You can't withdraw shit from your CPF
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Originally posted by maxtor:
Ok. I've consulted the CPF Life Guide. My answer to you is yes. The premium payable is = to 100% of your Retirement Account balance. This is a lump sum = one time payment at age 55. Once you reach age 62, your monthly payouts will commence.
actually, for people born in the 80s and after, the draw down age is 65...
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Originally posted by bladez87:
actually, for people born in the 80s and after, the draw down age is 65...
Thanks for the clarification.
I am going to try to explain this whole CPF Life thing and how it links to the current Minimum Sum Scheme. The examples I use DO NOT apply to everyone and are quite generic in nature. Information I provide is for general education only. DO NOT take anything here as a professional recommendation or professional advice. If in doubt, do counsult a financial advisor.
All of us (working professionals or have worked before) have a CPF account. This CPF account consists of 3 major components, namely CPF-OA (Ordinary Account), CPF-SA (Special Account) and CPF-MS (Medisave Account). During our working years, our CPF will look something like this:-
CPF-OA CPF-SA CPF-MS
$100 000 $50 000 $30 000
Say you turn 55 years this year (2009), and the above is your CPF Account Statement. What happens now? When you turn 55, a new CPF component will be set up for you. This account is called the Retirement Account - aka CPF-RA. When your CPF-RA is set up, funds from your CPF-OA and CPF-SA will be transferred over to make up what is known as the Minimum Sum. The Minimum Sum is an amount dictated by the Government and increases every year ($117 000 in Year 2009). Using the above example, your CPF account will now look like this:-
CPF-OA CPF-SA CPF-MS CPF-RA
$33 000 $0 $30 000 $117 000
Remember: CPF Board will clear out your CPF-SA first, then followed by your CPF-OA to make up the Minimum Sum. If there is any balance left in your CPF-OA or CPF-SA after making up the Minimum Sum, you can withdraw it as cash (REMEMBER: this scenario only happens when you turn 55 this year, 2009).
Now that this is explained, i shall move on to explain what the MSS and CPF Life is. When you reach 62 years old, you will attain what is known as the Drawdown Age (DDA). This is when your monthly payouts begin.
The current Minimum Sum Scheme (MSS) is a 20 year insurance plan also known as an annuity. An annuity is an insurance plan. What happens is all the money in your CPF-RA ($117 000) will be taken to pay you a monthly payout for the next 20 years, compounding at 4% p.a. (till Dec 31 2009).
Then the Govt realised that people are living longer, and there is a pertinent danger that they might outlive their savings (20 years of MSS payouts). So they decided to come out with CPF Life,
CPF Life is VERY SIMILAR to the current MSS - the only difference being CPF Life pays out monthly payouts FOR LIFE. The current MSS only pays out for 20 years whereas CPF Life pays out for life.Also, with CPF Life you can choose to receive a higher monthly payout or a lower monthly payout, depending on which plan you choose (there are 4 of them). With the MSS your payouts are fixed and you cannot choose.
The above example used is very generic and does not apply to everyone. In my next post I will elaborate on other aspects of CPF.
Hope I've been of some help.
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Originally posted by maxtor:
Thanks for the clarification.
I am going to try to explain this whole CPF Life thing and how it links to the current Minimum Sum Scheme. The examples I use DO NOT apply to everyone and are quite generic in nature. Information I provide is for general education only. DO NOT take anything here as a professional recommendation or professional advice. If in doubt, do counsult a financial advisor.
All of us (working professionals or have worked before) have a CPF account. This CPF account consists of 3 major components, namely CPF-OA (Ordinary Account), CPF-SA (Special Account) and CPF-MS (Medisave Account). During our working years, our CPF will look something like this:-
CPF-OA CPF-SA CPF-MS
$100 000 $50 000 $30 000
Say you turn 55 years this year (2009), and the above is your CPF Account Statement. What happens now? When you turn 55, a new CPF component will be set up for you. This account is called the Retirement Account - aka CPF-RA. When your CPF-RA is set up, funds from your CPF-OA and CPF-SA will be transferred over to make up what is known as the Minimum Sum. The Minimum Sum is an amount dictated by the Government and increases every year ($117 000 in Year 2009). Using the above example, your CPF account will now look like this:-
CPF-OA CPF-SA CPF-MS CPF-RA
$33 000 $0 $30 000 $117 000
Remember: CPF Board will clear out your CPF-SA first, then followed by your CPF-OA to make up the Minimum Sum. If there is any balance left in your CPF-OA or CPF-SA after making up the Minimum Sum, you can withdraw it as cash (REMEMBER: this scenario only happens when you turn 55 this year, 2009).
Now that this is explained, i shall move on to explain what the MSS and CPF Life is. When you reach 62 years old, you will attain what is known as the Drawdown Age (DDA). This is when your monthly payouts begin.
The current Minimum Sum Scheme (MSS) is a 20 year insurance plan also known as an annuity. An annuity is an insurance plan. What happens is all the money in your CPF-RA ($117 000) will be taken to pay you a monthly payout for the next 20 years, compounding at 4% p.a. (till Dec 31 2009).
Then the Govt realised that people are living longer, and there is a pertinent danger that they might outlive their savings (20 years of MSS payouts). So they decided to come out with CPF Life,
CPF Life is VERY SIMILAR to the current MSS - the only difference being CPF Life pays out monthly payouts FOR LIFE. The current MSS only pays out for 20 years whereas CPF Life pays out for life.Also, with CPF Life you can choose to receive a higher monthly payout or a lower monthly payout, depending on which plan you choose (there are 4 of them). With the MSS your payouts are fixed and you cannot choose.
The above example used is very generic and does not apply to everyone. In my next post I will elaborate on other aspects of CPF.
Hope I've been of some help.
Thank you. This is very informative.
But back to my previous question - is there an admin fee / or any other fee (?) that you need to pay to the government / CPF Board from the CPF RA of $117,000 in your example since it is now an annuity program?
Someone mentioned to me that there was - though exact details could not be ascertained.
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Originally posted by charlize:
Thank you. This is very informative.
But back to my previous question - is there an admin fee / lump sum premium (?) that you need to pay to the government from the CPF RA of $117,000 in your example since it is now an annuity program?
Someone mentioned to me that there was - though exact details could not be ascertained.
I see what you are trying to say: - are you trying to ask if there are any fees/charges OTHER THAN the $117 000 that you have to pay?
The answer is yes. However these charges are transparent to you - the consumer. All insurers are profit driven and have to make money to continue serving their clients. CPF Life is a wholly government driven initiative, and there will be also be charges involved - administrative, distribution, etc etc.
However no one knows how much these charges are.
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Originally posted by maxtor:
CPF Life is VERY SIMILAR to the current MSS - the only difference being CPF Life pays out monthly payouts FOR LIFE.
What happens to the remaining money in "CPF Life" after you drop dead?
CPF Life is a wholly government driven initiative, and there will be also be charges involved - administrative, distribution, etc etc.
However no one knows how much these charges are.
You mean to say that this fucking "CPF Life" sucks more money from Singaporeans?
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Originally posted by maxtor:
I see what you are trying to say: - are you trying to ask if there are any fees/charges OTHER THAN the $117 000 that you have to pay?
The answer is yes. However these charges are transparent to you - the consumer. All insurers are profit driven and have to make money to continue serving their clients. CPF Life is a wholly government driven initiative, and there will be also be charges involved - administrative, distribution, etc etc.
However no one knows how much these charges are.
You mean NOT transparent since the actual amount or % is not revealed to the retirees in the scheme.
If that's the case, what is stopping the government from taking out a sum or % that does not justify the relevant fees or is even higher than what private insurers are taking?
It almost looks as if your CPF money (of which the total amount is rightfully yours in the first place) is now "taxed" when it is returned to you monthly sum by sum.
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Originally posted by angel3070:
What happens to the remaining money in "CPF Life" after you drop dead?
You mean to say that this fucking "CPF Life" sucks more money from Singaporeans?
I do believe that is the case to put it in a nicer way.
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Yeah, come to think about it, right now, you need to "pay" them to return your money.
Haiz.
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Back to my attempt at explaining this whole CPF thing -
The example I have given was an ideal one - where one has enough money in his/her CPF account to put aside for the Minimum Sum Scheme and still have cash to withdraw.
However the truth is, alot of us do not have this kind of money in our CPF. Why is this so? Remember - alot of us use our CPF to purchase our property (and property prices are very high in Singapore). Another reason is, we only contribute CPF from our monthly salary of up to S$4500. I will use an example to illustrate this.
Say for example you are making $4500 a month, your CPF contribution is :-
$4500 x 20% = $900 ( your CPF contribution)
$4500 x 14.5% = $652.50 (Employer's contribution)
Total CPF Contribution = $900 + $652.50 = $1552.50
This $1552.50 will be split between your CPF-OA, CPF-SA and your CPF-MS. This percentage differs with age. For more information on allocation rates, see
http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/ContriRa.htm
EVEN if you make $5000 a month, $6000 a month, $20 000 a month, your CPF contribution stays at $1552.50. This is to reduce the burden on employer contribution. Now imagine if your property cost $400 000 (Assume: HDB Resale 4 Rm in mature estate), how much will you be left with after paying for your property?
So a more realistic scenario for your CPF Account when you are 55 years should look abit like this -
CPF-OA CPF-SA CPF-MS
$50 000 $30 000 $30 000
With the above figures, how are you going to make up your Minimum Sum? The answer is - you are allowed to use your property to make what is known as a property pledge.
Using the above example - a 4 Rm HDB Resale flat at $400 000, you are allowed to use 50% of the Minimum Sum as a property pledge.
Since you can use 50% of $117 000 = $58 500 as a property pledge, your CPF account should now look like this :-
CPF-OA CPF-SA CPF-MA CPF-RA
$21 500 $0 $30 000 $58 500 (property pledge)
$30 000 (CPF-SA)
$28 500 (CPF-OA)
This mans that you can withdraw $21 500 as cash when you turn 55 this year (2009).
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Originally posted by angel3070:
What happens to the remaining money in "CPF Life" after you drop dead?
You mean to say that this fucking "CPF Life" sucks more money from Singaporeans?
That depends on which CPF Life plan you choose - if you take the 4th plan (i forgot the name) there is no payout to your beneficiaries after you pass away.
I dont want to turn this into a political thread - so i will not comment on whether it sucks more money from singaporeans ...
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Originally posted by maxtor:
I dont want to turn this into a political thread - so i will not comment on whether it sucks more money from singaporeans ...
maxtor, you have studied this issue, you know about it than us, so I would like you to give your informed opinion on whether the "CPF Life" is a good deal for Singaporeans.
Thank you.
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Originally posted by angel3070:
maxtor, you have studied this issue, you know about it than us, so I would like you to give your informed opinion on whether the "CPF Life" is a good deal for Singaporeans.
Thank you.
Ok. this is my personal opinion.
Honestly it is a good plan. I currently work as an independent financial advisor and in terms of annuity plans, there is NO other plan better than CPFLife in terms of returns. There used to be one, from Manulife, but it has already been discontinued.
However i think there is a very huge opportunity cost involved. The government, in implementing CPF Life, have classified all Singaporeans into one group with one broad stroke of the brush. Why do I say that? The implementation of CPF Life and some new regulations e,g, phasing out of 50% withdrawal rule, our CPF monies will be stuck in CPF for life. I will post more about the phasing out of 50% withdrawal rule in my next post.
Think about it. An annuity plan is the insurance equivalent of buying a property. If i am allowed to take out cash from CPF to buy a property and rent it out, isn't it also a form of annuity? Or if I take the cash and buy stocks or invest in a business, there is a chance I could grow the money into an even bigger amount.
With CPF Life, I am not given that choice.
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Phasing Out 50% Withdrawal Rule
Currently, members who are unable to meet the full CPF MS at age 55 are allowed to withdraw the first $5,000 or 50% of their savings in their CPF Accounts1, whichever is higher. Members who are able to meet the full MS will be allowed to withdraw the remaining monies in their CPF Accounts.As announced in 2003, from 1 January 09, the percentage for withdrawal will decrease from the current 50% to 40%, and thereafter be further reduced every year by 10 percentage points. Therefore, from 1 January 2013, CPF members must meet the CPF and Medisave Minimum Sums first before they can withdraw their remaining Ordinary Account and Special Account balances at age 55. However, CPF members can continue to withdraw the first $5,000 from their Ordinary Account and Special Account balances.
The change in the withdrawal rule will enable members turning age 55 from 1 Jan 09 to set aside more savings for their retirement.
http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_16June2008.htm
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max. which co u working for? i from financial alliance
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actually, you can still withdraw your money, just that a smaller portion. and the fact is most people need annuity, so what most people do is to take out MS and buy annuity from private sector.
just that now the gov step in, and make it compulsory for everyone to get annuity that it is providing. but really, the commoners will benefit from it , while those who are extremely rich wouldnt really be affected.
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Originally posted by bladez87:
actually, you can still withdraw your money, just that a smaller portion. and the fact is most people need annuity, so what most people do is to take out MS and buy annuity from private sector.
just that now the gov step in, and make it compulsory for everyone to get annuity that it is providing. but really, the commoners will benefit from it , while those who are extremely rich wouldnt really be affected.
I agree with you on the point that everyone needs some form of annuity.
The point i am contending is, that the annuity does not need to be an insurance plan. It can be a private residential property, a commercial property, a stock that pays out a dividend, etc etc. These are all different forms of ''annuity'' which serve the same purpose, which is to give a regular passive income.
To be fair, the annuities on the market now ( i shall not give names) all average about 2% return p.a., which is honestly, not alot. However on the flipside, i acknowledge that low return = low risk and their projected return probably can be extrapolated into the future without much deviation from the trend.
Just my personal opinion...
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to angel question,
there are 4 plans.
Basic Plan
between 55 to 90, you will be using from RA.
payout starts at 90yo. very old i know. low income, highest bequest.
Balanced Plan (default)
between 55 to 80, you will be using funds from RA.
payout at 80, mid income, mid bequest
Plus Plan
this plan totally no RA. all your funds from RA will be used for LIFE.
payout at current draw down age. 65 atm. high income, lowest bequest
Income Plan
this plan totally no RA. all your funds from RA will be used for LIFE.
payout at current draw down age. 65 atm. highest income. 0 bequest.
bequest is the amount that is passed down.
so if you die and you are using the Basic or Balanced plans, your kids will get the balance in RA and any unused annuity PREMIUM.
if using the Plus plan, the kids will be getting unused annuity PREMIUM.
However for Income plan, nothing will be refunded, even if you die before you even start drawing the annuity. meaning if u suay suay 64 yo die, nothing will be left.
Note for people born after 1954, meaning us, the draw down age is 65.
on a side note, can move this topic to my forum ma. cause i set up a forum for financial discussions like this and currently no activity in my forum. haha XD
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Originally posted by maxtor:
I agree with you on the point that everyone needs some form of annuity.
The point i am contending is, that the annuity does not need to be an insurance plan. It can be a private residential property, a commercial property, a stock that pays out a dividend, etc etc. These are all different forms of ''annuity'' which serve the same purpose, which is to give a regular passive income.
To be fair, the annuities on the market now ( i shall not give names) all average about 2% return p.a., which is honestly, not alot. However on the flipside, i acknowledge that low return = low risk and their projected return probably can be extrapolated into the future without much deviation from the trend.
Just my personal opinion...
what you say is true. but for stocks, i think a bit risky for old people. property, not many people can afford to get multiple properties, and those who can, are most likely not going to be very affected by the sum taken for CPF LIFE.
is like 1 hdb unit can cost 250k? the sum taken for CPF LIFE is at most 106k. and not to mention the possibility of getting lower rents and having to pay a higher installment for the house.
i think for property is more of capital appreciation and income generation. depending on income generation alone might be a little risky, as if the property market falls, the person might not live long enough to wait for it to go up again. but if there is intention to hand down the property to the kids then different story le, which probably means the guy is rich enough and no need to depend on his kids and thus most likely not going to be affected by LIFE.
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btw max which company u from and how long have u been in this industry?
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Originally posted by bladez87:
btw max which company u from and how long have u been in this industry?
i have pm-ed you :) -
nice insights from bladez87 and maxtor there.
but how much bequest be it low medium high, the formula is undisclosed yet. And I cant imagine living in a place where I work hard for 40 years only to have my CPF locked inside till i die.
CPF life has good interest rates no doubt but they are non-guaranteed. And this CPF life plan doesnt factor inflation into it. $500 today is peanuts 30 years later.
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I reckon in another 10 years time, they will tweak the scheme again with another scheme to lock in more of your money.
Minimum sum will be so high that you wonder whether you will even hit that figure.
I can almost bet on it.
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Originally posted by charlize:
I reckon in another 10 years time, they will tweak the scheme again with another scheme to lock in more of your money.
Minimum sum will be so high that you wonder whether you will even hit that figure.
I can almost bet on it.
That's a definite yes, they can't afford to pay everybody, else they have to start liqudating Temasek and GICs.