New Cpf Life Calculation

[dork32]

the other thing to note is this. one man's meat is another man's poison.

CPF life is a good product for people that do not know how to manage their own finances.

but there are also many of us like bbc and me. we do not need cpf life.

garmen is choosing a fail safe solution. everyone are forced into it. for bbc and me, we do not need the monthly cpf payout. but it is very difficult to identify who needs and who does not. just to play safe, everyone go into it.

also though we do not need the payout, paying for the cpf life premium does not hurt us a lot when we are forced into it. but for those people that really need it, it could be a matter of life or death.

 

[henrylbh]

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.

What is there is compare? The benefits of CPF or RA have been there even without CPF Life. With RA, you draw what's yours - no more no less. One can choose a lower payout, than 1330 that will last till 90+, if one wants the payout to last beyond 90+.

With CPF Life, you pay a premium (and many are not fully aware) for assurance to receive Life payout to live beyond 90+. Nothing to extol such benefits.

The question is how many are willing to lose what's are theirs (or pay insurance premium) for the assurance of life payout beyond 90+. I believe many will say to hell with such insurance or assurance especially when the product is not transparent enough - but they are forced to bet and lose if they don't survive beyond 90.

 

[henrylbh]

How to upload my worksheet for others to check my calculations that with 1330 payout based on RA of 166k, the payout can last to 90+ if there is no CPF Life assuming current CPF rates remain? One can key in any payout, RA amount or change the interest rates to see how long 166k RA will last

 

[w1rbelw1nd]

Talking about CPF or CPF LIFE? why would cpf real returns( if it even increases) or tax benefit affect cpf life itself?

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.

 

[chopra]

beat the system?

1. if everyone beat the system, the payout will self adjust to make it sustainable
2. how to u beat? ask king of hell to postpone ur due date because u haven consume up ur cpf life savings?

it's a nice actuary exercise.
enjoy the long weekend.

 

[henrylbh]

the other thing to note is this. one man's meat is another man's poison.

CPF life is a good product for people that do not know how to manage their own finances.

Whether it's CPF Life or RSS it matters not to those who got much lesser than the expected payout because they have low retirement sum. Only difference is he get a higher payout and finishes his retirement sum earlier or a lower payout but forever. Either way, higher or lower payout for those with low retirement sum is still not enough and nothing to do with whether he knows how to manage his finances. That's main problem - not life or no life.

 

[BBCWatcher]

Talking about CPF or CPF LIFE? why would cpf real returns( if it even increases) or tax benefit affect cpf life itself?

How else does one enter the CPF LIFE annuity payout phase?

With a private sector annuity, you pay a premium. In cash, after tax. You take cash input $X and then compare monthly payments $Y, assuming the same terms, conditions, and payor quality.

That's not CPF and CPF LIFE. You don't input cash as such. You input dollars, pre tax, which then grow at attractive interest rates. The tax and yield side has changed (improved). That's an intrinsic part of the program. It's a discount on the premium, a big one. To know whether you're getting a good deal or not (hint: you are), even if you're trying to compare apples and oranges, you have to include all the factors that go into how you accumulate your premium. You have to look at the whole fruit, as it were.

To pick an example, Sinagpore's marginal income tax rates have risen. Consequently the tax break associated with CPF contributions has grown, too. That's an important part of the calculus.

For the record, I have no idea what points Dork32 is trying to make other than simply arguing for the sake of arguing. In my view everybody ought to have some lifetime guaranteed annuity. I already have a comparatively large lifetime annuity in the pipeline, already locked and loaded. To repeat: a lifetime annuity. (Actually it's even better than that because it's joint/survivor.) So I have a different decision to make than practically everybody else: will I further increase that annuity income stream, and by how much? I expect the answers to be: (a) yes, probably; and (b) not sure yet, but it could be as high as FRS level CPF LIFE.

I have never recommended unlimited CPF or CPF LIFE. Which is not a problem anyway, because the government doesn't allow it. But I do recommend some "reasonable" level of lifetime guaranteed annuity. Zero is not reasonable, and BRS level CPF LIFE may not even be reasonable. I'm already above ERS level CPF LIFE. Every dollar of CPF LIFE annuity will be added to that personal reality. I'm in an unusual situation, already previously, carefully described.

 

[w1rbelw1nd]

How else does one enter the CPF LIFE annuity payout phase?

With a private sector annuity, you pay a premium. In cash, after tax. You take cash input $X and then compare monthly payments $Y, assuming the same terms, conditions, and payor quality.

That's not CPF and CPF LIFE. You don't input cash as such. You input dollars, pre tax, which then grow at attractive interest rates. The tax and yield side has changed (improved). That's an intrinsic part of the program. It's a discount on the premium, a big one. To know whether you're getting a good deal or not (hint: you are), even if you're trying to compare apples and oranges, you have to include all the factors that go into how you accumulate your premium. You have to look at the whole fruit, as it were.

To pick an example, Sinagpore's marginal income tax rates have risen. Consequently the tax break associated with CPF contributions has grown, too. That's an important part of the calculus.

For the record, I have no idea what points Dork32 is trying to make other than simply arguing for the sake of arguing. In my view everybody ought to have some lifetime guaranteed annuity. I already have a comparatively large lifetime annuity in the pipeline, already locked and loaded. To repeat: a lifetime annuity. (Actually it's even better than that because it's joint/survivor.) So I have a different decision to make than practically everybody else: will I further increase that annuity income stream, and by how much? I expect the answers to be: (a) yes, probably; and (b) not sure yet, but it could be as high as FRS level CPF LIFE.

I have never recommended unlimited CPF or CPF LIFE. Which is not a problem anyway, because the government doesn't allow it. But I do recommend some "reasonable" level of lifetime guaranteed annuity. Zero is not reasonable, and BRS level CPF LIFE may not even be reasonable. I'm already above ERS level CPF LIFE. Every dollar of CPF LIFE annuity will be added to that personal reality. I'm in an unusual situation, already previously, carefully described.

Yup I guess you are just further elaborating your point. Fair enough, you can choose to look at CPF life as CPF + CPF Life, but there is technically nothing wrong with looking at CPF life on itself. We can simply just go for BRS and withdraw all our CPF balance (with all the tax savings and yield). If we are looking at the angle of ERS versus BRS + managing ur own CPF withdrawal, the tax savings and yield is really not the relevant comparison

 

[BBCWatcher]

If we are looking at the angle of ERS versus BRS + managing ur own CPF withdrawal, the tax savings and yield is really not the relevant comparison

That's yet another, different decision. It consists of two primary steps, although step two is simple:

1. How much lifetime guaranteed annuity should you have? Let's call this number X (current dollars per month). In general, I would be uncomfortable with the paltry monthly payout at the BRS level if that were my only post-retirement lifetime guaranteed annuity. And I'd be especially uncomfortable without the 2% annual increase feature. BRS level CPF LIFE is a very, very low amount of lifetime annuity for Singapore. The FRS level is not a tremendously large income stream either. So consider this decision very, very carefully. (For perspective, retirees in many developed countries with lower costs of living are receiving higher monthly payouts.)

2. Once you've decided X, you can decide how to apportion X between minimum compulsory CPF LIFE and any amount above that minimum that could be used to purchase a private sector annuity. And this part is simple because CPF LIFE is a great annuity deal, so you'd favor CPF LIFE first for your annuity needs.

If you want a higher X than the ERS level CPF LIFE payout, then you have to buy some more annuity on the private market (from NTUC for example).

 

[rrr2015]

• upload to google drive
• open with google sheets, this will convert to google sheet format
• on converted sheet, click share, get share link & set access options
• share the link here for others to access

How to upload my worksheet for others to check my calculations that with 1330 payout based on RA of 166k, the payout can last to 90+ if there is no CPF Life assuming current CPF rates remain? One can key in any payout, RA amount or change the interest rates to see how long 166k RA will last

actually am still quite undecided between BRS / FRS
thanks to discussion here, (i think) it helps me understand better now

 

[henrylbh]

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.

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.

It makes me wonder, sometimes, whether you care what's the point or you simply say what you want

 

[henrylbh]

• upload to google drive
• open with google sheets, this will convert to google sheet format
• on converted sheet, click share, get share link & set access options
• share the link here for others to access

actually am still quite undecided between BRS / FRS
thanks to discussion here, (i think) it helps me understand better now

Thanks for the help on how to upload. Will try another time.

I would certainly go for brs with property pledged if there is option for other half to remain in SA. It's quite a challenge to generate the same return on the other half that's withdrawn. Even if can't beat the return, the flexibility of money on hand is more tempting. If forced to take out the other half, one can still re-deposit it into OA and SA with flexibility to take it out anytime, assuming BHS has been met.

 

[w1rbelw1nd]

In general, I would be uncomfortable with the paltry monthly payout at the BRS level if that were my only post-retirement lifetime guaranteed annuity. And I'd be especially uncomfortable without the 2% annual increase feature. BRS level CPF LIFE is a very, very low amount of lifetime annuity for Singapore. The FRS level is not a tremendously large income stream either. So consider this decision very, very carefully.
2. Once you've decided X, you can decide how to apportion X between minimum compulsory CPF LIFE and any amount above that minimum that could be used to purchase a private sector annuity. And this part is simple because CPF LIFE is a great annuity deal, so you'd favor CPF LIFE first for your annuity needs.

I personally dont think (this is an opinion) that there is a need to match certain cash outflow/needs to certain cash inflow, to be honest.

So lets say if there is a UHNWI with $100 million, with a $5k month expected cash outflow a month. Seems to me you will advise the UHNWI to make sure he has annuity plans (CPF Life + private) to cover 100% of his $5k monthly requirements.

There are individuals wealthy enough, confident enough, and savvy enough to take a calculated risk to meet their wealth planning purposes. It is the same thing with the 110/100 - age = stock % allocation assumption, I dont believe it applies to everyone's needs and goals.

So I would think it is perfectly reasonable for this UHNWI to only take a BRS and put 100% of his $100 million in a low cost, globally diversified index at 1-2% yield. There is enough buffer in his networth to take volatility. Some of us may choose a more aggressive allocation as we may want to leave more money for inheritance/charity.

 

[henrylbh]

So lets say if there is a UHNWI with $100 million, with a $5k month expected cash outflow a month. Seems to me you will advise the UHNWI to make sure he has annuity plans (CPF Life + private) to cover 100% of his $5k monthly requirements.

Example of UHNWI with 5k a month expected cash outflow is far from realistic. Even 50k monthly is still not enough.

 

[w1rbelw1nd]

How is it not realistic? Unhwi doesn't mean ultra high spending.

Warren buffett is well known to be frugal. Anyway even if you don't like the assumption, for $20k a month my case still stands.

Example of UHNWI with 5k a month expected cash outflow is far from realistic. Even 50k monthly is still not enough.

 

[henrylbh]

How is it not realistic? Unhwi doesn't mean ultra high spending.

Warren buffett is well known to be frugal. Anyway even if you don't like the assumption, for $20k a month my case still stands.

Even 50k is modest relative to their wealth. Expense on car alone excluding driver already more than 5k. Finding one who is frugal with the amount you mentioned is almost non-existent, unless the person is old and has no life. I know one like that but not ultra rich, but HNW - excluding medical expenses.

 

[w1rbelw1nd]

Even 50k is modest relative to their wealth. Expense on car alone excluding driver already more than 5k. Finding one who is frugal with the amount you mentioned is almost non-existent, unless the person is old and has no life. I know one like that but not ultra rich, but HNW - excluding medical expenses.

Great, you have your opinion and I have my opinion on this matter then. Dont understand why rich = spend more. Not like either of us can pull statistics on spending of the UHNWI, lol.

Any comments on the annuity part of my previous post then?

 

[BBCWatcher]

Seems to me you will advise the UHNWI to make sure he has annuity plans (CPF Life + private) to cover 100% of his $5k monthly requirements.

Not necessarily. "Something more than cat food level" is what I'd suggest and feel comfortable with.

BRS level CPF LIFE, in current dollars, has a monthly payout of S$700+ at age 65. (That can be deferred to age 70 for a higher monthly payout, and those who can and who are in good health should.) In my view, S$700/month is not enough.

High net worth individuals, even if they have prudent management (not a given), still have creditor liability and asset title risks, among other "wipeout" risks. They can also easily afford FRS or ERS level CPF LIFE with deferral to age 70. ERS level is $1,860+/month (current Singapore dollars, payouts starting at age 65), for perspective. That's a little more dignified.

 

[BBCWatcher]

Dont understand why rich = spend more.

Nor I. Ability to spend is a necessary but not sufficient condition for actual spending. For example, this man died with a US$8 million fortune. He was a janitor and gas station attendant, and he lived rather modestly his whole life. He left $6 million to his community hospital and library.

He also received a monthly U.S. Social Security payout.

 

[dork32]

For the record, I have no idea what points Dork32 is trying to make other than simply arguing for the sake of arguing. In my view everybody ought to have some lifetime guaranteed annuity. I already have a comparatively large lifetime annuity in the pipeline, already locked and loaded. To repeat: a lifetime annuity. (Actually it's even better than that because it's joint/survivor.) So I have a different decision to make than practically everybody else: will I further increase that annuity income stream, and by how much? I expect the answers to be: (a) yes, probably; and (b) not sure yet, but it could be as high as FRS level CPF LIFE.
.

dork is not arguing for the sake of arguing. dork is saying bbc is either inconsistent or dont know what he is talking about.

bbc says cpflife is fantastic yet he has his money in an alternative.
if the alternative is worse than cpflife why is bbc locking his money there? if the alternative is so good, why isnt he advising people to put it there ?
bbc says gates also take social security but he not going need the extra that ers will give him.
bbc says there are no alternatives but yet he is trying to minimize the amount in cpf life.
bbc says he is different from everyone else. what rubbish is this. dork is also different from everyone else. dork also dont need cpf life. the amount dork receive from my passive income is enough to fund dork's living. dork save almost every cent of dork's salary. i quote bbc: even gates is not grumbling about social security. dork needs cpf life because dork lose to gates, is bbc going to beat gates? this statement is total crab.
if bbc does not need extra, why is it that other people needs extra?

i will state my rational analysis again.
-cpf life is probably the best of its class in sg.
-not everyone needs cpf life.
-to break even with cpf life, you need to live to 92. this makes cpf life unattractive to some people like henry and dork and probably bbc
-when you are thinking about topping up your sa or transferring oa to sa, you should consider this as well. they are giving you a higher interest, but you may lose part of it. there is a risk to it. if you are willing to take this risk, go ahead. there is no right or wrong
-to avoid exposing to this risk, dork is not putting extra to dork's sa/ra so that dork can go for brs
-dork also pay income tax until cannot tahan. instead of cpf sa, dork put money into srs to siam tax. anyway dork does not qualify for cpf sa topup because sa already hit frs.