RSS old scheme vs CPF life basic ? CPF Life Basic vs Std/Esc

[henrylbh]

For parent. Rss or cpf life? Concensus is rss?

Depends on his expected life span, the amount he has and whether he can manage it and whether you wants to take a bet.

 

[BBCWatcher]

For parent. Rss or cpf life? Concensus is rss?

Depends on his expected life span, the amount he has and whether he can manage it and whether you wants to take a bet.

Under current rules it (opting for CPF LIFE) is also a decision that can be made at age 65, at age 79.9 (strictly before age 80 -- at least a month before, to be safe), or anywhere in between.

However, one aspect is simple. The Retirement Sum Scheme offers zero longevity insurance, while CPF LIFE offers three forms of longevity insurance in varying strengths. Should your parent have at least some longevity insurance? That's your parent's decision, but you're free to offer advice (if entertained) that may or may not be respected.

 

[SKenny]

Only if you live to above 90. Otherwise, you are only consoling yourself of sure win, more or less, like someone who said that practically everybody wins. Most will likely to be shortchanged unless most live to 90.

If most Singaporeans live to age 90, the break even age will automatically be adjusted to around, say 98.

You will only be better off in Escalating option, if you outlive vast majority of fellow Singaporeans.

 

[BBCWatcher]

You will only be better off in Escalating option, if you outlive vast majority of fellow Singaporeans.

"Vast majority" is overstated.

Of course most people don't know how long they're going to live, and many of those who think they do tend to underestimate their own lifespans. And most people are risk averse and don't want to run the risk of outliving their savings. So, if they don't have adequate, quality longevity insurance, they try to self-insure, often badly, which means they need to hoard assets and keep them in more conservative (higher yielding) vehicles, like the low yielding bank fixed deposits that Singaporean grandmothers and grandfathers find so popular and that help subsidize lots of mortgage lending in Singapore.

I don't think it's at all smart to manage retirement with this particular formula, except in rare circumstances when you have some specific, accurate insight into your date of death -- a confirmed terminal illness diagnosis, for example. (Although Stephen Hawking's doctors were completely wrong on that score, so you never know.)

 

[henrylbh]

If most Singaporeans live to age 90, the break even age will automatically be adjusted to around, say 98.

You will only be better off in Escalating option, if you outlive vast majority of fellow Singaporeans.

I got chance to outlive majority?

Mother's side, my uncle uplorry at 87 last week, leaving 2 more at 86 and 83.

Father's side, got one turning 98 next month, followed by 5 others at 96, 95, 85, 83 and 81.

 

[BBCWatcher]

I got chance to outlive majority?

Obviously you do, unless you have a confirmed terminal illness diagnosis you haven't mentioned.

To be clear, even without the multiple members of your family in their 90s (and counting), you cannot really draw inferences if there were early deaths. Singapore's health and mortality experience has made such tremendous strides so quickly that such intergenerational comparisons don't work. Family mortality experiences only offer clues (not hard predictions) when life expectancies are holding steady, but that's not Singapore. If, alternatively, you consider your grandfather's and grandmother's financial experiences (income, wealth, standard of living), then use that to predict your future experience, you're probably going to be way, way too pessimistic simply because median and mean financial lives have improved dramatically and continue to improve in Singapore. Same thing with mortality: we are different people compared to prior generations, freakish "superhumans" in some sense.

....And it's not just humans. As a fun example, take a look at milk production per cow in the United States over the last century. Yes, today's American cows are producing over 4 times as much milk as their 1930s ancestors did. (And milk production per cow has increased another ~12% over the past decade, since that 100 year chart was published.) Today's cows are freakishly higher producers. Humans aren't quite this freakish, but todays Singaporeans are a lot different than even their parents are/were.

 

[Toni90]

Only if you live to above 90. Otherwise, you are only consoling yourself of sure win, more or less, like someone who said that practically everybody wins. Most will likely to be shortchanged unless most live to 90.

No. Sure win. CPF generates profit which is returned to everyone. Some received more than others. No one lose.

 

[kelhot2001]

Obviously you do, unless you have a confirmed terminal illness diagnosis you haven't mentioned.

To be clear, even without the multiple members of your family in their 90s (and counting), you cannot really draw inferences if there were early deaths. Singapore's health and mortality experience has made such tremendous strides so quickly that such intergenerational comparisons don't work. Family mortality experiences only offer clues (not hard predictions) when life expectancies are holding steady, but that's not Singapore. If, alternatively, you consider your grandfather's and grandmother's financial experiences (income, wealth, standard of living), then use that to predict your future experience, you're probably going to be way, way too pessimistic simply because median and mean financial lives have improved dramatically and continue to improve in Singapore. Same thing with mortality: we are different people compared to prior generations, freakish "superhumans" in some sense.

....And it's not just humans. As a fun example, take a look at milk production per cow in the United States over the last century. Yes, today's American cows are producing over 4 times as much milk as their 1930s ancestors did. (And milk production per cow has increased another ~12% over the past decade, since that 100 year chart was published.) Today's cows are freakishly higher producers. Humans aren't quite this freakish, but todays Singaporeans are a lot different than even their parents are/were.

Basically for him he mindset is there, just like mine to be on Basic withdrawal plan

For those still unsure, just question whether you are comfortable at $1300 pmth for 25 years or not, my gambler way of looking at this is

1) CPF give standard/esc extra $100+ p/mth at $1300.00 annually
2) Compare to what you lose if are not on basic withdrawal plan
3) age you passed on

Age 66, Win 1.3K , Lose Std 9K , Esc 1K
Age 69, Win 4.2K , Lose Std 43K, ESc 29K
Age 70, Win 5.5K , Lose Std 54K, Esc 38K
Age 75, Win 13K, Lose Std 103K, Esc 79K
Age 78, Win 16.9K, Lose Std 127K, Esc 102K
Age 80, Win 26K, Lose Std 140K, Esc 115K
Age 85, Win 32.5K Lose Std/Esc 95K

My way of looking at this is you will be using 20 years from 65 to 85 a big sum of money for a low return. Please note that as of today (2018) about 70 percent have already passed on by age 85 , maybe in 20 years time 50% will be gone, so will you use 140K to bet and win 26K based on a statistic of 50/50 , well I dont , I rather stay hungry at $1300.00 p/mth till 90 years of age

That is my way of choosing my plan

 

[henrylbh]

No. Sure win. CPF generates profit which is returned to everyone. Some received more than others. No one lose.

Don't imagine or guess.

 

[Toni90]

Don't imagine or guess.

U means cpf not generate profit? What is the 4% thing?

 

[tangent314]

You don't know when you are going to die.
What you do know is that there is a significant chance of outliving your RSS and if that happens your retirement income drops to $0 until the rest of your life, and that can be quite a problematic situation to be in.

 

[henrylbh]

You don't know when you are going to die.
What you do know is that there is a significant chance of outliving your RSS and if that happens your retirement income drops to $0 until the rest of your life, and that can be quite a problematic situation to be in.

Nobody knows when is time to leave. All depends on probability. Some must lose for some to win for the scheme to be viable. No 2 ways about that as government is not funding the scheme in converting RSS to CPFL. I guess government is likely to save paying the prevailing interests under CPFL than under RSS.

RSS will surely run out of money by 90 and beyond depending on the amount in RSS and members should be aware of it and manage it accordingly since it has been like that since 1987. There was no cry or referendum for CPFL. It's just forced down your throat, like it or not.

 

[kelhot2001]

You don't know when you are going to die.
What you do know is that there is a significant chance of outliving your RSS and if that happens your retirement income drops to $0 until the rest of your life, and that can be quite a problematic situation to be in.

Seriously, I wont know when I will die or maybe I will outlive till 95
But the same way neither does the government know, but the government use statistic to show at 20 years later your chance of death is at 85

So, made my CPFL plan based on 85 years of age rather than 93 to do a breakeven. if the Government made a plan that is unpopular (doesn t mean it is no good) , 80 percent opt for basic, 15 percent for std, 5 percent for esc. Then what is the point have esc plan.

You need to set it attractive enough for people to join, if the bequest gradually fall to zero at age 85, maybe I consider it for esclating plan

 

[BBCWatcher]

So, made my CPFL plan based on 85 years of age rather than 93 to do a breakeven....

But that doesn't make any sense.

Slightly more than half of Singaporean males celebrating their 65th birthdays will survive to age 85, based on today's statistical longevity data. I know very, very few people -- except compulsive gamblers frequenting casinos -- that would be satisfied with a 50-50 roll of the dice on whether they outlive their savings or don't. Most people are risk averse. Most people don't want their bedrock retirement income to collapse to zero for any period of time while they're retired, even for one month....

....And most people don't structure their retirement finances this way, or at least they try not to. Traditionally, they hoard assets and put them in ultra conservative vehicles, such as low yielding bank fixed deposits. Which can be done, obviously, but that's expensive.

There's value in longevity insurance, a lot, for anyone who is risk averse. You have to assume risk aversion in this assessment, because most people are.

If you're the casino gambling fan, that's exceptional. Tag yourself accordingly: "I'm not risk averse. I want to try gambling in this way." And that's fine if that's what you want, but it's not the majority viewpoint.

 

[tangent314]

So, made my CPFL plan based on 85 years of age rather than 93 to do a breakeven. if the Government made a plan that is unpopular (doesn t mean it is no good) , 80 percent opt for basic, 15 percent for std, 5 percent for esc. Then what is the point have esc plan.

You need to set it attractive enough for people to join, if the bequest gradually fall to zero at age 85, maybe I consider it for esclating plan

There were A LOT of calls and demand for a plan with payouts that increase with inflation back when CPF Life was first introduced.

The problem is, a lot of these people want the same starting payouts as the original plan, and as we know that is not mathematically possible while maintaining sustainability.

So CPFB calculates how much the starting pay has to be reduced in order for the escalating plan to be sustainable, and once that final value is released, it doesn't look that attractive anymore even if they are actuarily neutral. This is really mainly because human beings brains are wired to prioritize short term over long term.

 

[kelhot2001]

But that doesn't make any sense.

Slightly more than half of Singaporean males celebrating their 65th birthdays will survive to age 85, based on today's statistical longevity data. I know very, very few people -- except compulsive gamblers frequenting casinos -- that would be satisfied with a 50-50 roll of the dice on whether they outlive their savings or don't. Most people are risk averse. Most people don't want their bedrock retirement income to collapse to zero for any period of time while they're retired, even for one month....

....And most people don't structure their retirement finances this way, or at least they try not to. Traditionally, they hoard assets and put them in ultra conservative vehicles, such as low yielding bank fixed deposits. Which can be done, obviously, but that's expensive.

There's value in longevity insurance, a lot, for anyone who is risk averse. You have to assume risk aversion in this assessment, because most people are.

If you're the casino gambling fan, that's exceptional. Tag yourself accordingly: "I'm not risk averse. I want to try gambling in this way." And that's fine if that's what you want, but it's not the majority viewpoint.

LOL, my own viewpoint .....

Most people are risk averse. Most people don't want their bedrock retirement income to collapse to zero for any period of time while they're retired, even for one month....

AnsWe are choosing a lesser evil of the 3 plans so to speak, which mean all 3 plan will still give a stable income till death only more or less and not zero

Lastly , if based on today statistic from Stats.gov.sg on who is still alive based on Singapore citzen only. This cover a period of 30 years around
1.3 million people born (average about 50K per year), who should be 65 and above

2013 2014 2015 2016 2017 2018
65 & Over 338,714 414,844 441,553 468,368 496,495 526,397
70 & Over 231,918 260,361 266,672 278,447 301,067 323,492
75 & Over 136,030 158,342 168,775 179,520 186,707 193,437
80 & Over 71,174 84,875 90,767 95,016 98,419 103,901
85 & Over 30,151 37,748 40,442 43,028 45,767 48,669

the rate of increase is steady at 3000 per years assuming 20 years, the rate of 85 above is alive maybe 110,000, but that is out of 1,100,000 million people . I dont think it is 50/50 for those at 65 now to 20 year later more probably 10/90 at this rate. Please do include that of 110000, 33.3% will be only male which fall lower to 33,330 which stand even lower out of the 1.1 million . I might wrong, but anyway again my view and my choice

 

[SKenny]

"Vast majority" is overstated.

Of course most people don't know how long they're going to live, and many of those who think they do tend to underestimate their own lifespans. And most people are risk averse and don't want to run the risk of outliving their savings. So, if they don't have adequate, quality longevity insurance, they try to self-insure, often badly, which means they need to hoard assets and keep them in more conservative (higher yielding) vehicles, like the low yielding bank fixed deposits that Singaporean grandmothers and grandfathers find so popular and that help subsidize lots of mortgage lending in Singapore.

I don't think it's at all smart to manage retirement with this particular formula, except in rare circumstances when you have some specific, accurate insight into your date of death -- a confirmed terminal illness diagnosis, for example. (Although Stephen Hawking's doctors were completely wrong on that score, so you never know.)

A very long post which confirm that majority of us will not outlive "the average mortality age plus 5 years".

It is simple maths.

 

[SKenny]

I got chance to outlive majority?

Mother's side, my uncle uplorry at 87 last week, leaving 2 more at 86 and 83.

Father's side, got one turning 98 next month, followed by 5 others at 96, 95, 85, 83 and 81.

Majority of us will die before "the average morality age plus 5 years". This is the truth.

It is also true that most of us are better off with the Basic option.

 

[assiak71]

Depends on his expected life span, the amount he has and whether he can manage it and whether you wants to take a bet.

Rss vs cpf life basic, which has higher payout monthly?

 

[henrylbh]

Rss vs cpf life basic, which has higher payout monthly?

If same balance and eligible to start payout same time, off course RSS has much higher payout cause the balance is paid over a period of about 20 years.

Under CPF Life, the payout is lower and for life and you need to live to about 95 or longer to recover your balance.

Those born from 1958, RSS is not an available option.