FRS or ERS?

[chong18]

I'm now more inclined to choose ERS over FRS, will decide basic or standard closer to 70 yo depending on health condition and also whether my nieces/nephews are nice to me lol!! If not why leave bequest for them. Rather get more monthly payouts for myself and benefit the pool.

 

[Okenba]

As of now, I am not convinced by escalating.

There are studies about retirement spending that show a decrease in spending over time.
(After an initial increase, presumably to do bucket list stuff.)
If we subscribe to that, no real need to have increasing payouts over time.
One might even say it is better to have higher payouts early so that you can enjoy yourself while you are still young and healthy and mobile.

If we don't subscribe to that but think that inflation protection is important, then escalating also doesn't seem to add up. 2% increase each year when FRS is increasing by 3.5%?
If FRS is increasing by 3.5%, then they are projecting inflation at about that number.
2% is hardly enough to offset this.

Either way, doesn't quite make sense to me.

 

[henrylbh]

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?

Yes you can opt out of CPFL anytime from 65 to the default payout starts at age 70. The estimated monthly payout can be obtained from the CPF Life Estimator. So you can compare with any private annuity insurance in the market. Believe me, none is better than CPFL. So better to stick and bet on CPFL and decide on the next stage of bet based on the 3 plans available which will depend on your life expectancy, dependents/beneficiaries and inflation and how much you depend on cpf monthly payouts, discounting sudden death. If you are alone and for yourself only, you still need to take a bet on whether fixed or escalating payout is suitable. Whichever plans, my guess is you need to live beyond 93/95 to get back what is yours before starting monthly payout based on prevailing RA rate of interest.

 

[iceblendedchoc]

personally i lean towards standard plan over basic and escalating in such order.

 

[BBCWatcher]

if you have followed us before, standard is better than basic if you survive beyond 87- 88 years old

Here’s a summary comparison of these two plans (under current rules):

1. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for the member, the owner of the CPF Retirement Account.

2. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for at least one person (and never worse for anyone) after the point when the Basic Plan’s residual reaches zero.

3. The CPF LIFE Basic Plan might or might not be better for the CPF member’s nominee(s) after payouts start and before the Basic Plan’s residual falls to zero. This answer chiefly depends on what happens to the monthly payment delta between the Standard Plan and the Basic Plan, the financial relationship between the member and nominee(s), and the member’s date of death. The answer is also somewhat sensitive to personal discount rates, inflation rates, alternative investment returns, member and nominee liquidity positions, and whether any nominees are subject to inheritance tax — as notable examples.

 

[BBCWatcher]

There are studies about retirement spending that show a decrease in spending over time.

Which studies?

The studies I’m familiar with characterize real retirement spending as typically “double humped.” Typically there’s higher real spending in early retirement, lower in middle retirement, and higher again in late retirement. The goods and services purchased in these segments vary to some extent. Inflation underlies the entire retirement period. And of course these are typical/median experiences, not universal ones.

One might even say it is better to have higher payouts early so that you can enjoy yourself while you are still young and healthy and mobile.

OK, good idea: let’s enjoy life while we can and (I would add) more generously support the family members and causes we care about earlier. But you’re forgetting a super important fact at least for most people in this forum (we hope!): you’ll have lots of retirement savings, and your ability to confidently enjoy the lifestyle your savings can buy (and to give away more money) is greatly enhanced when there’s reliable escalating life annuity income ahead of you.

You shouldn’t consider a CPF LIFE payout plan in isolation. Unless you’re otherwise practically broke, or plan to be. Then you have nothing else to consider holistically.

If FRS is increasing by 3.5%, then they are projecting inflation at about that number.

Nope. BRS/FRS/ERS increases are fundamentally pegged to Singapore’s rising nominal wages, not to the prices of goods and services (inflation). On average wages have been rising faster than inflation in Singapore. We should hope that continues. One reason is that the composition of the Singaporean citizen workforce has been “upskilling” for many decades.

2% is hardly enough to offset this.

Whether it’s enough or not, 2% per year helps defend against inflation while 0%/year doesn’t help one bit.

 

[royalmix]

Here’s a summary comparison of these two plans (under current rules):

1. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for the member, the owner of the CPF Retirement Account. (False)

2. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for at least one person (and never worse for anyone) after the point when the Basic Plan’s residual reaches zero. (False because of the point)

3. The CPF LIFE Basic Plan might or might not be better for the CPF member’s nominee(s) after payouts start and before the Basic Plan’s residual falls to zero. This answer chiefly depends on what happens to the monthly payment delta between the Standard Plan and the Basic Plan, the financial relationship between the member and nominee(s), and the member’s date of death. The answer is also somewhat sensitive to personal discount rates, inflation rates, alternative investment returns, member and nominee liquidity positions, and whether any nominees are subject to inheritance tax — as notable examples. (False)

 

[BBCWatcher]

I'm now more inclined to choose ERS over FRS, will decide basic or standard closer to 70 yo depending on health condition….

A very sensible remark!

Personally I’m highly inclined to select the Escalating Plan if I’m in decent or better health (fairly assessed) when I’ll need to make a plan selection at about age 69 years 10 months. And of course I’ll wait as long as allowed to make that decision so I’ll have as much insight into my health situation as possible. If I’m in poor health at that time then the Basic Plan is probably the way to go since I still don’t expect to need the money while I’m alive and a nominee could probably end up with a higher residual when I likely depart earlier.

 

[BBCWatcher]

All 3 numbered paragraphs I wrote upthread are 100% accurate, truthful statements of fact. You can’t just claim “False! Fake news!” without explaining exactly which word or detail is inaccurate, and why.

 

[dork32]

Here’s a summary comparison of these two plans (under current rules):

1. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for the member, the owner of the CPF Retirement Account.

2. The CPF LIFE Standard Plan is always better than the CPF LIFE Basic Plan for at least one person (and never worse for anyone) after the point when the Basic Plan’s residual reaches zero.

3. The CPF LIFE Basic Plan might or might not be better for the CPF member’s nominee(s) after payouts start and before the Basic Plan’s residual falls to zero. This answer chiefly depends on what happens to the monthly payment delta between the Standard Plan and the Basic Plan, the financial relationship between the member and nominee(s), and the member’s date of death. The answer is also somewhat sensitive to personal discount rates, inflation rates, alternative investment returns, member and nominee liquidity positions, and whether any nominees are subject to inheritance tax — as notable examples.

1. you are right standard is always better for the individual. not having children is always better for the individual.

2. you are right. can you tell us when the cut over is?

3. if you are alone in the world, you are right again.. if you have kids. your kids will lose 120k if your are on frs standard if you die at 80. 120k is not better, what is?

 

[dork32]

bbc is always telling half truths. he will not show what is on the other side to boost his argument. this is especially if it looks uglg

 

[chong18]

I think the majority will choose FRS Standard plan, the pool should have sufficient funds to support those that live till 95-10x.

 

[DevilPlate]

bbc is always telling half truths. he will not show what is on the other side to boost his argument. this is especially if it looks uglg

He is not a qualified financial advisor anyway...so take his words with a pinch of salt and for reference only.

 

[dork32]

He is not a qualified financial advisor anyway...so take his words with a pinch of salt and for reference only.

I oso not qualified. Just put your facts out on both sides. And let the people decide

 

[dork32]

I think the majority will choose FRS Standard plan, the pool should have sufficient funds to support those that live till 95-10x.

You don't have children. It is natural you don't care about bequest. Most people have children

 

[chong18]

You don't have children. It is natural you don't care about bequest. Most people have children

No actually I care about bequest even if I don't have kids. I'm just saying most ppl will choose standard because it looks like that's the plan that is encouraged by govt. Not everyone is savvy enough to know the difference.
If I pass on at 80 or earlier I would rather my nieces and nephews get the 120k instead of some random strangers, provided I have sufficient funds outside of CPF to last till I die.

 

[sohguanh]

No actually I care about bequest even if I don't have kids. I'm just saying most ppl will choose standard because it looks like that's the plan that is encouraged by govt. Not everyone is savvy enough to know the difference.
If I pass on at 80 or earlier I would rather my nieces and nephews get the 120k instead of some random strangers, provided I have sufficient funds outside of CPF to last till I die.

Let's say you know in advance you will die before age 70. Which frs or ers or XXXs will you choose?

 

[chong18]

Let's say you know in advance you will die before age 70. Which frs or ers or XXXs will you choose?

Choose the lowest BRS and spend the money all on myself..

 

[sohguanh]

Choose the lowest BRS and spend the money all on myself..

Precisely that is my point I am trying to make (or hint at) very early on when this thread is created.

 

[DevilPlate]

Precisely that is my point I am trying to make (or hint at) very early on when this thread is created.

u mean your crystal ball so good that can tell u yr death date?