FRS vs ERS

[dork32]

Some like SARS, ebola or 'super dengue' may kill some but that's it.

we are lucky it is sars and not flu. sars is not so contagious.

spanish flu killed tens of million world wide. hitler only managed to kill 6 million jews.

 

[Merg91]

In medical schools, your answer guarentees a repeat in microbiology exam.

we are lucky it is sars and not flu. sars is not so contagious.

spanish flu killed tens of million world wide. hitler only managed to kill 6 million jews.

 

[Merg91]

The centenarians may not be the norm now or you.


In 1990, they numbered 50.

According to the Department of Statistics (DOS), there were 1,200 Singaporeans aged 100 and above as of last June, so the proportion of centenarians among Singaporeans has surged by 18 times between then and now.
https://www.straitstimes.com/singap...tenarians-eyes-unlocking-secrets-to-longevity

... ignoring statistics for now, do you think you'll live till 100 yo? If you could share what is it that makes it a possibility ?

What you said below is what brought the graph to what it is, male just <80 as of 2017. What's the enabler from there on that the expectancy will be 100 very very soon ?

 

[lifeafter41]

XIRR isn't the answer to all questions. It's useful as a returns on investment calculation, yes. But in reality, money received at different points of time has different values to a CPF Life member.

We need to remember that CPF Life needs to cater to the lowest common denominator - people that depend fully on their CPF Life as their retirement income, that may not even have met the FRS. Perhaps they have been low income all their working life or perhaps they have been scammed out of all their cash balances. If you are rich or middle income, you will probably have other source of retirement income outside of CPF Life, so you can afford to play around with various CPF Life options to try to maximize returns that leaves some residual amount behind as inheritance.

For those that have no other source of retirement income, however, they will need to prioritize themselves. The differences in payout between the various plans become more significant and leaving behind a residual becomes less important.

Agreed on this POV.
For some the initial payout is more critical to them then the bequest,
Maybe to them, their children may not even be in a position to take care of them financially.

 

[SBC]

Getting close to 50 now.

SA just reached 200k. Should I target FRS or ERS?

 

[romeo88]

Have you heard or seen a bell curve ?

The centenarians may not be the norm now or you.


In 1990, they numbered 50.

According to the Department of Statistics (DOS), there were 1,200 Singaporeans aged 100 and above as of last June, so the proportion of centenarians among Singaporeans has surged by 18 times between then and now.
https://www.straitstimes.com/singap...tenarians-eyes-unlocking-secrets-to-longevity

 

[Merg91]

Newer medical technologies :
Google & read more before brushing these off.
And further to the improvements / wider uses later.

1.
CRISPR : may cure genetic diseases

2.
CAR-T therapy :cancer recurrence /remission

 

[Merg91]

The figures are there.
Told you it may be the norm in the years later.

Have you heard or seen a bell curve ?

 

[romeo88]

All I see is straw man and so far you don't understand what you're saying, just parroting what your master is telling you.

Yes, you told me and I heard you, limpeh.

The figures are there.
Told you it may be the norm in the years later.

 

[celtosaxon]

Here are the breakeven points that I have calculated (includes all payments and the bequest, if any, at each age).

BRS:

Up to age 86: Basic has a higher IRR
Age 87-98: Standard has a higher IRR
Age 99+: Escalating has a higher IRR

FRS:

Up to age 88: Basic has a higher IRR
Age 89-95: Standard has a higher IRR
Age 95+: Escalating has a higher IRR

ERS:

Up to age 87: Basic has a higher IRR
Age 88-93: Standard has a higher IRR
Age 93+: Escalating has a higher IRR

However, do note that in terms of total dollars received from start to finish, escalating is higher in all cases from age 90 onwards, believe the IRR is still lower because of time value of money differences.

This all assumes payments start at age 65.

At age 70, Basic has an IRR of 3% for FRS/ERS and 3.4% for BRS.

By age 80 the IRR for Basic has increased to 3.4% for FRS/ERS and 3.9% for BRS. It is around this time that the Standard and Escalating IRR starts to tick up above 0%.

By age 90 the IRR for Standard is 4% for FRS/ERS and 4.9% for BRS, whereas Basic is 3.5% for FRS/ERS and 4% for BRS.

In terms of getting the maximum return on your principle, clearly BRS is the winner. But before you dismiss FRS/ERS, compare it against other guaranteed returns and see if it is worth it.

The bigger decision in my mind is between Basic/Standard/Escalating, and that will depend on many factors that are specific to each individual.

All I see is straw man and so far you don't understand what you're saying, just parroting what your master is telling you.

Yes, you told me and I heard you, limpeh.

 

[henrylbh]

Whatever the plan and IRR mean nothing, only the age you uplorry. You decide on the bet.

Everyone must contribute to the pool. For it to be sustainable, some must end up taking less and some more from their contributions that pool. In deciding the life payout, the manager of the pool is also taking a bet

 

[celtosaxon]

With Basic you are only partially in the pool, whereas Standard & Escalating you are “all in” - to use the gambling term.

While nobody can predict what age they will check out, you can consider your lifestyle and your family genetic history.

FRS/ERS Basic has a 3-3.5% return throughout, which is still decent compared to guaranteed returns outside.

To me the higher return on Standard/Escalating after 90 is not compelling enough to make me want to take that longevity bet, plus the larger bequest (if triggered) fills an important gap in my situation.

Whatever the plan and IRR mean nothing, only the age you uplorry. You decide on the bet.

Everyone must contribute to the pool. For it to be sustainable, some must end up taking less and some more from their contributions that pool. In deciding the life payout, the manager of the pool is also taking a bet

 

[BBCWatcher]

This all assumes payments start at age 65.

Age 70 payout start would be interesting. According to CPF, a majority of CPF members defer payouts.

In terms of getting the maximum return on your principle, clearly BRS is the winner.

Inartfully phrased. In terms of getting the maximum return per dollar of input, BRS is the winner. In terms of getting the maximum total return, you have to assess your next best investment alternative(s) and your ability to execute them. CPF LIFE is very attractive, though. (See below.)

The bigger decision in my mind is between Basic/Standard/Escalating, and that will depend on many factors that are specific to each individual.

We can be a little more specific. Everyone not choosing Escalating needs that much stronger, alternative financial defenses against inflation. That's possible, but you must actually raise those stronger, alternative financial defenses against inflation.

With Basic you are only partially in the pool, whereas Standard & Escalating you are “all in” - to use the gambling term.

No, not actually. None of the payout plans are "all in" since they all include residuals. An "all in" payout plan is a pure life annuity with zero residual. That type of payout plan existed when CPF LIFE was first introduced and was called the "Income Plan," but it was only available through 2012. A few people are on that plan now.

(Insert my arguments in favor of a new "Partner Plan" here.)

While nobody can predict what age they will check out, you can consider your lifestyle and your family genetic history.

And other wealth, if any, which is a much bigger factor. If you can afford to play games and take a little longevity risk because you have other and reasonably substantial wealth, then you try to eke out a little more average return from CPF LIFE. But if you're trying to protect against long tail risks, you should treat CPF LIFE like the foundational longevity insurance program it is. Even a few obese smokers beat the odds and live past 100.

FRS/ERS Basic has a 3-3.5% return throughout, which is still decent compared to guaranteed returns outside.

The word I'd use is "excellent" or even "unique." Nobody else of even minimal quality is offering guaranteed Singapore dollar returns anywhere near these percentages.

To me the higher return on Standard/Escalating after 90 is not compelling enough to make me want to take that longevity bet, plus the larger bequest (if triggered) fills an important gap in my situation.

Just be aware that the residual declines in nominal terms once payouts start, declines even faster in real terms, and falls to zero if you merely live long enough. In my view CPF LIFE is a much more useful tool when purposed as a defender of a bequest (from other assets) -- and, better yet, lifetime gifts -- not as a deliverer of a bequest.

Relatedly, you don't control the precise or even approximate timing of a bequest. You do control the timing of lifetime gifts, and you can make the biggest lifetime gifts if you have adequate (and highly preferably escalating) longevity insurance. Timing is often extremely important to your loved ones. For example, if a grandchild is admitted to a prestigious university, and there's a tuition bill, it does no good to say "wait until I (grandpa) die, then you can go, if there's still enough residual." This doesn't actually work. This, too, is an aspect of the time value of money, a very, very important one.

 

[celtosaxon]

Age 70 payout would be interesting.

That is on my to do list. But with a 7% increase each year, I can’t see how it wouldn’t be a good idea to wait.

Maximum return per dollar of input

True, I am comparing input vs. output in a vacuum, but knowing that helps one compare with outside alternatives. That is what convinced me that ERS is worthwhile. Knowing the break-even points also helps one assess the opportunity costs they are incurring between payout plans. I think everyone wants to choose the option that has the greatest odds of making the most out of their hard earned CPF savings.

... alternative financial defenses against inflation.

Agree. Let’s get even more specific: beyond CPF you need SRS and you need an ETF portfolio. Assuming CPF LIFE covers 40% of your income needs, the combined balances in your SRS and ETF portfolio should equal 40-50x your annual CPF LIFE payout so that you can manage a 3-4% withdrawal rate with minuscule risk of total depletion.

None of the payout plans are “all in”

I see your point. But clearly, Basic is “less in” than the others.

... residual declines in nominal terms

I tend to look at this from a “total returns”
perspective. The reason is because if I had to completely self-fund my retirement, longevity risks would be self-insured. I would have a balanced stock/bond portfolio and apply a 4% withdrawal rate. Sure, it’s not as safe as CPF LIFE, but the risks are not significant. With CPF LIFE in the mix, it just supplants a portion of the bonds I would have needed in a self-funded scenario.

 

[dork32]

Relatedly, you don't control the precise or even approximate timing of a bequest. You do control the timing of lifetime gifts, and you can make the biggest lifetime gifts if you have adequate (and highly preferably escalating) longevity insurance. Timing is often extremely important to your loved ones. For example, if a grandchild is admitted to a prestigious university, and there's a tuition bill, it does no good to say "wait until I (grandpa) die, then you can go, if there's still enough residual." This doesn't actually work. This, too, is an aspect of the time value of money, a very, very important one.

this is trash, as i have mentioned it many times

first, escalating gives a lower payout at the start. so if you die at 75, you will be getting less every month and less bequest for your kids compared to basic. so what life time gift are you tokking abt. basic allows you to give a bigger lifetime gift than escalating in this case.

second, if you choose standard, yes, the payout is higher than basic. it is 130 more per month on frs. i really like to see this 130 per month see your grandchild through prestigious uni or buy a home for them etc.

yes cpf life basic is the fairest of the three schemes. it works well, this is why many of us would choose it. cpf is our money, we should spend it, but if we cannot finish spending it, our kids will spend it for us. this is a very fair scheme. i do not have to pay for others if i die old. i dont not have to leech on others if i die very old.

 

[henrylbh]

FRS/ERS Basic has a 3-3.5% return throughout, which is still decent compared to guaranteed returns outside.

What return have you if you uplorry about 81 or 82? The return is zero, if not negative, if you opt for BP or EP.

 

[maple96]

Age 70 payout start would be interesting. According to CPF, a majority of CPF members defer payouts.

When did CPF share this piece of stats, ie a majority of CPF Life members defer payout? Obviously spouting rubbish again with no facts to support

Minister JT only talked about RSS, extracts below:

"7. Common reasons for deferment

Minister Teo also added that 60% of eligible members who reached retirement age in 2017, didn’t ask to begin their payouts.

She cited at least 5 common reasons for deferment:

1. Have other savings to draw from
2. Still in the workforce
3. Want to earn higher interest
4. Didn’t know they can start earlier
5. Didn’t inform CPF Board

Did the majority of members gave reasons #4 or #5 for deferment?

 

[maple96]

What return have you if you uplorry about 81 or 82? The return is zero, if not negative, if you opt for BP or EP.

the "frog in the well" jumped out of the well, the well managed to capture the frog here.

moral of the story: ?

he has a motive for choosing Basic Plan for his wife so if his spouse die first, he can get more bequest to be fair to him, cos if he die first, his wife gets more (he is not CPF member/no CPF Life)

 

[celtosaxon]

If you opt for Standard or Escalating, you are correct, 0% return up to age 80/81.

Basic is the only one where you will realize at least 3.4% return at age 80/81.

What return have you if you uplorry about 81 or 82? The return is zero, if not negative, if you opt for BP or EP.

 

[BBCWatcher]

I tend to look at this from a “total returns” perspective. The reason is because if I had to completely self-fund my retirement, longevity risks would be self-insured.

OK, but you don't have to self-insure and won't if you have a life annuity (such as CPF LIFE) in the pipeline. Since you have a life annuity in the pipeline, what can you do with it? Read on....

I would have a balanced stock/bond portfolio and apply a 4% withdrawal rate. Sure, it’s not as safe as CPF LIFE, but the risks are not significant. With CPF LIFE in the mix, it just supplants a portion of the bonds I would have needed in a self-funded scenario.

With a reliable life annuity in the mix, you're no longer restricted to a safe withdrawal rate. You're free, or at least more free, to give a grandkid 13.5% of your wealth on August 15, 2032, for tuition at a prestigious university, for example. Is that lifetime gift-ability worth something, or even a lot? Hell yes! It sure is worth a lot to the grandkid, and that's just one example.