Retirement account with CPF LIFE ? | Pros & Cons

As a CPF account holder, you will need to make certain decisions with your CPF retirement account when you reach age 55 and 65. While CPF LIFE is the default scheme for most people, there are 3 types of CPF LIFE schemes that you can choose from. In this video I will be explaining the three types of CPF LIFE schemes available and how each scheme works.

Hi everyone welcome to my channel in my previous video i went through the basics of the four types of cpf accounts if you haven’t checked out that video i have put the link above for your reference in this video i will be focusing on just the retirement account what is the purpose of this account and what are the options you have when you reached age 65 when it

Turns 55 a retirement account will be created for you using savings from your special account followed by your ordinary account to form your retirement sum your retirement sum will provide you with a money income in oah in terms of how much to put in retirement account you have three options another option one if you have a property you can choose to set aside

Money equivalent to the basic retirement sum under option two you have to set aside full retirement sum in your retirement account which is two times of basic retirement sum or third option which is to top out to the enhanced retirement sum which is 279k as of 2021 which is three times the basic retirement sum do note that this amount only applies to 2021 and

The brs frs and ers will change every year do check out the cpf website for the exact amount that will be applicable to you when you turn h35 for example if you set aside the brs of 93k in your retimer account at age 55 sra earns an interest rate of up to six percent it will help you grow your savings through compound interest and by the time you turn age 65 you

Will have about 145k in your re if you enroll into cpf life you will be receiving about 770 to 830 every month until you pass on the idea is the more you have in your retirement account the higher your pr is so now what is exactly cpf life okay cpf life is currently the default scheme for most of us when we reach 65 years old first you will need to pay a lump sum

Premium the data from your ra when you join the scheme this means that there is a chance your retirement account will be depleted when you turn 65 on the other hand as a lifelong bit suggests your retirement payouts will never stop you will receive the money payout until you pass on do they know that there are three types of plans and the cpf life that you could

Choose from the first type is called the standard 10 here 100 of your retirement account savings will be used to pay a lump sum premium when you first enrolled into this plan and you will receive the stable money payouts for the remaining life for example if you put aside amount equivalent to brs at the age 55 and by the age 65 you have 145k right and this full

Amount will be used to pay the cpf live premium and you will start to receive your money paid out from age 65. i did a quick estimate here on the right if you receive a money payout of 800 per se it will take about 15 years to finish paying out 145k which is your premium amount so from 80 years old onwards the government will continue to pay a hundred dollars to

You and that’s where you start to get your free money in short cpf life is a much more attractive retirement scheme for the simple reason that you just don’t know how long you live and so even if you get bitten by ever coulomb and become immortal you won’t run out of money the second type of cpf life that you can opt in for is the escalating plan okay here 100 of

Your re savings will be used to pay the lum sum premium which is the same as the standard plan okay but here the payouts start out lower than that of the standard plan and then payouts will only increase two percent yearly to keep the pace with inflation so for instance a money payout that starts at a thousand dollars when you are at 65 years old will reach about

1500 by the time you are 85 years old the third type of the cpf life that you can go for is the basic plan in the cpf live basic plan 10 to 20 of your re savings is deducted to pay for the cpf life premium so leaving 80 to 90 percent in your ra okay and then your ie will then continue to earn that interest rate of up to six percent your money payout will first be

Paid from your ra and is estimated to last until 90 years old okay that thereafter money payouts will be paid from your cpf life premium if your cpf life premium is depicted you will continue to receive money paid out okay no matter how long you live same as you know like other plans however do take note that since the payout is first payout from your ra once your

Ra falls below 60k your money payout will decrease and this is because the extra interest that will be earned on the first 60k of your combined cpf balancers right will be paid as part of your money payout but as balances fall due to payouts the extra interest earned and subsequent payouts will decline as well as you can see unlike the cpf life standard plan that

Gives higher and level money payouts the money payouts under the basic plan are lower and will get progressively lower when your combined cpf balances eventually fall below 60k so this plan is more suitable for you if you wish to retain majority of your funds in your ra for your loved ones when you pass on retaining in ra will also at least earns a bit more

Interest as compared to other two types of cpf life do note that this cpf life basic plan right is a bit of like a legacy plan and it’s likely to get phase out in the coming years so if you are very young now and you are planning ahead for your retirement this plan might not be available when you reach 65 years old so just take note of that all right let’s look at

What are the pros and cons of cpf life first of all cpf life is good in the way that you know after the premiere has been exhausted you will still continue to receive the same money paid out for the rest of your life and then even if you were to pass on right all the unused cpf life premium plus your remaining cpf savings will then be distributed to your nominees

So you wouldn’t lose out on your cpf like premium if let’s say you didn’t manage to fully utilize through the money payouts however um there are of course cons as well here i have put together an estimate to see how many years would it takes to fully draw down the premium paid and guess what it offers around 79 years old to 81 years old depending on the premiums

Amount okay but the average is about 80 years old okay this would mean that you will only be able to get the free payout starting from 80 years old onwards what this means is example if you were to enroll into this cpf life at the age of 65 right you are actually withdrawing your own money from 65 years old to 80 years old and then from 80 years old onwards if

You were to leave until then then the payout will continue to be paid to you right and then that’s where you get the free money do you ever wonder how the government is able to continue to give you the same money payout until you pass on well this payout is not contributed by the government technically okay rather this is funded by the interest that you and other

Cpf life members have accumulated based on the premium you guys paid okay so what i meant is if you were to look at this payment that you have paid right you are not earning any interest for this amount okay but rather the interest that is earned on the premium that you have paid will be put together with other cpf line members and to form a pool and then this

Lifetime money payout will be paid out of these pool actually how this cpf life is sustainable is that the interest earned from cpf life members premium paid is put together and fund the cpf life members who are able to live longer so actually in this scheme you will only be benefited if you live longer than an average of 80 years old before that actually you are

Losing out that you know um interest earned between these 15 years still remember just now i mentioned that all unused cpf life premium will be distributed to your nominees for instance if mr tan died at age 75 and his unused cpf life premier is 50k only this 50k will be distributed to his beneficiary but if you think of it this 50k is actually his money to be began

With and the interest earned on this cpf life premium will not be included as part of the money paid to his beneficiary so if anyone who enroll into cpf life and pass on before an average age of 80 years old they are actually in a way losing out the interest that he or she would have earned if they were to keep the money in ra or even withdraw out and put in fixed

Deposit or investments so in this case the interest earned from mr turns premium will be used to fund other cpf lives members who are able to live longer personally i find that this scheme is a bit unfair but this is how the program is structured so that you know the retirement life will be taken care of under this scheme if you were to live longer than 80 years

Old well most of us will be automatically placed on cpf life once we retire whether we like it or not but is there any way to up out of the scheme yes actually you can’t if you buy your own retirement insurance okay example the private entity plan in fact you can also be exempted from the cpf retirement sum as well but not just any plan you’ll do okay to apply

For exemption you must be age 55 and above your private enrollment team must give you long life money payouts and then you may be fully or partially exempted depending on how much payouts you get another way to up out of this cpf life is due to medical reasons example automatically ill physically or mentally incapacitated or leaving singapore and west malaysia

Permanently for good upon successful exit of the scheme okay all unused portion of your cpf live premiums minus any money payout you have already received will be refunded okay so if you are unable to op outright you will be automatically enrolled into a cpf life so there’s no other choice okay now the next step is to evaluate which plan suits your preference

Okay next is to decide on the amount you want to keep in the eye at age 55 because the amount that you retain in ra plus all the interest accumulated from 55 to 65 years old will become the balance you will have by the age 65. you want to retain the amount just enough for you to execute your plan at age 65. not more not less so plan your desired amount of money

Payouts to meet your retirement needs okay and then work backwards to derive at what amount you should set aside in your retirement account when you wish you define yourself you will need to set aside more money in your retirement account if you wish to have a higher payout when you retire sharing my personal take on cpf life okay personally i see this game works

As a life insurance okay it works for people who doesn’t want complications when they are old but personally i am not in favor of these cpf life plans because i could have used the money and invest where he earns interest and i can make a money payoff for myself because this team is just giving you back your own money okay on a money basis until you reach about

80 when your money runs out but it’s just my personal view um i mean if i were to continue to stay in singapore i have no choice but to opt into one of the cpf life but of course you know i will keep my premium to the lowest okay so that i can use additional money you know we draw out and then put in other investments that could earn more interest but let me know

Your thoughts on this leave a comment below and let me know what’s your view what’s your take on cpf life and what are you planning to do when you reach 865. i hope you find this video useful if you like this video remember to click on the like button thank you for watching bye

Transcribed from video
Retirement account with CPF LIFE ? | Pros & Cons By Evelyn’s thoughts