New Cpf Life Calculation

[OngHuatHuat]

Add 900 each year to account for additional interest during first 10 years of compounding period




Monthly payout 1330 (mean of 1280 -1380)
Interest during payout period 0.04


Assumption during payout period:


Receive yearly payout and remaining amount compound at the end of each year
Assume payout till 90 years old.

 

[OngHuatHuat]

https://drive.google.com/open?id=11ulLVRXr7F-Z37bY3yRf2knOTR_l_n8OEyY2aaBUooc

I uploaded my Excel file, for those who are interested to estimate interest rate during payout period of 20 years or 25 years can change the number for interest during payout period, the number will readjust accordingly.
Monthly payout also can be adjusted by adjusting the number beside the monthly payout column.

 

[henrylbh]

I have a detailed calculation on worksheet. When I key 1330 based on your example into my table, the payout of 1330 will last to about 92 yo 5 months. If I delete the additional interest, the payout will last to 88 yo 6 months.

My calculation assume no deduction on RA for LIF.

I use this table to estimate the revised monthly payout on my father RA as I used to top up his RA and my estimate is not far from the actual revised monthly payout.

 

[henrylbh]

Based on calculation since payout of 1330 will last to 92 yo 5 months, I guess there is no real need for all of us to gamble on CPF Life (and most will lose )

 

[The_Davis]

So must stay alive till what age to win?

 

[OngHuatHuat]

Payout period estimate interest I think is between 3-4 % only. Higher than what i calculated last year.

I have a detailed calculation on worksheet. When I key 1330 based on your example into my table, the payout of 1330 will last to about 92 yo 5 months. If I delete the additional interest, the payout will last to 88 yo 6 months.

My calculation assume no deduction on RA for LIF.

I use this table to estimate the revised monthly payout on my father RA as I used to top up his RA and my estimate is not far from the actual revised monthly payout.

 

[OngHuatHuat]

Depending on your expected interest rate.
You can play around with it with different rate.
If 4 %, think 89 years old.

So must stay alive till what age to win?

 

[henrylbh]

So must stay alive till what age to win?

If present rates, including additional interest, stay for RA, you need to live till 92 to gain.

 

[BBCWatcher]

CPF LIFE is simply a modest amount of longevity insurance, to protect against outliving your savings. The age-related arguments people try to make are getting tedious. They completely miss the whole point of insurance.

If you think CPF LIFE isn't a great deal, then just go compare it with the best, comparable annuity that the private sector has to offer. And you won't find anything comparable in the private annuity market that's as good a deal as CPF LIFE. When I checked recently it appears to me that CPF LIFE ranks among the best of the private sector annuities offered in the United States, the largest and most efficient financial market in the world. It's really very good value-for-premium.

The government has decided that practically everybody needs a little longevity insurance. CPF LIFE annuities are not huge by any means. And this forum provides tons of evidence that the government is correct, with all the real stories about elder parents and grandparents becoming destitute, many even before age 70. So welcome to a modern, developed country that is trying to solve that elder destitution problem -- cautiously, maybe too cautiously. (Most developed countries offer more generous, more universal longevity insurance. And more expensive.)

 

[qhong61]

CPF LIFE is simply a modest amount of longevity insurance, to protect against outliving your savings. The age-related arguments people try to make are getting tedious. They completely miss the whole point of insurance.

If you think CPF LIFE isn't a great deal, then just go compare it with the best, comparable annuity that the private sector has to offer. And you won't find anything comparable in the private annuity market that's as good a deal as CPF LIFE. When I checked recently it appears to me that CPF LIFE ranks among the best of the private sector annuities offered in the United States, the largest and most efficient financial market in the world. It's really very good value-for-premium.

The government has decided that practically everybody needs a little longevity insurance. CPF LIFE annuities are not huge by any means. And this forum provides tons of evidence that the government is correct, with all the real stories about elder parents and grandparents becoming destitute, many even before age 70. So welcome to a modern, developed country that is trying to solve that elder destitution problem -- cautiously, maybe too cautiously. (Most developed countries offer more generous, more universal longevity insurance. And more expensive.)

I guess cpf life at least prevent us needing to collect cardboard at later age.

 

[dork32]

a system that requires you to break even at the age of 92 is not a great deal.

even with the old ra system, the payout will not end at 70. it will end when you are 82. hence whether there is cpf life or not, you will not be a destitute at 70.

i do agree that it is good to have some insurance should you attain immortality.

 

[Shion]

No way to win

 

[OngHuatHuat]

I guess if you take your expected interest to a super high level, there will be a point the money inside keep growing.

A very misleading assumption, people thought what happen during compounding period will happen during payout period and this is exactly what had happened.

I LOL at people that add that 900 during the payout period coz nobody has promised anything about that 900. It is just the old story over and over again i.e. People demand very high interest + additional interest some more during the payout period.

The most important thing about cpf life is about sustainability of payout at higher age, but you all seems keep harping how to break even at 4 %
4 % not enough, someone add in the additional 900 which is supposed to be bonus interest to make it even harder to break even just to justify his point.

a system that requires you to break even at the age of 92 is not a great deal.

even with the old ra system, the payout will not end at 70. it will end when you are 82. hence whether there is cpf life or not, you will not be a destitute at 70.

i do agree that it is good to have some insurance should you attain immortality.

 

[OngHuatHuat]

I believe for this model to work, during payout period , the interest should lie between Oa and SA interest. Just think about it.

If you want interest rate to go higher, the only way to achieve it is via depreciation of sgd, which is what happened to ringgit now. Is that what you want to achieve higher rate?

No way to win

 

[dork32]

I guess if you take your expected interest to a super high level, there will be a point the money inside keep growing.

A very misleading assumption, people thought what happen during compounding period will happen during payout period and this is exactly what had happened.

I LOL at people that add that 900 during the payout period coz nobody has promised anything about that 900. It is just the old story over and over again i.e. People demand very high interest + additional interest some more during the payout period.

The most important thing about cpf life is about sustainability of payout at higher age, but you all seems keep harping how to break even at 4 %
4 % not enough, someone add in the additional 900 which is supposed to be bonus interest to make it even harder to break even just to justify his point.

i did not do any calculation. henry was the one that did it. The way he does his spread sheet, you cannot go wrong.

henry's comparison with the old ra system is good. it is what we have all the time. it is not some crazy schemes from usa which most of us dont even know that they exist.

cpf life basic is similar to the ra system, which makes his calculation more credible. it takes you about 85 to 88 to deplete your ra account using cpf life basic. so the 92 years that henry calculated is reasonable, considering the cpf life premium that you have paid out.

 

[dork32]

I guess if you take your expected interest to a super high level, there will be a point the money inside keep growing.

A very misleading assumption, people thought what happen during compounding period will happen during payout period and this is exactly what had happened.

I LOL at people that add that 900 during the payout period coz nobody has promised anything about that 900. It is just the old story over and over again i.e. People demand very high interest + additional interest some more during the payout period.

The most important thing about cpf life is about sustainability of payout at higher age, but you all seems keep harping how to break even at 4 %
4 % not enough, someone add in the additional 900 which is supposed to be bonus interest to make it even harder to break even just to justify his point.

there is nothing wrong with using the 4% and the extra interest. cpf life calculator uses it to estimate the bequest amount, which is the money you have left in your cpf ra.

unless you say the extra interest is because they use the money from cpf life to pay for it.

 

[dork32]

If you want interest rate to go higher, the only way to achieve it is via depreciation of sgd, which is what happened to ringgit now. Is that what you want to achieve higher rate?

this point is very correct. interest rates are affected by strength of currency. all the more we should not be comparing cpf with crazy foreign schemes.

but there are fools around that complain that i should not be talking about exchange rates when doing such comparisons.

 

[dork32]

you want to compare with epf scheme? it is more than 8% interest. wow their scheme is better than ours.

but yywin is right, if you look that the strength of their currency, you would be glad that your money is in the cpf.

 

[OngHuatHuat]

I think you really dunno what you talking about.

i did not do any calculation. henry was the one that did it. The way he does his spread sheet, you cannot go wrong.

henry's comparison with the old ra system is good. it is what we have all the time. it is not some crazy schemes from usa which most of us dont even know that they exist.

cpf life basic is similar to the ra system, which makes his calculation more credible. it takes you about 85 to 88 to deplete your ra account using cpf life basic. so the 92 years that henry calculated is reasonable, considering the cpf life premium that you have paid out.

 

[OngHuatHuat]

Ern, then might as well, use a much higher interest rate to compound and say it is very fair?

there is nothing wrong with using the 4% and the extra interest. cpf life calculator uses it to estimate the bequest amount, which is the money you have left in your cpf ra.

unless you say the extra interest is because they use the money from cpf life to pay for it.