FRS or ERS?

[qhong61]

this one chialat. based on his concept, if today is his last day, he spend everything. tomorrow wake up got no money left

Collect cardboard

 

[qhong61]

you follow my concept. i dont need to know when i die. if i die tomorrow, i just leave everytning i have to my kids. if i dont die, i continue to spend. no matter how i spend, i know i cannot finish spending when i die. as such, i am never under pressure to spend. i am also never under pressure that i finish spending my money before i die

More afraid is our kids hope we will die earlier.

 

[dork32]

Why would you say the payouts are guesstimations when cpf has an official payout estimator. Or are you saying we shouldn't trust CPF either?

maybe you misunderstood him. the 140 a month more is a fair advantage compared to the the disadvantage that you lose 120k if you die at 80. the break even at 88 is also fair. all these numbers are made by experts.

i have no right to dispute these numbers as i am guessing how old i will die.

but he is right though. i really dont have the real mathematics. i am basing on feel that there is a good chance that i will die at 80

 

[edmwing]

Govt considers the bigger picture and standard/escalating plan pays for the bigger picture (i.e. the pool). Basic plan will be gone soon anyways so I may not have this option when I need to choose.

 

[sohguanh]

but he is right though. i really dont have the real mathematics. i am basing on feel that there is a good chance that i will die at 80

The number 80 is based on parents and relatives average they gone? You do survey and conclude for you should be same around 80?

 

[qhong61]

Don't be so calculative.

 

[chong18]

So far 4 of my parents' siblings who have passed away all died before 80 (ranging from 50's to 70's). 4 grandparents only one lived till 90+ the other 3 was 60's 70's. So that's 1 out of 8 lived till 90's. What's the chance that I will live past 80? I already have lots of health issues at mid 40's, that's why I'm leaning towards Basic plan.

 

[sohguanh]

So far 4 of my parents' siblings who have passed away all died before 80 (ranging from 50's to 70's). 4 grandparents only one lived till 90+ the other 3 was 60's 70's. So that's 1 out of 8 lived till 90's. What's the chance that I will live past 80? I already have lots of health issues at mid 40's, that's why I'm leaning towards Basic plan.

That is why if you read comments in this thread read it with a pinch of salt. Those readers that are more optimistic all give some high numbers so most likely their parents and relatives live long lives.

Everyone case is different there are family trees that have shorter lifespan and for these just plan what fit your situation. Those high number lifespan advice just listen one ear in one ear out like noise perhaps.

 

[DevilPlate]

bbc just dont get it. your payout is 140 more because you have chosen standard. how much do you want to give your nephews? so you nephew get that 140. what long term investment is he going to make with $140? talk numbers, not grandmother stories.

also notice there is no reccomendation of what investment tool mentioned. for most, it is probably going to sit in their dbs savings

They will most likely spent on starbuck/bubble tea or change newer phone whahaha

 

[DevilPlate]

That is why if you read comments in this thread read it with a pinch of salt. Those readers that are more optimistic all give some high numbers so most likely their parents and relatives live long lives.

Everyone case is different there are family trees that have shorter lifespan and for these just plan what fit your situation. Those high number lifespan advice just listen one ear in one ear out like noise perhaps.

Anyway whether or not to max RA to ERS or leave it at FRS also largely depends on how much excess spare cash u have by 55yo….

Let say i have 1M spare cash….js top up to max ERS la….build up extra safety net aka peace of mind.
Let say only got 100-200k spare cash, wah lau eh top up simi sai…..i might even consider BRS lor whahahaha

 

[junlove]

So far 4 of my parents' siblings who have passed away all died before 80 (ranging from 50's to 70's). 4 grandparents only one lived till 90+ the other 3 was 60's 70's. So that's 1 out of 8 lived till 90's. What's the chance that I will live past 80? I already have lots of health issues at mid 40's, that's why I'm leaning towards Basic plan.

Funny hor, this scheme is like benefit those uber genes and healthy ppl. Same thoughts, family genes and personal health IF not so good, then forget it, BRS or FRS suffice. Got spare liquidity can do other investments.

 

[anddrool]

lets do a simple comparison before you decide. my comparison is going to be fair. it looks at the winners on both sides.

let me qualify this: bbc is right. if you are alone in this world and dont have even nephews and nieces to give you money, yes standard is your choice. he is also correct that as long as you are alive, basic will never beat standard, if you are the centre of the universe. it is only through bequest that basic can be better than standard.

my analysis is based on you and your kids as one entity. your kids getting your cpf is as good as you getting your cpf.
lets choose a ra of frs 200k at 55. at 65, you would probably have 300k .

at 65, standard gives about 1630 a month and basic gives 1490 a month . so standard is better.

standard earns no interest for yourself. basic earns 4% for maybe 250k, or 10k per year.

for the first few years, standard give you 140 a month extra and or 1.6k extra a year, but you lose 10k of interest.

from 65 to 80
because you are drawing down at a higher rate and you are not earning any interest, your cpf hits 0 at 80. the gap between basic and standard opens up at this stage to a max of 120k. in other words the value of basic is 120k more than that of standard at 80. this is the max. as bbc have rightly mentioned, you will never live to see this 120k

for 80 to 88
after 80, standard would have depleted its principal. but you are still drawing payout. you are drawing money from nothing. so standard starts to catch up with basic. at 88, the bequest amount of basic would have dwindled to the extent that the higher monthly payout of standard overtakes the bequest.

from 88 onwards, standard is better than basic. a point to note is that at 90, there would be nothing left to bequest for basic. the gap between standard and basic will open up from this point on till you die. the gap increases by 1.6k a year excluding interest. so if you live till 98, you would have gained 16k without interest. you want to include interest? tell me what your rate is and i can factor that in

based on this scenario, you go decide which is best for you

For basic, there is still bequest at age 90.
Only RA is depleted. The CPF life basic premium(10-20%) is still there. Whatever remaining premium will be given to nominee.

 

[dork32]

Funny hor, this scheme is like benefit those uber genes and healthy ppl. Same thoughts, family genes and personal health IF not so good, then forget it, BRS or FRS suffice. Got spare liquidity can do other investments.

for me, it is not a matter of how long i can live. i dont have to factor that in. i will still go for ers basic.

if i die at 67, yes i cannot finish spending my cpf. but it will be given to my kids. they can spend it for me

if i die at 100, i would be much better off if i had gone standard. but the irr of basic is also very decent. it will be much higher that the 4% sa interest. i still win, but i win less.

if i go brs and i die at 67. i get to enjoy the full sum. but if i still alive at 95, my payout is 750 a month, that one quite bad.

 

[dork32]

The number 80 is based on parents and relatives average they gone? You do survey and conclude for you should be same around 80?

no, i dont have anything to back up the number 80. 80 is the worst case for standard. you lose big if you die at 80. looking at the people that died, i think 80 is a reasonable age to die

 

[sohguanh]

Funny hor, this scheme is like benefit those uber genes and healthy ppl. Same thoughts, family genes and personal health IF not so good, then forget it, BRS or FRS suffice. Got spare liquidity can do other investments.

All along the cpf scheme is designed to benefit long life ppl. Those with shorter lifespan always super rugi. As for argument like you die early your monies go to your offspring is a separate issue IMHO. For those with no offspring then how?

My thinking is somehow a middle path need to be reached for cpf scheme to also consider for the fact some ppl got short life and they be not shortchanged compared to those super long life. One way is for those living long life but suffering terminal illness allow them to end their life earlier (think euthanasia). This bring down the total number of long life ppl and less taking from the pool.

 

[iceblendedchoc]

Gifts are clearly better than bequests. Is there anyone who prefers $1,000 years from now instead of $1,000 today?

Whatever your gift and bequest giving objectives are it makes absolutely no sense to treat CPF and CPF LIFE in isolation, separate from all other wealth and retirement income. A dollar is a dollar! Or the fancy way to say that is that money in hand is fungible. It doesn't matter if the gift or bequest dollar comes from CPF, some other pool of assets, or some combination. But this thread has lots of people suggesting that clinging to a slower declining (but still declining) residual — with permanently lower lifetime retirement income — in CPF LIFE is a sensible goal in and of itself. That's illogical! If you want to give gifts and bequests then all gifts and bequests count, not just the relatively small bequest that might speculatively come only from CPF LIFE if you happen to die early enough.

Unless you're practically broke, or plan to be practically broke. Then CPF LIFE is all you've got financially.

Actually, if anything, the government lately suggests members ought to consider the CPF LIFE Escalating Plan first. The government isn't wrong about the fact the CPF LIFE Escalating Plan is the only payout plan that can possibly support a stable real lifestyle for all of an individual's retirement years predominantly or exclusively from CPF LIFE income.

Well, "savvy" isn't the first word that comes to mind in this thread either.

But wouldn't it be even more wonderful if you hand them more money now, or sooner? Or at least invest more dollars sooner in prudent long-term vehicles that are better suited to the longer time horizons that your nieces and nephews have?

Get more money to younger generations sooner, working harder, and you turbocharge dynastic wealth accumulation. Stronger longevity insurance is a super useful tool to liberate you to do exactly that.

I don't think BBCWatcher has recommended any specific CPF LIFE payout plan in this thread. In specific individual circumstances BBCWatcher might recommend a particular payout plan. BBCWatcher and his spouse don't expect to choose their CPF LIFE payout plans until their respective age 69 years 10 months, and neither has reached that age yet. And neither has made any firm decision yet about which plan they'll choose. It'll depend on their respective health situations at that point in time.

Living in Singapore with a BRS-level CPF LIFE income stream as one's sole source of income (and no tappable wealth) would not be luxurious.


But that doesn't make any logical sense if you even think about it for a minute, does it?

CPF LIFE consists of only two parts: a monthly income for the life of the member and a possible residual when the member dies. These dollars are temporally distributed, and money has zero value (expires) to dead people. There's no logical reason to assume that $1,040 distributed to a CPF member's nominee 12 months from now has the same net present value as $1,000 distributed to the CPF member today, much less the same utility to anyone. For sure, guaranteed, money not paid to the CPF member him/herself has no value to the member him/herself. And there's also no logic in assuming that CPF LIFE is the only financial ingredient in gifts, bequests, and retirement income. Your predicates just don't make sense. They aren't general validity assumptions, not even close. Different individuals and families have different personal discount rates (that can diverge wildly from market and CPF interest rates), different liquidity constraints, different relationships (for example, greater or lesser difficulties requesting money either way), different actual money flows (both ways), different real lifestyle expectations and needs. It's all over the map. I don't know how to value the wonderful additional fancy buffet(s) a CPF member can enjoy with her grandchildren while she's still alive (!) that can she can better afford thanks to a CPF LIFE Standard Plan selection instead of a CPF LIFE Basic Plan selection (for example). Don't pretend you know either. You shouldn't even try. Those moments of extra joy together could be effectively priceless to that family. But apparently you want to assume you know the value of that joy, and the value is whatever your IRR calculator says it is. Sorry, that's just not a useful analysis when trying to shuffle dollars across the death of the CPF member. Death is a rather important event!

end of day, it depends on individual lifestyle upon retirement. I will get ERS and standard plan as it will ease my retirement entry into certain countries which required show proof of certain standard of monthly income (US1k per month) or alternatively lump sum deposit into their real estate, set up business and hire a few locals or bank them in fixed deposit (which i am not very keen on).

I only spent $ 200 on food for the entire family every month ( We only eat vegetables).

But for travelling ,we spend on business class tickets minimum, at times first class tickets if the destination has first class, suite hotel stays but i am quite sure this will go out of the window once i retire.

 

[iceblendedchoc]

All along the cpf scheme is designed to benefit long life ppl. Those with shorter lifespan always super rugi. As for argument like you die early your monies go to your offspring is a separate issue IMHO. For those with no offspring then how?

My thinking is somehow a middle path need to be reached for cpf scheme to also consider for the fact some ppl got short life and they be not shortchanged compared to those super long life. One way is for those living long life but suffering terminal illness allow them to end their life earlier (think euthanasia). This bring down the total number of long life ppl and less taking from the pool.

the only thing is we dunno how long we can live. But instead of planning for dying young, plan for dying old

 

[sohguanh]

the only thing is we dunno how long we can live. But instead of planning for dying young, plan for dying old

That is the approach currently but I am asking a middle path cannot be reached for both dying young and dying old? It must be very rigid only cater for dying old? Those dying young does contribute to the pool to feed those dying old so shouldn't a better treatment be made out for them i.e those dying young?

 

[iceblendedchoc]

That is the approach currently but I am asking a middle path cannot be reached for both dying young and dying old? It must be very rigid only cater for dying old? Those dying young does contribute to the pool to feed those dying old so shouldn't a better treatment be made out for them i.e those dying young?

that is why the risk is pool, actuaries already calculated. If you live long and withdraw more than you put in, congratulations! No matter BRS, FRS , ERS , i recalled the breakeven is like 85 or 87 years old, if you start payout at 65. For those who want to defer payment and start at 70, will need to live longer to breakeven.

 

[sohguanh]

that is why the risk is pool, actuaries already calculated. If you live long and withdraw more than you put in, congratulations! No matter BRS, FRS , ERS , i recalled the breakeven is like 85 or 87 years old, if you start payout at 65. For those who want to defer payment and start at 70, will need to live longer to breakeven.

You still don't get my earlier suggestion. The pool scheme is flawed and tilted heavily to long life ppl favor. It give little benefits (if any) to short life ppl. This is the issue I am trying to address.

Anyway nevermind thanks for replying.