE. Opting out of CPF LIFE also means opting out of a CPF Retirement Account.

CPF Life is indeed mandatory. There is NO option that is better than CPFL unless you choose to leave the country for good.

CPFL is not only mandatory but a scheme in which everyone is forced into a betting position. It's a scheme in which some MUST lose for the benefit of others in order for the scheme to be viable. To ensure solvency, the fund manager will invariably build a buffer as the manager cannot and will not guarantee payout. If the buffer is too large, everyone as a whole from an earlier cohorts is a loser.

 

[Okenba]

Hmmm ..so top up every year is good huh?
So top up 10 yrs to ERS will likely around $110k?
Anyone got calculate this amount will get u how much more per month as compare if u do not top up?

If we take 2023 as the year when the member turns 55, topping up to ERS each year until 65 should take an extra 120k.
This is a rough figure. ERS for the next 5 years (I think) is known on the CPF website. The rest is assumed.
If you take the known figures, the increase is roughly by 3.5% each year. So you can work that out.

The final figure in your RA if you don't top-up, would be (($298,200 x 1.04) + 900) for however many years until you decide to start CPF Life.
Roughly $450k at 65. About $555k at 70.
If you do top-up annually,
Roughly $595k at 65. About $815k at 70.

Using Standard Plan as comparison.
No Top-Up & Start at 65 gives you roughly $2,410 / mth.
Top-Up & Start at 65 gives you roughly $3,160 / mth.

I'll just do that Start at 70 as well.
No Top-Up & Start at 70 gives you roughly $3,230 / mth.
Top-Up & Start at 70 gives you roughly $4,720 / mth.
(This last figure is an extrapolation. CPF Life calculator does not allow a figure in RA larger than $800k.)

 

[BBCWatcher]

CPF Life is indeed mandatory. There is NO option that is better than CPFL unless you choose to leave the country for good.

These sentences are contradictory.

Brushing your teeth is not mandatory. The costs of not brushing your teeth might be somewhat unattractive. And they may vary, depending on your diet for example. But that doesn't mean you're required to brush your teeth.

 

[BBCWatcher]

I'll just do that Start at 70 as well.
No Top-Up & Start at 70 gives you roughly $3,230 / mth.
Top-Up & Start at 70 gives you roughly $4,720 / mth.
(This last figure is an extrapolation. CPF Life calculator does not allow a figure in RA larger than $800k.)

I assume these figures are for male CPF members. For female members the monthly payouts are a little lower. Men and women are longevity risk pooled separately in CPF LIFE.

The $4,720/month figure isn't the absolute maximum. You're allowed to continue topping up your Retirement Account each time the ERS is raised. You can top up your Retirement Account for the rest of your life if you wish. After you top up the CPF Board will recompute your CPF LIFE monthly payout (and any residual) to take your top up into full account.

 

[Mephist0pheLes]

CPF Life is indeed mandatory. There is NO option that is better than CPFL unless you choose to leave the country for good.

CPFL is not only mandatory but a scheme in which everyone is forced into a betting position. It's a scheme in which some MUST lose for the benefit of others in order for the scheme to be viable. To ensure solvency, the fund manager will invariably build a buffer as the manager cannot and will not guarantee payout. If the buffer is too large, everyone as a whole from an earlier cohorts is a loser.

it's a bet for u bcos u view it as an investment, rather than an annuity product it actually is. And for some reason u place no value on the part where it removes/lower longevity risk.

 

[henrylbh]

That's not what I wrote. The member (the CPF Retirement Account holder) is never better off with the Basic Plan. That's a 100% true statement. Also true: other people (not the member) may or may not be better off if the member selects the CPF LIFE Basic Plan.

True is rubbish as member is not only himself as he has to take into account his beneficiaries and dependants. If he is alone than BP is never better for the CPF member him/herself.

 

[Okenba]

I assume these figures are for male CPF members. For female members the monthly payouts are a little lower. Men and women are longevity risk pooled separately in CPF LIFE.

The $4,720/month figure isn't the absolute maximum. You're allowed to continue topping up your Retirement Account each time the ERS is raised. You can top up your Retirement Account for the rest of your life if you wish. After you top up the CPF Board will recompute your CPF LIFE monthly payout (and any residual) to take your top up into full account.

However, I'm not sure how the top ups after you start CPF life are computed.
Especially if you are on Basic Plan.

I believe the whole top up goes into the pool and no part of it into RA, in which case it is calculated separately from one's basic plan. I could be wrong though. That's my impression.