There is no need to adjust the rates, the payout of CPF life is controlled by the board.
There is no need to adjust the rates, the payout of CPF life is controlled by the board.
Sounds good on paper, but reality is another story.......
You can go here and take a look (read the comments by Wilson Nugraha Citra), and people found that the CPF Life actual return that people will get even if they live until 86 years old is likely less than 1.94% based on current payout...........
Mind you, 86 years old is already the average age of women (for men is about 82 years old), and the actual return of 1.94% based on the current payout is MUCH LESS than the 3.5-4% that you were told you will get from CPF Life.........
Before people get carried away by all the statistics and figures touted and thrown in your face, you better make a reality check, whether these figures are real or not.........
It happen to Temasek , GIC as well as insurance companies.
The bonus declared will also be reduced for all insurance polices if the investment return continue to be weak in the next few yrs.
Private annity will also be affected by the low return & need reduce their payout.
That is not material to what we are saying here.........
The thing is, we were told that CPF Life annuity payout is about 3.5-4.0% per year (if my memory did not fail me, correct me if I am wrong here), but actually when some people run a check on the figures touted based on the current payout, the real return even if you live till 86 years old is only like 1.94%, that is the problem..........
So who pocketed the other profit of 1.56-2.06% pa?
Anyway, Temasek claimed about 17% pa return and GIC claimed 6+% pa return, all so much higher than the 1.94% that CPF Life is paying out (and hence there is no risk to the 1.94% payout being cut, instead it should really be increased to 3.5-4% to back up what these people claimed)......
For transparency of CPF Life account, it should be caved out as a separate account from CPF and have its own annual financial statements on incomes and payouts. Thereafter, when there are accumulated surpluses because of the low payout, the payouts should be adjusted upwards (In current form, it seems that if there are profits from the low payouts, CPF Board will pocket the profit?).
Last edited by teddybear; 31-07-16 at 18:19.
CPF.Retirement.Aug16.jpgCPF.Retirement.Aug16.jpgCPF.Retirement.Aug16.jpgToday Sunday times - CPF $1m by age 65
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It is a no brainer that CPF compounded high interest RISk FREE is a good retirement plan scheme.
But sadly, not many people TRUST in our CPF scheme. Lock in, PAP become the opposition, Shift
"goal post " etc. It tool me 2yrs + to convince my friend who is quite financial savvy to transfer his
CPF OA to CPF SA. He hestiated. But finally he transferred it. Later, he regretted for not transferring
much earlier to enjoy the high compounded interest.
With the S$1m, the interest will be est > $30k. Every yr keep increasing due to it compounded effect.
I will be using the $30k interest to travel around the world with my wife when I am close to age 58-60.
Still a long way but I am very patience to wait for that day.
Didi you notice recently that our GOVT has promoted AWARENESS of SDIC at heartland mall ?
Why do our GOVT trying to promote the SDIC awareness ?
SDIC - Singapore deposit insurance corporation. WE insure your deposits up to $50,000.
In the event a Deposit Insurance Scheme member bank or finance company fails, all of your eligible accounts with that member are aggregated and insured up to S$50,000. Trust and client accounts held by non-bank depositors are insured up to $50,000 per account.
To support teddy, here is the Maths for the inputs:
Current value: $241,500
Current age: 55
Payout age: 65
Estimated payout: $1,770 - $1,920 monthly ($21,240 - $23,040 per year)
Life expectancy: 86
N = 86 - 65 = 21 (years)
Future value: 0
https://www.cpf.gov.sg/Members/Schem...ent-sum-scheme
Last edited by richwang; 14-08-16 at 20:27.
Let's use discount rate of 1.94%
Standing at the year when you are 65 and calculate the "current value" of your total payouts:
I = 1.94
N = 21
PMT = 21,240
FV = 0
Any financial calculator will give you:
PV= 363,511
http://www.calculator.net/present-va...1=end&x=61&y=9
In this case, 85.x years old is the average age of female and so should be the study case for a female.
Yes, this is an interesting case and we would like to know what is the real return in this scenario (assuming a person lives till the average age of 86 years old and no bequest left)?
Wondering why you are calculating the PV?
PV should be known (since at 55 years old you have $241,000 and you are supposed to get 3.5-4% return till 65 years old).
What is unknown here is the interest rate / return for your annuity (from 65 years old onwards) if you live till the average age of 86 years old.
And now back to age 55, to see what is the effective rates used between age 55 and 65.
PV = 241,500
FV = 363,511
N = 65 - 55 = 10
PMT = 0
Again any financial calculator will tell you:
I = 4.174%
http://www.calculator.net/finance-ca...tit=0&x=53&y=2
This is about right for the weighted average interest rate:
First 30k 6%
Next 30k 5%
The rest 4% (241,500 - 60,000 = 181,500)
To be exact
Weighted I = (30,000 X 6 + 30,000 x 5 + 181,500 X 4 ) / 241,500 = 4.37
Ok, teddy is right.
With weighted interest rate of
I = 4.37
PV = 241,500
PMT = 0
N = 65 - 55 = 10
By age 65, the
FV = 370,402
http://www.calculator.net/finance-ca...it=0&x=67&y=11
Now stand at age 65,
PV = 370,402
FV = 0
N = 86 - 65 = 21
PMT = 21,240
Financial calculator tells you:
I = 1.755
http://www.calculator.net/finance-ca...tit=0&x=62&y=2
My dear, teddy was nice to say 1.96%!
For those who are interested in the calculation, some kind soul has developed a Google Sheet to help you to calculate the figures (please click here!), and you can see for yourself (LIVE) that CPF Life really pays very low annuity return of 1.9% (or so) even if you live till 85 years old (for women)........ (You need to make a copy of the Google Sheet file before you can change the figures! To make a copy, you need to have Google Drive account and login to it. You can also download a copy as Excel .xlsx file).
If people tell you otherwise, you can show them how you calculate them and ask them to justify and prove the contrary (don't just empty talk and bullshit)...........................
And in case you are wondering why use 85 years old for women, you can see the statistics here, which states that life expectancy for Singapore women is 84.9 years and for men is 80.4 years!
Now, let's find out how much they should pay, using 4% as the rate:
PV = 370,420
FV = 0
N = 86 - 65 = 21
I = 4
Calculate
PMT = 26,403
(S$2,200 per month)
I only know if you buy property, you pay 20% loan 80%.
Before the loan is fully pay, you buy another one and loan.
This way you are ahead of inflation.
1988 4 room HDB cost 83,000
1996 5 room HDB cost 225,600 (now 5 room asking 640,000)
2006 2 Bedroom cost 535,000 (now asking 1,450,000)
2011 3 bedroom PH cost 1,305,800. (now asking 1,500,000)
If bank can loan me money, I will still buy property.
Last edited by Arcachon; 14-08-16 at 22:15.
Every month collect rental don't need until the end of the year.
The amount of money printing is getting worst.
Whoever believe in money is going to get a shock when they need it most.
Next month all BUS and TRAIN under the government.
Soon you will get shorter lease so that more can enjoy housing.
Rental?
There is nothing guarantee about rental, so the rental is a bonus and I won't even bet on collecting it every month non-stop.
Most important is that even if you have NO rental, how long can you last?
And for money you can't deploy in property, you better get better return than leaving them in the bank (as you said, "The amount of money printing is getting worst")! So, better learn to invest for good returns in other venues (other than properties)............. And Don't leave your money in CPF, they are dead-duck!
Without bullets better don't go for war.
Guerilla warfare can be extremely profitable without any bullet, think you should learn to invest and make money outside of properties (which unfortunately most people like you have been priced out because of property cooling measures like TDSR and ABSD etc).
You people should learn to forget about profiting from property (which you can't now) and still make lots of money elsewhere..............
People can make money anywhere or anyhow, or any way.
Property good, stocks also good. Borrow to invest, just think of scenarios like Swiber. If hedge everything carefully, its still ok overall.
The bulk of my friends keep cash and worship cash in bank. That is the only strategy that feels safe but is highly risky over the very long run.
The three laws of Kelonguni:
Where there is kelong, there is guni.
No kelong no guni.
More kelong = more guni.
There is definitely a cap to SA contribution at FRS, which is currently $161,000(?) (as far as I know).
Is there a cap to CPF OA? Even if there isn't, the return is only 2.5% on CPF OA, too little to be of any use........
So the article is misleading perhaps?
There is no problem to hit $1M in CPF if people contribute most of these money from Cash top-up but definitely not because they contribute small amount of money into CPF and CPF give them superb returns to help them to achieve $1M (which seems to be the story the writer is trying to sell?)
However, this is not to say that CPF or the government short-change people because hei, 2.5% is still a good rate for people who don't know how to invest! For these people, they should be grateful!
For those who know how to invest, it is better to DIY (than leave their money in CPF) and more options and avenues for them to invest should be made available (instead of all those stupid restrictions restricting them from many investments which are available to them if they use Cash).........
OOPS, wrong interest rates used. Because the higher rates only applies to the first $60k, with the amount increasing, the weighted average rate will go lower than 4.37%. So the FV 370,402 is over estimated. Thus the annuity rate is under estimated.
We really need a spreadsheet for all the cash flows.
Sorry for this.
Richard
Here is the catch: putting in $3,000 cash MONTHLY.
"Mr Wong will continue to transfer 100 per cent of his Ordinary Account funds to his Special Account this year and the next. In addition, he will top up his Special Account with $3,000 cash monthly during the same period."
http://www.straitstimes.com/business...-cpf-by-age-65
You can use this Google Sheet to help you to calculate the figures:
https://docs.google.com/spreadsheets...it?usp=sharing
You need to make a copy of the Google Sheet file before you can change the figures! To make a copy, you need to have Google Drive account and login to it. You can also download this copy as an Excel .xlsx file for offline use.
Since 2015, the 1st $30k of the Retirement Account earns 6%, the next $30k earns 5%, and the remaining earns 4%, and this only applies for the period when you are 55 years old to 65 years old.
After that, as our calculation shows, even if a woman lives until average age of 85 years old, the return you get is only <1.9%............
So who claimed that CPF Life is giving you 3.5 to 4% return???
Last edited by teddybear; 15-08-16 at 21:00.