Should you delay your CPF Life payout

[SKenny]

I am confused by your above statements on bequest specifically ... in front and at the back.

Whether front or back, the bequest includes interest. So what's wrong?

It means that $1 today is worth more than $1 say 20 years in the future.

Another way of looking at it; today $1k only buys a fraction what our parent could buy with $1k 30 years ago.

This is inflation, time-value-of-money, real money vs nominal money etc etc.

 

[dork32]

Pardon my simpleton, what is the insurance element for ?
For people like me not smart/money savvy. I am only interested to take what I put in and take out what I have plus interest. Nothing more

no you are not a simpleton.

you came up with a wonderful idea.

 

[dork32]

In short, 0% if annuity not depleted.

XIRR approaches infinity% if you live till eternity

xirr does not approach infinity when years tends to infinity. it approaches payout*12/initial principal, or yearly payout/principle.

 

[dork32]

It means that $1 today is worth more than $1 say 20 years in the future.

Another way of looking at it; today $1k only buys a fraction what our parent could buy with $1k 30 years ago.

This is inflation, time-value-of-money, real money vs nominal money etc etc.

you are right. this is wat i meant

 

[dork32]

Pardon my simpleton, what is the insurance element for ?
For people like me not smart/money savvy. I am only interested to take what I put in and take out what I have plus interest. Nothing more

the insurance is such that you do not run of cash if you just wont die.

with your suggestion, you will never run of of cash. hence insurance is not needed. this is why i say you are not a simpleton.

 

[maple96]

What a disappointment. I released the second worksheet with a little reluctant on my part, for your comments and observations, as you like to have, but you reserved your comments (for the time being?)

If u choose Standard or Escalating Plan and start payout at 65, Bequest will be zero at 81 and 82 respectively.

If u think u can live beyond 81/82 but cannot live beyond 85/86, it pays to defer payout till 70 as this will ensure your bene gets a bequest Yes bequest only hit zero at 85 for Standard and 86 for Escalating Plan. Wow!

For Basic, defering payout till 70 only defers Bequest=0 by one year : 93 instead of 92

 

[maple96]

the insurance is such that you do not run of cash if you just wont die.

with your suggestion, you will never run of of cash. hence insurance is not needed. this is why i say you are not a simpleton.

Spot on! I like that!

 

[dork32]

If u choose Standard or Escalating Plan and start payout at 65, Bequest will be zero at 81 and 82 respectively.

If u think u can live beyond 81/82 but cannot live beyond 85/86, it pays to defer payout till 70 as this will ensure your bene gets a bequest Yes bequest only hit zero at 85 for Standard and 86 for Escalating Plan. Wow!

For Basic, defering payout till 70 only defers Bequest=0 by one year : 93 instead of 92

if you are on escalating, you cannot wait for your bequest to hit 0. this is when your xirr starts to rise. so waiting for you to hit 85 to hit 0 is no good.
but the other view is this: the reason why it took so long to hit 0 is because it has accumulated 5 more years of interest. you will take a bit more time to use up this interest.

on basic, i dont really care if the bequest hits 0. if it does not, i continue to earn the 4+% interest on what is left.

 

[BBCWatcher]

Pardon my simpleton, what is the insurance element for ?

Let's assume for sake of argument that you're a billionaire. According to the financial math, you should have no problem assuring that you'll enjoy at least a basic lifestyle for the rest of your life. And that's true, as far as it goes. So is longevity insurance worthless to you?

No, not worthless. It has some value. How much value we could quibble about perhaps, but zero is not correct. And the reason is that billionaires also live in/among civil society, and really the only force that's keeping them billionaires is a government (or governments) that enforce private property rights and contracts....

....With a caveat or two. What governments giveth, governments can also take away. A government can seize assets under color of law. All assets, in fact, except for assets that are explicitly protected from forfeiture under the law.

Theft, fraud, and gross incompetence are also possible. Government tries to defend private property from theft, but even the best run police force isn't perfect and doesn't always recover assets. There's a recent example here in Singapore. A Singaporean allegedly violated United Nations and U.S. sanctions against North Korea, and the United States government has thrown the book at him. While he might not have lost all his wealth, for sure he's been whacked hard and continues to be whacked. He's now on a "Denied Parties" list, nobody reputable (or even semi-reputable) can touch him, and he probably has lots of assets frozen. It's hard to know for sure how the U.S. government has impacted his life, but it's not fun. And the U.S. government can do all that, legally, even if he's innocent. Many governments can, actually.

Anyway, a relatively small amount of high quality sovereign longevity insurance is very, very cheap insurance against "SHTF" catastrophes. The asset protection aspects have value. Most wealthy people understand this value, which is why I continue to wonder whether the people who don't understand this are as wealthy as they claim.

 

[cscs3]

the insurance is such that you do not run of cash if you just wont die.

with your suggestion, you will never run of of cash. hence insurance is not needed. this is why i say you are not a simpleton.

But if you die, you would not get the cash too. Is someone else, you may get so excited if they care to burn some for you.

 

[tangent314]

Pardon my simpleton, what is the insurance element for ?
For people like me not smart/money savvy. I am only interested to take what I put in and take out what I have plus interest. Nothing more

If you are happy living on $1300/month for the rest of your life from a principle of $390k that doesn't diminishing which you can bequest, that is fine.

Others may not be fortunate to have so much money to start with. However with $247.6k to purchase CPF Life standard plan at age 65, he will also receive ~$1375/month for the rest of his life. The catch is there will be unlikely to be any money to pass on when this person passes away.

All the above assumes that you don't care about inflation. When CPF annuity options were first announced, there were a lot of feedback saying that the payouts need to go up with inflation. So now we have the escalating plan which is not a perfect inflation peg, but should be decent enough.

Trying to match inflation with the "withdraw interest only" plan becomes tougher though, since you need to withdraw the interest less inflation. To match the CPF Life escalating plan's 2%, you would be cashing out 2%++ of interest and leaving 2% to grow your principle, giving you a starting monthly payout of $675. In contrast, starting the CPF Life escalating plan with $147.8k at age 65 will give you the same starting monthly payout of $675.

So for people in the lower rungs of society whose retirement savings total around the FRS in their CPF RA, then CPF Life allows them an income to provide them a dignified living for the rest of their lives. For the majority of people with a lot more retirement savings, this FRS payout is still compulsory for them (without the property pledge), anything above you have your various options of what to do with that sum of money.

 

[dork32]

But if you die, you would not get the cash too. Is someone else, you may get so excited if they care to burn some for you.

i have already mentioned. money to my kids is as good as money to myself.

 

[dork32]

If you are happy living on $1300/month for the rest of your life from a principle of $390k that doesn't diminishing which you can bequest, that is fine.

so starting off with just 1000 a month is very much better?

 

[dork32]

Others may not be fortunate to have so much money to start with. However with $247.6k to purchase CPF Life standard plan at age 65, he will also receive ~$1375/month for the rest of his life. The catch is there will be unlikely to be any money to pass on when this person passes away.

you are right. cpf life is for this sort of person.

but is cpf life very important to people like uncle kenny?

good that you mentioned the other side. there is no bequest for cpf life standard, vs a bequest of 390k on what this guy suggested.

 

[spiritGate]

If for me I will just get the standard plan for 247.6k package together with my wife. Hopefully by that time we have dividends and own saving as well to sustain our living. As for kids my kids will just inherit our property and our left over cash. Should be good already

Sent from OPPO CPH1879 using GAGT

 

[SKenny]

you are right. cpf life is for this sort of person.

but is cpf life very important to people like uncle kenny?

good that you mentioned the other side. there is no bequest for cpf life standard, vs a bequest of 390k on what this guy suggested.

Why you alway quote my name?

I was told in no uncertain term that I need to buy longevity insurance hor. I scare I will become old, destitute and penniless.

 

[SKenny]

If for me I will just get the standard plan for 247.6k package together with my wife. Hopefully by that time we have dividends and own saving as well to sustain our living. As for kids my kids will just inherit our property and our left over cash. Should be good already

Sent from OPPO CPH1879 using GAGT

If both of you are on the ERS limit, then your safety net provided CPF Life is a very decent one.

You may want to consider topping up your RA to the prevailing ERS limit, as the returns in RA is among the best out there (in the same risk category).

 

[Toni90]

you are right. cpf life is for this sort of person.

but is cpf life very important to people like uncle kenny?

good that you mentioned the other side. there is no bequest for cpf life standard, vs a bequest of 390k on what this guy suggested.

So cpf life is good. Gov give choices for everyone.

 

[dork32]

Why you alway quote my name?

I was told in no uncertain term that I need to buy longevity insurance hor. I scare I will become old, destitute and penniless.

i quote you coz you are power. you are the perfect example against bbc which claims that there is a non zero chance that we will all become destitutes if we chose basic instead of escalating.

 

[iMac]

Why you alway quote my name?

I was told in no uncertain term that I need to buy longevity insurance hor. I scare I will become old, destitute and penniless.

I guess you are the perfect 好榜样 for us. Everyone is hoping to be able to achieve the amount of saving you had in cpf?