Should you delay your CPF Life payout

[rrr2015]

i remember it was pay out at 65 unless you opt to start at 70. so when did they flip?

There is no default. As per the letter you receive, if you choose to do nothing. Then pay out start from age 70, You can always choose to start at 65.

 

[dork32]

The longest confirmed human lifespan to date was Jeanne Calment's. She died at age 122 years and 164 days. If there's a maximum human lifespan it's at least that long, because somebody has already lived that long. My family tree happens to be chock full of male and female centenarians running back at least a couple generations, so "100 is the new 80" wouldn't be at all surprising. It's already mostly happened, really.

bolt can run 9.58. i really want to see you come close to that.

i am not interested in the best. median would be a better reflection.

 

[lifeafter41]

first is medisave is only 50+k.
second is your health goes down as you aged. there is a high chance that medisave is used for your medical bills.

I believe BBC rationale is to use cash for payment and leave the medisave as the bequest, albeit earning good interest.

 

[dork32]

If the money does not deplete and continue to earn 4%, what are you trying to accomplish? For bequest? Even if it deplete to zero, it doesn't mean that your monthly payout suddenly become zero...

If you say that CPF Life would pay only what you contributed and nothing more, of course try to delay it to earn the extra interest...

But this is not the case with CPF Life which pay till you die...

for people like uncle kenny, i believe he will definitely have money left over to give to his kids. i believe i belong to that category. since i confirm that i will have to bequest to my kids might as well as give more to them.

i have also told bbc this before. i will not join a scheme that gives me a 20% annual return, if i get to see the money when i am 150 yo.

but i will join a scheme that gives 4% return that i have little chance of seeing the money, but my kids will get the full sum

 

[SKenny]

I believe BBC rationale is to use cash for payment and leave the medisave as the bequest, albeit earning good interest.

I always pay by cash even when payment from Medisave is allowed, for this same reason.

 

[SKenny]

I used to have a position that I will delay my CPF payout till 70. I have since changed my mind.

It is not because I need the money but rather the payback of a delay is "not worth" it.

 

[BBCWatcher]

i remember it was pay out at 65 unless you opt to start at 70. so when did they flip?

No, I don’t think that’s correct.

Previously, if you did nothing (took no action), payouts never started. In fact, if you died, and if your CPF nominated heir(s) also took no action, they could leave your accounts fully in place, and those funds would continue to earn interest.

CPF has changed all those happy rules in stages. Now, if you do nothing, payouts start at age 70 and, when you die, any residual (if any) that your CPF nominated heir(s) inherit will stop earning interest at some point (6 months after you die, as I recall).

There are three remaining exceptions to the age 70 payout start (at least for those born in 1958 and thereafter):

1. If you take no action, and if you are a former citizen or a former PR who has left the immediate region, then your payouts will not start at age 70. Indeed, you are barred from participating in CPF LIFE (if you terminated your status before your payouts started).

2. If you notify CPF that you have an acceptable substitute life annuity and that you wish to opt out of CPF LIFE, and if CPF agrees that your other life annuity is a reasonable and sufficient substitute, then your payouts will not start at age 70.

3. If your Retirement Account balance falls below the minimum for mandatory CPF LIFE participation, and if you take no action, then your payouts will not start at age 70 since you won’t be on CPF LIFE.

In all three of these exceptional cases you’re not on CPF LIFE, so no payouts will start automatically.

In addition, in practice, you could probably ignore CPF’s pleas to provide your bank details so that they can start depositing your CPF LIFE payouts from age 70. But that’d probably only put them off for a few months until they figure out a way to shove the money at you.

 

[dork32]

I believe BBC rationale is to use cash for payment and leave the medisave as the bequest, albeit earning good interest.

if you can use cash of medical bills, you probably have so much that you do not medisave for your bequest.

 

[dork32]

I always pay by cash even when payment from Medisave is allowed, for this same reason.

as expected uncle kenny does not need medisave to pay for his bills. what did i say about uncle kenny before?

 

[dork32]

I used to have a position that I will delay my CPF payout till 70. I have since changed my mind.

It is not because I need the money but rather the payback of a delay is "not worth" it.

there is no worth it or not worth it. it is right pocket, left pocket thing.

if you take early, you have more cash and less ra.
if you take later, you have more ra and less cash.
cash is my right pocket, ra is my left pocket.

 

[SKenny]

there is no worth it or not worth it. it is right pocket, left pocket thing.

if you take early, you have more cash and less ra.
if you take later, you have more ra and less cash.
cash is my right pocket, ra is my left pocket.

This is not what I meant.

The additional payout if you delay for 1 year is about 5+%. IMHO, this is a low return.

 

[tangent314]

Hmm, CPF claims "up to" 7%. Where did you get 5+%?

 

[lifeafter41]

if you can use cash of medical bills, you probably have so much that you do not medisave for your bequest.

The point is more towards the interest one will be getting vis a vis to the cash payout.

As for too much cash, don’t think amyone will think it’s too much....

 

[maple96]

there is no worth it or not worth it. it is right pocket, left pocket thing.

if you take early, you have more cash and less ra.
if you take later, you have more ra and less cash.
cash is my right pocket, ra is my left pocket.

your equations are not true, think out of the box

 

[dork32]

This is not what I meant.

The additional payout if you delay for 1 year is about 5+%. IMHO, this is a low return.

i will be on basic. there is no rate of return.

eg. i have 100k in ra
if the payout is 1k, i have 99k in ra. total 100k
if the payout is 2k, i have 98k in ra. total still 100k
to me ra is just as good as cash.

makav did mention one point. you may want to choose a plan that allow your ra to hit 0 first.

 

[dork32]

your equations are not true, think out of the box

there are no equations.

cash is better if you can invest it for bigger returns.
ra is better if it can earn a bigger return.

we are not here to discuss out investment ability.

 

[dork32]

Wrong analogy lah. CPF Life is insurance, so it is not your right pocket and left pocket. If you die early, excess money will be in CPF Life reserve fund to benefit others (and not to you)!

i always say cpf life is not an insurance. you do not spend 170k to buy insurance.

i also mentioned if you are in basic, your cpf life is in your ra. if you die early, excess money will not be given to you but your kids. definitely not to others.

 

[dork32]

If you opt for CPF Life Basic, ~20% of your RA money will be deducted as insurance premium and transferred to CPF Life Reserve Fund. That is as good as insurance already.

i am talking about the 80% that is leftin ra, not the 20% lost

 

[kehyi4]

i am talking about the 80% that is left in ra, not the 20% lost

CPF FAQ says:

Q What happens if I choose the CPF LIFE Basic Plan?
A When you join the CPF LIFE Basic Plan, we will deduct about 10 - 20% of your Retirement Account (RA) savings for the annuity premium at the point of policy issuance. The actual percentage will depend on your age and gender. We will inform you on the amount deducted when your policy is issued. The premium deducted will be paid into the Lifelong Income Fund. The rest of your RA savings will stay in your RA.

You will receive monthly payouts from the savings in your RA from your payout start age until one month before you reach 90 years old. Once you reach 90 years old, you will continue to receive monthly payouts from the Lifelong Income Fund for as long as you live.

Payouts under your CPF LIFE Basic Plan will be reduced when the combined balances in your CPF accounts, including the amount committed to CPF LIFE, falls below $60,000.This is due to the reduction in any extra interest earned and paid to you.

 

[SKenny]

Hmm, CPF claims "up to" 7%. Where did you get 5+%?

They did used the "upto" 7% clause which often means it can be way less.

I used the CPF LIFE Estimator and input my data for drawdown age of 65 vs 66. The increase of that 1 year is about 5.7%. (FYI I used the midpoint of basic plan).

Like i said earlier, the additional 5.x% increase doesn't look too attractive.