private annuities

[evertoolate]

Hi, asking a noob question. If I expect interest rate to increase in Singapore, would it be worthwhile to wait for a few rate increases before buying an annuity? Thank you!

 

[foozgarden]

That question is like asking if next month. Will I strike toto.


annuity is too a long of a period.
What if IR goes down. Are you.going to regret?

Hi, asking a noob question. If I expect interest rate to increase in Singapore, would it be worthwhile to wait for a few rate increases before buying an annuity? Thank you!

 

[lifeafter41]

Multiply that 200 by 12 months and by some number of years and include interest, it adds up to quite a bit of difference in the bequests.

I recall shifting the line from 65 to 75, ie 10 years.
200x12x10=24,000.
But the difference in bequest at 75 for basic and standard is so much difference.
You might want to take a look under the CPF website......
What gives???

 

[lifeafter41]

read above on what makes up the bequest amt for Basic Plan.

Seems to me the basic plan is the better choice, after reading it.

 

[henrylbh]

Seems to me the basic plan is the better choice, after reading it.

Depends. If you think you can live beyond 90, the other 2 is better, though I personally would go for basic.

 

[tangent314]

I recall shifting the line from 65 to 75, ie 10 years.
200x12x10=24,000.
But the difference in bequest at 75 for basic and standard is so much difference.
You might want to take a look under the CPF website......
What gives???

Standard and Basic use two different methods for calculating bequests. Standard is simply a 'principal guarantee' that pays out the difference between the amount paid out and the amount in your RA when you join the CPF Life scheme. Basic pays out like an annuity until the annuity runs out of money then the life annuity takes over, so the bequest follows an annuity curve.

Theoretically, if you consider only XIRR, then Basic is 'better' until about age 88. However, you don't really know when you are going to die, so I think it's a better idea to follow the principles that CPF has already laid out - how important is the bequest for your loved ones? If they are already doing fairly well themselves, and the bequest is not going to help them out that much then I would think it's best to take a higher payout and improve the quality of your retirement. Don't forget to consider the merits of the escalating plan too.

 

[BBCWatcher]

However, you don't really know when you are going to die, so I think it's a better idea to follow the principles that CPF has already laid out - how important is the bequest for your loved ones?

I don't really understand CPF's argument here. The fact is that none of the CPF LIFE payout plans guarantee a bequest. They are all "bequest lotteries" -- every single one. Just live long enough, and the bequest from your Retirement Account falls to zero.

The best you could say is that the CPF LIFE Standard Plan offers the longest, decreasing term life insurance element -- which is not an assured bequest but something quite different. For example, if you father a child at age 65 (let's suppose), and if you want some assurance that you'll leave something behind for that child if you die before the child reaches adulthood (and a decreasing amount as the child gets closer and closer to adulthood), then the Standard Plan might fit that profile best. That's not exactly common, but there you go.

If you're trying to use CPF to provide a bequest with high assurance, there is one leg of CPF that can work pretty well in that role: Medisave. Just keep pushing dollars into your Medisave Account -- which you can do, subject to the CPF Annual Limit -- and there you go, you've got a nice, high interest bequest vehicle.

And, finally, if you maximize the longevity insurance aspects of CPF LIFE -- which you can do with the combination of age 70 deferral, CPF LIFE Escalating Plan, and Retirement Account top-ups as high as the Enhanced Retirement Sum -- then you can best defend and provide lifetime gifts and bequests. And gifts are better than bequests, a lot better. Those gifts can fund earlier rather than later education, first homes, maternity care, or whatever else represents real investments in your loved ones' futures.

 

[maple96]

Standard and Basic use two different methods for calculating bequests. Standard is simply a 'principal guarantee' that pays out the difference between the amount paid out and the amount in your RA when you join the CPF Life scheme.[/COLOR]

U are wrong! Bequest = Unused CPF Life Premium in the Pool (no interest) less Payout todate.

Basic pays out like an annuity until the annuity runs out of money then the life annuity takes over, so the bequest follows an annuity curve.

Bequest = Balance in RA (includes 4%+2%) + Unused CPF Life Premium in the Pool (no interest)

Theoretically, if you consider only XIRR, then Basic is 'better' until about age 88. However, you don't really know when you are going to die, so I think it's a better idea to follow the principles that CPF has already laid out - how important is the bequest for your loved ones? If they are already doing fairly well themselves, and the bequest is not going to help them out that much then I would think it's best to take a higher payout and improve the quality of your retirement. Don't forget to consider the merits of the escalating plan too.

Payout Level = Standard > Basic > Escalating

Dun forget the unwritten assumptions made by CPFB in calculating payouts and bequest in the later years!

 

[maple96]

I don't really understand CPF's argument here. The fact is that none of the CPF LIFE payout plans guarantee a bequest. They are all "bequest lotteries" -- every single one. Just live long enough, and the bequest from your Retirement Account falls to zero.

The best you could say is that the CPF LIFE Standard Plan offers the longest, decreasing term life insurance element -- which is not an assured bequest but something quite different. For example, if you father a child at age 65 (let's suppose), and if you want some assurance that you'll leave something behind for that child if you die before the child reaches adulthood (and a decreasing amount as the child gets closer and closer to adulthood), then the Standard Plan might fit that profile best. That's not exactly common, but there you go.

If you're trying to use CPF to provide a bequest with high assurance, there is one leg of CPF that can work pretty well in that role: Medisave. Just keep pushing dollars into your Medisave Account -- which you can do, subject to the CPF Annual Limit -- and there you go, you've got a nice, high interest bequest vehicle.

And, finally, if you maximize the longevity insurance aspects of CPF LIFE -- which you can do with the combination of age 70 deferral, CPF LIFE Escalating Plan, and Retirement Account top-ups as high as the Enhanced Retirement Sum -- then you can best defend and provide lifetime gifts and bequests. And gifts are better than bequests, a lot better. Those gifts can fund earlier rather than later education, first homes, maternity care, or whatever else represents real investments in your loved ones' futures.

By choosing the basic plan, we are assured that our monies in RA earns 4+2% and all are refunded when u exit the CPF Life earlier than expected.

Yes the Basic Plan guarantees all 4+2% interest are refunded and increase in payout for life!

From CPF after 55 booklet:

For a member with $30,000 in his Retirement Account at age 55, the additional 1% extra interest amounts to about a 15% increase in his monthly payout, or about $40 more each month, for the rest of his life."

 

[BBCWatcher]

By choosing the basic plan, we are assured that our monies in RA earns 4+2% and all are refunded when u exit the CPF Life earlier than expected.

And if you merely live long enough, any bequest is still zero. All CPF LIFE plans share that characteristic.

 

[maple96]

And if you merely live long enough, any bequest is still zero. All CPF LIFE plans share that characteristic.

If u know u will live past 90, good luck! There u are playing a lottery of winning by choosing escalating plan! U are betting u will live past 90 or even 100, so u can enjoy forever increasing payout under the escalating plan! But wait, CPF never say payout will not reduce in future, nor increase forever!

I dun, I just want my money back if I exit early!

 

[henrylbh]

I don't really understand CPF's argument here. The fact is that none of the CPF LIFE payout plans guarantee a bequest. They are all "bequest lotteries" -- every single one. Just live long enough, and the bequest from your Retirement Account falls to zero.

You have to agree that CPF Life is a mandatory betting system.

If anyone ever gets a bequest from the system, it's a loss - either big or small depending on which one chooses.

 

[BBCWatcher]

I dun, I just want my money back if I exit early!

You don't get anything if you're dead. You're dead.

You have to agree that CPF Life is a mandatory betting system.

No, CPF LIFE is a quasi-mandatory longevity insurance program -- not strictly mandatory -- with a bundled, decreasing, term life insurance element with a choice of terms.

 

[henrylbh]

No, CPF LIFE is a quasi-mandatory longevity insurance program -- not strictly mandatory -- with a bundled, decreasing, term life insurance element with a choice of terms.

If you want to see it that way, it's up to you - just like bequest is a lottery!

It's mandatory for all except for those few who meet the conditions.

 

[maple96]

You don't get anything if you're dead. You're dead.

I said exit early! U know there are many ways of exiting early?

Yes my estate gets! That's where we differ in culture!

 

[henrylbh]

I said exit early! U know there are many ways of exiting early?

Yes my estate gets! That's where we differ in culture!

But once you get into any one of CPF Life plans, bequest or withdrawal there is certainly some loss when exiting.

 

[maple96]

But once you get into any one of CPF Life plans, bequest or withdrawal there is certainly some loss when exiting.

Yes that's a no choice, just need to minimise amount of CPF Life Premium which is my choice!

 

[henrylbh]

Yes that's a no choice, just need to minimise amount of CPF Life Premium which is my choice!

Someone will say you HAVE a choice cause it's not strictly mandatory.

 

[maple96]

Someone will say you HAVE a choice cause it's not strictly mandatory.

oops I forgot!

Leave sg, buy pte annuity as alternative if accepted by CPF!

Not my choice!

 

[henrylbh]

oops I forgot!

Leave sg, buy pte annuity as alternative if accepted by CPF!

Not my choice!

Those not free choices. Choice means can choose to do nothing. The options are part of the betting system which you must partake or go and meet your creator.