New Cpf Life Calculation

[BBCWatcher]

how does the garmen know it is me or some other idiots?

They don't, and they cannot. There is no perfect crystal ball available.

So the government insists that you buy up to $83,000 (Basic Retirement Sum, age 55 premium, 2017 dollars) of a world class lifetime guaranteed annuity, or a benefit equivalent substitute, so that the rest of society's downside risk is limited. A pittance if you're a filthy rich invincible. (If you're complaining so bitterly about this pittance, it makes me wonder whether you are indeed rich and invincible. Bill Gates has never, to my knowledge, complained about his U.S. Social Security obligations.)

The same government helps you pony up that (up to) $83K premium by paying as much as 6% on the way there and waiving all income taxes on the premium, its interest, and its annuity proceeds. (Which is part of the CPF LIFE program, by the way, and not something you can separate out to claim that CPF LIFE is a "bad deal." The deal is the whole deal.) And by heavily subsidizing the housing that you can use to lower your CPF LIFE participation level to $83K if you wish. That's part of the deal, too.

Good grief. I guess people can complain about anything, even about genuinely terrific deals like CPF that are extremely "light touch" obligations compared to the rest of the developed world. Whatever. I agree with W1rbelw1nd. Debating the existence of these (mild) obligations is pointless. They're eminently reasonable, they exist, and they will exist. What each individual can decide is how best to optimize his/her lifetime experiences with CPF and with the rest of his/her financial strategy.

 

[Yachtmaster]

BBCWATCHER

What's with all the US here US there. Are you a US person, EP, SPR or SC?

 

[redchallenge]

i've read through the thread and I can see where both you guys' are coming from.

@dork32, you are right to (for the lack of better word, but no offense intended) moan about this lack of choices. However as BBC has mentioned, this is a total inclusion policy. I agree with you that there are a group of people out there that can do better with their CPF monies, but unfortunately there are also a large group of people that think they can do better, but cant.

While I am convinced that you belong to the former, it is safe to assume 4% guaranteed pa is a hard to beat thing for your average joe. So the question is, what if someone had over estimated his own financial management capability, draw out everything bar BRS, blew those amount in years?

of course the garmen cannot ignore. there are many out there that squander everything away. how does the garmen know it is me or some other idiots?

As you wrote previously, the answer to that is, they dont know. which is why they can't take chances. If we were to read about "idiots" like them, all we can say is, "too bad lor". But the gov cant do that.

Maybe we can attribute this to a lack of flexibility of the CPF scheme, but as we Singaporeans are a kiasu bunch of people. The generation direction is; when in doubt, just cover everything first then say lor. As for people like you that believe you wont be destituted by whatever means (no right and wrong there, i must emphasize), confident that they can do better with the monies, the best work around now is as you said, draw the FRS/BRS, then do whatever you want with the leftover.

 

[dork32]

So the government insists that you buy up to $83,000 (Basic Retirement Sum, age 55 premium, 2017 dollars) of a world class lifetime guaranteed annuity, or a benefit equivalent substitute, so that the rest of society's downside risk is limited. A pittance if you're a filthy rich invincible. (If you're complaining so bitterly about this pittance, it makes me wonder whether you are indeed rich and invincible. Bill Gates has never, to my knowledge, complained about his U.S. Social Security obligations.)

That's where you are totally wrong. gates is filthy rich, the way contribute to charity, he does not care one little bit about whether he receives anything or not. it just does not get into the thick numb skull of yours. i have much less than him. i have to a lot more careful with what i have.

 

[dork32]

The same government helps you pony up that (up to) $83K premium by paying as much as 6% on the way there and waiving all income taxes on the premium, its interest, and its annuity proceeds. (Which is part of the CPF LIFE program, by the way, and not something you can separate out to claim that CPF LIFE is a "bad deal." The deal is the whole deal.) And by heavily subsidizing the housing that you can use to lower your CPF LIFE participation level to $83K if you wish. That's part of the deal, too.

i do not blame the garmen for everything. watch my lips. i appreciate the cpf system. i do not like cpf life. also i did not receive one cent of subsidy from garmen for my housing.

 

[dork32]

i've read through the thread and I can see where both you guys' are coming from.

@dork32, you are right to (for the lack of better word, but no offense intended) moan about this lack of choices. However as BBC has mentioned, this is a total inclusion policy. I agree with you that there are a group of people out there that can do better with their CPF monies, but unfortunately there are also a large group of people that think they can do better, but cant.

you are right. i can only suck thumb. i can only complain.

but i want to reiterate this. i dont see myself consistently beating 4% sa/ra interest. what we are trying to do here is to highlight that the breakeven age vs the old rss scheme is 92. we feel it is not easy to beat this age.

 

[dork32]

Maybe we can attribute this to a lack of flexibility of the CPF scheme, but as we Singaporeans are a kiasu bunch of people. The generation direction is; when in doubt, just cover everything first then say lor. As for people like you that believe you wont be destituted by whatever means (no right and wrong there, i must emphasize), confident that they can do better with the monies, the best work around now is as you said, draw the FRS/BRS, then do whatever you want with the leftover.

the garmen is trying to improve the system. i know it is difficult to suit everyone needs. but for the salary that the ministers receive, they should do better than that.

you are right. i do have my own strategy of dealing with my cpf money. i will work around the system to get the most from it.

what i want to highlight is it is not that beautiful or perfect as some people put it. we must be aware of its weaknesses, which henry has done a good job highlighting it.

 

[redchallenge]

what we are trying to do here is to highlight that to breakeven age vs the old rss scheme is 92. we feel it is not easy to beat this age.

i think it depends on how we view this CPF LIFE scheme, imo there isnt much of "beating" it. if i die before i can beat the it, at least my money will flow down to my children. then again if i dont have kids and not married, then yeah in this case we can say that gov "win". (take note i have no idea what happen to the CPF money in this case)

what i want to highlight is it is not that beautiful or perfect as some people put it. we must be aware of its weaknesses, which henry has done a good job highlighting it.

i agree, i think as much as i think CPF LIFE is good. we cannot rely purely on it. taking my own case as an example, i'm trying to build up my portfolio, hopefully when i am old i will have income from different sources not just CPF LIFE. but at the end of the day, i think it is quite comfortable to know if all my investments fail, i still have CPF LIFE as a fallback option.

 

[dork32]

just want to highlight some of the nice things i have taught people about how to use the cpf.

i know a guy that is 56 years old. he has withdrawn a very large sum from his oa to buy his home which he has completed the payment. on top of that he has quite a lot of cash that he keeps in the fd of banks.

instead of keeping the cash in fd, i advised him to repay his cpf oa. no fd in sg can beat the 2.5% oa is offering now. also he can withdraw from oa anytime he wants to.

this is one part of cpf that i like a lot.

i also want to highlight another point here. sbi is offering the best fd in sg. no one can beat them, so we must put our money into sbi. No, all the fd in sg is rubbish to this guy. just because sbi gives the best rate does not mean that we must put our money there. for this guy, cpf oa is a much better choice.

 

[henrylbh]

They don't, and they cannot. There is no perfect crystal ball available.

So the government insists that you buy up to $83,000 (Basic Retirement Sum, age 55 premium, 2017 dollars) of a world class lifetime guaranteed annuity, or a benefit equivalent substitute, so that the rest of society's downside risk is limited. A pittance if you're a filthy rich invincible. (If you're complaining so bitterly about this pittance, it makes me wonder whether you are indeed rich and invincible. Bill Gates has never, to my knowledge, complained about his U.S. Social Security obligations.)

The same government helps you pony up that (up to) $83K premium by paying as much as 6% on the way there and waiving all income taxes on the premium, its interest, and its annuity proceeds. (Which is part of the CPF LIFE program, by the way, and not something you can separate out to claim that CPF LIFE is a "bad deal." The deal is the whole deal.) And by heavily subsidizing the housing that you can use to lower your CPF LIFE participation level to $83K if you wish. That's part of the deal, too.

Good grief. I guess people can complain about anything, even about genuinely terrific deals like CPF that are extremely "light touch" obligations compared to the rest of the developed world. Whatever. I agree with W1rbelw1nd. Debating the existence of these (mild) obligations is pointless. They're eminently reasonable, they exist, and they will exist. What each individual can decide is how best to optimize his/her lifetime experiences with CPF and with the rest of his/her financial strategy.

What a dumb to see it as a good deal

It's just taking from one to pay another for life

 

[BBCWatcher]

....what we are trying to do here is to highlight that the breakeven age vs the old rss scheme is 92.

1. The Retirement Sum Scheme is no longer available, and it never provided guaranteed lifetime payouts.

2. Once again, your fundamental calculation logic is flawed. CPF LIFE does not begin at age 55, or 65, or 70. It begins all the way back when you (and usually your employer) put the first dollar into your Special Account. It includes the income tax relief and the 5% bonus interest rate. And the 6% bonus interest rate later, and the 4% floor interest rate. Those things are part of the CPF LIFE program, too.

To compare the program, you have to compare the whole program.

Look, if somebody hands you $100 in bonus money, but then the lifetime yield is $50 less than some previous offer that didn't even accomplish the same thing, you can't say "Wow, that second half the program sucks." That's not a reasonable, rational way to assess the program, the whole program. CPF LIFE makes it much easier to accumulate the input premium (BRS for example) and then takes that premium and offers a high value-for-dollar guaranteed lifetime annuity, with the second half of that equation world class all by itself when compared to the best the private sector offers anywhere in the world. But no other annuity offers the tax and yield benefits that CPF offers on the input side, and those are important, too.

You're running a VERY partial calculation, in other words. For a correct comparison, or at least a more accurate one, you have to compare a private annuity purchased with after tax dollars at, say, age 30 with a deferred monthly payout starting at age 65. Then compare that to CPF with CPF LIFE. That'd get you closer to the truth.

It's just taking from one to pay another for life

I have two reactions to that remark:

1. Compared to...what else? What is your proposed alternative?

2. The sovereign and sovereign wealth fund that support CPF are "taking" a significant amount, in general tax revenues, from temporarily resident foreigners and foreign tourists who receive few government services. Many Singaporeans (and foreigners for that matter) understand and appreciate that important part of the equation.

 

[dork32]

1. The Retirement Sum Scheme is no longer available, and it never provided guaranteed lifetime payouts.

how many times must i say this rss is very similar to cpf life basic. in other words a large part of it is still around.

2. Once again, your fundamental calculation logic is flawed. CPF LIFE does not begin at age 55, or 65, or 70. It begins all the way back when you (and usually your employer) put the first dollar into your Special Account.

it is the same whether it is cpf life or rss scheme. no difference, so what is there to compare. remember, we are doing comparison. if there is no difference, there is not point stating it.

It includes the income tax relief and the 5% bonus interest rate.

this point is also the same. for both scheme.

anyway, at least i feel that i have more integrity than you. i dont like cpf life. i am going to choose brs when my time comes.

you go around telling everyone how fantastic cpf life and everyone should contribute to sa for tax relief. then you mentioned that you will go for brs. do you see any contradiction? also if you have faithfully been putting money into the sa, brs can never be your option. if you are able to choose brs, it means that you have never contributed to the sa. and there you go telling everyone to contribute when you yourself dont.

 

[BBCWatcher]

We're repeating ground already well covered, but I'll respond, again, to a couple specific points.

you go around telling everyone how fantastic cpf life and everyone should contribute to sa for tax relief. then you mentioned that you will go for brs. do you see any contradiction?

No. As I carefully and clearly explained previously, I am already eligible to receive a larger lifetime annuity, highly likely to be larger than the CPF LIFE ERS level. And no, I did not say I would opt for BRS level CPF LIFE. I only said I would consider opting for BRS level CPF LIFE if that option is available, in my personal circumstances. I also said it's very unlikely I would withdraw funds from CPF any time soon after age 55.

I'm a firm believer in some amount of lifetime guaranteed annuity. (With narrow exceptions, such as those with diagnosed terminal illnesses.) I'm practicing what I recommend. Most people will need CPF LIFE to realize any lifetime guaranteed annuity, and any/every CPF LIFE payout level is rather modest by global and Singaporean cost of living standards. I won't/don't have that requirement, but I'm quite unusual in certain ways.

With respect to the RSS, even if you want to make that (dubious) comparison -- RSS is not a lifetime guaranteed annuity, and that's a huge difference -- you have to do it on a whole program basis. The contribution, tax relief, and real yield side of CPF has improved significantly since RSS days. That matters, a lot.

 

[w1rbelw1nd]

I don't quite agree with the basis that the attractiveness of CPF life is to be assessed on the attractiveness of CPF as a whole (tax relief, higher interest rates etc).

CPF has been giving good returns even before the implementation of CPF life, so why do we need to look at the entire cpf system in totality when assessing cpf life? It is not as if cpf maintaining it's 2.5/4% returns is contingent on having cpf life in place.

 

[w1rbelw1nd]

Oh yes, seems like dork and bbc have different opinions on whether rss is a reasonably good basis of comparison.

There is value in using RSS scheme and external annuity plans as basis of comparison, imo, especially since there are probably no good comparables in Singapore /other countries. But how much importance we weigh on this comparison is really up to individual.

 

[BBCWatcher]

CPF has been giving good returns even before the implementation of CPF life, so why do we need to look at the entire cpf system in totality when assessing cpf life?

Because CPF's real returns and tax benefits have increased, and you have to factor those changes into account in any fair, realistic comparison. And it's still very difficult to compare a finite term annuity (RSS) with a guaranteed lifetime annuity.

 

[dork32]

We're repeating ground already well covered, but I'll respond, again, to a couple specific points.


No. As I carefully and clearly explained previously, I am already eligible to receive a larger lifetime annuity, highly likely to be larger than the CPF LIFE ERS level. And no, I did not say I would opt for BRS level CPF LIFE. I only said I would consider opting for BRS level CPF LIFE if that option is available, in my personal circumstances. I also said it's very unlikely I would withdraw funds from CPF any time soon after age 55.

I'm a firm believer in some amount of lifetime guaranteed annuity. (With narrow exceptions, such as those with diagnosed terminal illnesses.) I'm practicing what I recommend. Most people will need CPF LIFE to realize any lifetime guaranteed annuity, and any/every CPF LIFE payout level is rather modest by global and Singaporean cost of living standards. I won't/don't have that requirement, but I'm quite unusual in certain ways.

With respect to the RSS, even if you want to make that (dubious) comparison -- RSS is not a lifetime guaranteed annuity, and that's a huge difference -- you have to do it on a whole program basis. The contribution, tax relief, and real yield side of CPF has improved significantly since RSS days. That matters, a lot.

why do you even want to consider brs? cpf life is such a wonderful product. usa, china, jupiter, alpha centuri has nothing that can match it. you should put more money into it. ers should be the choice. So i am correct. lifelong annuity is not the only option. you rather put your money elsewhere than the wonderful cpf life. this what i am trying to say all along.

oh so you are unusual. you dont need so much payout while the rest of the world needs it. from the way you post, i am not surprise that you are an mp or minister. You are uttering total rubbish.

but if you are practicing what you are preaching and topping your sa every year, brs is not even an option.

i can tell you, i have never topped up my sa. i have never transferred from my oa to sa. i am going for brs.

cpf life basic and rss is similar in that you draw from your own account till it hits 0. the interest rates is also the same. you die, your family will take what is left of the account. the difference is that a 10% is taken from your account from the start for cpf life. because of this the monthly payout is reduced. also cpf life continues to pay because it 10% is used to buy the annuity.

 

[dork32]

Oh yes, seems like dork and bbc have different opinions on whether rss is a reasonably good basis of comparison.

There is value in using RSS scheme and external annuity plans as basis of comparison, imo, especially since there are probably no good comparables in Singapore /other countries. But how much importance we weigh on this comparison is really up to individual.

actually both dork and bbc has many similarities.

both of us are quite well to do. both of us do not intend to withdraw our cpf when we hit 55.

both of us agree that we will probably choose brs option.

but dork choose brs because dork feels cpf life cannot make it. so dork wants to put as little as possible into it. bbc chose brs because cpf life is the best product around and he is unusual.

 

[dork32]

I don't quite agree with the basis that the attractiveness of CPF life is to be assessed on the attractiveness of CPF as a whole (tax relief, higher interest rates etc).

i agree with this. you buy cpf life, i give you extra 1%. it sounds like some sales gimmick.

 

[dork32]

one big disadvantage of cpf life is that it forces you withdraw a fixed sum every month, whether you need it or not. if you do not need money that month, the money will probably be earning 0.05% at some lousy savings account.

i am puffing up by oa. i will withdraw only when i need it. otherwise it will remain there. for this, i am willing to take the lower interest rate in the oa.