Should you delay your CPF Life payout

[tangent314]

The numbers in your edit still don't seem to match the numbers from the CPF Life Calculator for M/1974/176k. Maybe you meant 1964 to match the FRS of 176k but the difference also won't be that much.

This is what I got for M/1974/176k for passing at 75, all of which is to the advantage of @70

 

[maple96]

Of course it is better to delay till 70 cos u earn another 5 years of compound interest and get higher payout from 70, there is no need to do any complicated maths. If u die before 70, all your monies still go to bene, u dun lose a single cent. Once u start payout, the potential loss will come into play if u die earlier than expected. Simple logic.

But dun forget u are making certain "undefined" assumptions which u might unconsciously or consciously be aware. If u dunno, good luck to u!

 

[Mecisteus]

Of course it is better to delay till 70 cos u earn another 5 years of compound interest and get higher payout from 70, there is no need to do any complicated maths. If u die before 70, all your monies still go to bene, u dun lose a single cent. Once u start payout, the potential loss will come into play if u die earlier than expected. Simple logic.

But dun forget u are making certain "undefined" assumptions which u might unconsciously or consciously be aware. If u dunno, good luck to u!

At the back of my head calculation, you are correct.

If you defer, your money is compounded inside RA.

If you don't defer and you cannot reinvest at the RA rate, then you are worst off.

 

[Mecisteus]

Standard as the name implies is a pure longevity insurance. Also with escalating plan.

If you want insurance with standard and escalating, then you need to pay some costs. The costs are the loss of interests.

If you don't like paying more for insurance, these 2 plans are definitely OUT.

Basic means put less in the insurance portion. You can take care of yourself better.

 

[soaresb]

Where do you all find the information on the amount used for annuity premium? I saw some of you mention 10-20% but I can't find this anywhere in the cpf website.

 

[iMac]

Of course it is better to delay till 70 cos u earn another 5 years of compound interest and get higher payout from 70, there is no need to do any complicated maths. If u die before 70, all your monies still go to bene, u dun lose a single cent. Once u start payout, the potential loss will come into play if u die earlier than expected. Simple logic.

But dun forget u are making certain "undefined" assumptions which u might unconsciously or consciously be aware. If u dunno, good luck to u!

Wah Lao...We know that later is more. But from 65 to 70...Are we going to collect cardboard for living while waiting for another 5 years.

If delay payout is good....Maybe we should delay till 95 or 100 then collect payout.

Rich ppl who don't need cpf payout can wait till 70, 80, 90 or 100.

Poor ppl who for need $ would want payout earlier.

There is no 1 size fit all Singaporean..Minister would suggest delaying payout should look from the poor ppl view too.

 

[BBCWatcher]

But from 65 to 70...Are we going to collect cardboard for living while waiting for another 5 years.

If you are in such financial distress that you must start CPF LIFE payouts at age 65, then that’s a problem already. Try to avoid that problem: save more for retirement, and invest your savings prudently, in a low cost, diversified, and age appropriate way.

Aspire to do better. Try.

 

[kehyi4]

Where do you all find the information on the amount used for annuity premium? I saw some of you mention 10-20% but I can't find this anywhere in the cpf website.

Erm, it's right there in the CPF Life FAQ

Q What happens if I choose the CPF LIFE Standard Plan?
A When you join the CPF LIFE Standard Plan, we will deduct all the savings in your Retirement Account as the annuity premium at the point of policy issuance. The premiums deducted will be paid into the Lifelong Income Fund. You will receive monthly payouts from the Lifelong Income Fund from your payout start age for as long as you live.

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.

Q What happens if I choose the CPF LIFE Escalating Plan?
A When you join the CPF LIFE Escalating Plan, we will deduct all the savings in your Retirement Account as the annuity premium at the point of policy issuance. The premiums deducted will be paid into the Lifelong Income Fund. You will receive monthly payouts from the Lifelong Income Fund from your payout start age for as long as you live.

The CPF LIFE Escalating Plan has lower initial payouts which will increase by 2% per year. The 2% increase will take place every year in the month that the first payout was made.

As with all CPF LIFE plans, payouts may be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual. We will inform you two to three months before we make any adjustments to your monthly payouts.

 

[Mecisteus]

Wah Lao...We know that later is more. But from 65 to 70...Are we going to collect cardboard for living while waiting for another 5 years.

If delay payout is good....Maybe we should delay till 95 or 100 then collect payout.

Rich ppl who don't need cpf payout can wait till 70, 80, 90 or 100.

Poor ppl who for need $ would want payout earlier.

There is no 1 size fit all Singaporean..Minister would suggest delaying payout should look from the poor ppl view too.

You are right. If there is an option to choose basic and delay indefinitely, it is even better.

In other words, those who have other sources of income don't need the insurance aspects of CPF Life.

The money in RA will continue to earn interests and be bequested.

 

[Mecisteus]

But if you choose standard or escalating and defer, then you are committing more into the insurance aspects.

This is not worth to me. Of course it's just me.

 

[kehyi4]

But if you choose standard or escalating and defer, then you are committing more into the insurance aspects.

This is not worth to me. Of course it's just me.

mm... CPF Life FAQ says:

Q When do I have to choose my CPF LIFE plan?
A If you are a Singapore Citizen or Permanent Resident born in 1958 or after and have to join CPF LIFE, we will write to you six months before you reach your payout eligibility age to explain the options you have and the choices you have to make.
You will only need to choose your CPF LIFE plan when you wish to start receiving your CPF LIFE monthly payouts, which is anytime from your payout eligibility age to age 70. The age at which you start receiving your payout is your payout start age. If you do not choose a plan before age 70, we will automatically place you on the CPF LIFE Standard Plan.

---
so, it looks like you can defer first, then choose

 

[henrylbh]

Of course it is better to delay till 70 cos u earn another 5 years of compound interest and get higher payout from 70, there is no need to do any complicated maths. If u die before 70, all your monies still go to bene, u dun lose a single cent. Once u start payout, the potential loss will come into play if u die earlier than expected. Simple logic.

But dun forget u are making certain "undefined" assumptions which u might unconsciously or consciously be aware. If u dunno, good luck to u!

Delay to 70 means you are also committing 20% to annuity premium based on the accumulated RA?

And just before payout at 70, if I decide to pledge property and withdraw my RA, how much can I withdraw? Half of FRS at 55 or half of accumulated RA before payout at 70?

 

[angtc11]

The numbers in your edit still don't seem to match the numbers from the CPF Life Calculator for M/1974/176k. Maybe you meant 1964 to match the FRS of 176k but the difference also won't be that much.

This is what I got for M/1974/176k for passing at 75, all of which is to the advantage of @70

Let me extract the numbers again when I get to a pc

 

[maple96]

Delay to 70 means you are also committing 20% to annuity premium based on the accumulated RA?

Yes this is one reason I prefer to start at 65. That's why I said many times those who always calculate dun no what assumptions they are making, dun know what they are comparing, dunno what they are doing There are so many variables they might not know or assume constant

And just before payout at 70, if I decide to pledge property and withdraw my RA, how much can I withdraw? Half of FRS at 55 or half of accumulated RA before payout at 70?

This dun apply to me, but the answer = it is always 50% of FRS unless rules change when u reach 55 then

see my comments above

 

[angtc11]

Of course it is better to delay till 70 cos u earn another 5 years of compound interest and get higher payout from 70, there is no need to do any complicated maths. If u die before 70, all your monies still go to bene, u dun lose a single cent. Once u start payout, the potential loss will come into play if u die earlier than expected. Simple logic.

But dun forget u are making certain "undefined" assumptions which u might unconsciously or consciously be aware. If u dunno, good luck to u!

Agree that it's straightforward at the accumulation phase,the comparison is identical for 55 to 65. From 65 to 70, the age-65 drawdown is in de-ccumulation and a purchase of longevity insurance while the age-70 drawdown is still accumulating. 70 to 75 both are de-ccumulation but ought to have different ending value.

Intuitively I find it hard to believe that drawing down early is worse off (which was probably why I took the cpf calculator numbers without doing basic checks the first time around, reminder to self). It also doesn't square with my previously calculated numbers that delayed drawdown is 'expensive'

 

[SBC]

3Ls strategy, consisting of liquidity, longevity and legacy.

Subconsciously, I am following it and had planned and allocated in each bucket

 

[Mecisteus]

Intuitively I find it hard to believe that drawing down early is worse off (which was probably why I took the cpf calculator numbers without doing basic checks the first time around, reminder to self). It also doesn't square with my previously calculated numbers that delayed drawdown is 'expensive'

Drawing down early is better if you can reinvest higher than the rate of RA.

Isn't this the case?

 

[Mecisteus]

3Ls strategy, consisting of liquidity, longevity and legacy.

Subconsciously, I am following it and had planned and allocated in each bucket

The longevity is referring to your health.

You can buy a lot of longevity insurances but not in good of health also no use.

 

[SBC]

The longevity is referring to your health.

You can buy a lot of longevity insurances but not in good of health also no use.

Need not to be bad health when referenced in retirement planning. It can be very good longevity whereby allocated fund for retirement is not enough.

Btw, saw many discussion in interest rate. Is it for RA or fund allocated in CPF Life?

Cpf Life being an annuity, works like a common pool. I did not find any official link that this pool will earn x%.

 

[Mecisteus]

Need not to be bad health when referenced in retirement planning. It can be very good longevity whereby allocated fund for retirement is not enough.

Ok you are right.

The longevity from a wealth planning POV is referring to the $$$ to sustain your lifestyle.

This is how people people started to get brainwashed.