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Complete Guide To Understanding The “Benefit Illustration” Of CPF LIFE Payouts

Here’s how much you’ll receive in monthly payouts and how much you’ll leave behind to your loved ones, depending on decisions you make regarding your CPF LIFE plan.

 

For those who don’t already know, CPF LIFE is a life annuity scheme that provides all Singaporeans and Singapore Permanent Residents with monthly payouts during their retirement, and also enables the person to leave a bequest to their loved ones.

These lifelong monthly payouts are meant to help with daily living expenses, limiting the number of retired individuals who may outlive their retirement savings or having to rely on their family or the government for sustenance during their retirement.

Read Also: [Beginners’ Guide] Understanding CPF LIFE And Your Monthly Payouts When You Retire In Singapore

Determining A CPF LIFE Option That Best Suit Your Needs

There are there still at least three major decisions you have to make regarding CPF LIFE to ensure it suits your needs.

One way to do this is to look at a “benefit illustration” in a similar way to how we may view term or life insurance policies. A sensible benefit illustration for CPF LIFE would be how much we have contributed, how much we will receive over time and how much will leave behind for our loved ones.

Let’s start with the three decisions we have to make, which affects how our benefit illustration would look like.

# 1 Deciding Our Retirement Sum

There are three options for our retirement sum. We can either choose the Basic Retirement Sum (BRS), Full Retirement Sum (FRS) or Enhanced Retirement Sum (ERS). Here’s how they are currently set in 2018.

55th Birthday On Or After Basic Retirement Sum (BRS) Full Retirement Sum (FRS) Enhanced Retirement Sum (ERS)
1 January 2018 $85,500 $171,000 $256,000
1 January 2019 $88,000 $176,000 $264,000

As you can see, the Retirement Sum options are not static either. They increase yearly to account for inflation and rising standards of living.

Also Read: CPF LIFE Escalating Plan: What You Need To Understand About The Latest CPF LIFE Plan Before Opting For It

# 2 Choosing Our CPF LIFE Plan

There are also three CPF LIFE plans that we can choose from. They are the Standard Plan, Basic Plan and the Escalating Plan.

Source: CPF

The default plan is the Standard Plan, which provides higher monthly CPF LIFE payouts to individuals.

The Basic Plan provides lower monthly CPF LIFE payouts, which effectively retains more in your CPF LIFE to leave behind for your loved ones when you pass on. This is why it is labelled as “more for loved ones” in the graphic above.

Lastly, the Escalating Plan, introduced on 1 January 2018, is “more for your future”. This is because it starts off by providing lower monthly payouts and gradually increases it by 2% each year to help keep up with inflation and rising costs during your retirement.

# 3 Deferring Your CPF LIFE Monthly Payouts

You can start receiving your CPF LIFE payouts once you turn 65. However, you also have an option to defer this payout up to the point you turn 70. You cannot defer receiving your CPF LIFE payouts beyond age 70.

According to CPF, for every year you delay your CPF LIFE payouts, your monthly payouts may increase by up to 7%. Of course, this is mostly because it has more time to sit in your Retirement Account (RA) collecting interest of up to 6% per annum.

Source: CPF

Your CPF LIFE Benefit Illustration

In calculating the benefit illustration, we will take the higher amount of any range that CPF LIFE numbers show. We take into consideration that a person has just turned 55 this year.

Also, note that these numbers are just estimates, and that the total amount you ultimately receive from CPF LIFE will be equal or higher than the initial amount you put in.

Standard Plan VS Basic Plan VS Escalating Plan

In the three tables below, we compare how your CPF LIFE monthly payouts and bequest amount would change if you opt for each of the three different CPF LIFE plans available.

Table 1: Full Retirement Sum + Standard Plan + Commence payment at age 65

Age Member passes On Full Retirement Sum (FRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($1,473/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $171,000 $262,121 $88,380 $171,422 $259,802
75 $171,000 $262,121 $176,760 $88,522 $265,282
80 $171,000 $262,121 $265,140 $8,379 $273,519
85 $171,000 $262,121 $353,520 $0 $353,520
90 $171,000 $262,121 $441,900 $0 $441,900

 

Table 2: Full Retirement Sum + Basic Plan + Commence payment at age 65

Age Member passes On Full Retirement Sum (FRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($1,345/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $171,000 $262,121 $80,700 $223,719 $304,419
75 $171,000 $262,121 $161,400 $187,949 $349,349
80 $171,000 $262,121 $242,100 $143,904 $386,004
85 $171,000 $262,121 $322,800 $89,670 $412,470
90 $171,000 $262,121 $403,500 $24,734 $428,234

 

Table 3: Full Retirement Sum + Escalating Plan + Commence payment at age 65

Age Member passes On Full Retirement Sum (FRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts (Increasing 2% yearly from $1,166/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $171,000 $262,121 $88,308 $187,130 $275,438
75 $171,000 $262,121 $170,352 $111,126 $281,478
80 $171,000 $262,121 $260,928 $31,194 $292,122
85 $171,000 $262,121 $360,960 $0 $360,960
90 $171,000 $262,121 $471,396 $0 $471,396

From the three tables above, you can see that if you live longer, you will definitely get more out of CPF LIFE. This is because you will be drawing out more in monthly CPF LIFE payouts over the years.

Also Read: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55

A second reason this happens is because funds in CPF LIFE continues to earn an interest of 4% per annum. This interest is paid to the Lifelong Income Fund, which is meant to pay for the monthly CPF LIFE payouts for those who are fortunate enough to live to a much older age. This is meant to de-risk retirement for everyone by taking the interest earned from those who do not live as long to allow those who live longer to continue receiving a livelihood via CPF LIFE payouts.

Another very clear observation is that the Basic Plan serves its purpose by providing your beneficiaries a larger bequest amount at every age as well as all the way till if you pass on after age 90.

Compared to the Standard Plan and the Escalating Plan, you no longer have anything to bequest to beneficiaries close to after your 80th birthday. This really means you need to know what you want to use your CPF LIFE for – yourself or your beneficiaries.

In terms of which plan gives you the best return, until age 85, it is the Basic Plan. However, if you live beyond that, the Escalating Plan starts being a lot more attractive. The standard plan provides the poorest overall benefits, but you do get more of your money out of it earlier.

Full Retirement Sum VS Basic Retirement Sum VS Enhance Retirement Sum

In the following three tables, we depict how your CPF LIFE monthly payouts and bequest amount differ when you opt to contribute the Full Retirement Sum, Basic Retirement Sum and Enhanced Retirement Sum.

 

Table 4: Full Retirement Sum + Standard Plan + Commence payment at age 65

Age Member passes On Full Retirement Sum (FRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($1,473/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $171,000 $262,121 $88,380 $171,422 $259,802
75 $171,000 $262,121 $176,760 $88,522 $265,282
80 $171,000 $262,121 $265,140 $8,379 $273,519
85 $171,000 $262,121 $353,520 $0 $353,520
90 $171,000 $262,121 $441,900 $0 $441,900

 

Table 5: Basic Retirement Sum + Standard Plan + Commence payment at age 65

Age Member passes On Basic Retirement Sum (BRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($801/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $85,500 $135,560 $48,060 $86,751 $134,811
75 $85,500 $135,560 $96,120 $41,587 $137,707
80 $85,500 $135,560 $144,180 $0 $144,180
85 $85,500 $135,560 $192,240 $0 $192,240
90 $85,500 $135,560 $240,300 $0 $240,300

 

Table 6: Enhanced Retirement Sum + Standard Plan + Commence payment at age 65

Age Member passes On Enhanced Retirement Sum (ERS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($2,140/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $256,000 $387,942 $128,400 $255,685 $384,085
75 $256,000 $387,942 $256,800 $135,418 $392,218
80 $256,000 $387,942 $385,200 $19,273 $404,473
85 $256,000 $387,942 $513,600 $0 $513,600
90 $256,000 $387,942 $642,000 $0 $642,000

You can clearly see a big jump in the monthly CPF LIFE payouts you receive on the different retirement amounts that you may choose to contribute to your Retirement Account and CPF LIFE plan.

At the lower end of the spectrum, the Basic Retirement Sum of $801 per month may barely provide a person an adequate amount to live on. If you choose to contribute the Basic Retirement Sum, it’s important to ensure that it is not your only source of income.

On the other hand, the Enhanced Retirement Sum allows you to receive a monthly payout of up to $2,140. This is more than 70% of what a person earning the median income in Singapore takes home today. This could be a good option for you if you’re looking to sustain yourself with just CPF LIFE payouts.

Starting CPF LIFE Payouts At 65 VS Deferring CPF LIFE Payouts Till 70

The following graphs show you how much you can expect to receive if you decide to go with the Basic Retirement Sum (BRS), but opt to start receiving payouts at 65 (table 7) and 70 (table 8) respectively.

 

Table 7: Basic Retirement Sum + Standard Plan + Commence payment at age 65

Age Member passes On Basic Retirement Sum (BRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($801/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $85,500 $135,560 $48,060 $86,751 $134,811
75 $85,500 $135,560 $96,120 $41,587 $137,707
80 $85,500 $135,560 $144,180 $0 $144,180
85 $85,500 $135,560 $192,240 $0 $192,240
90 $85,500 $135,560 $240,300 $0 $240,300

 

Table 8: Basic Retirement Sum + Standard Plan + Commence payment at age 70

Age Member passes On Basic Retirement Sum (BRS) Estimated Amount Contributed To CPF LIFE Total Amount Received In CPF LIFE Monthly Payouts ($1,081/mth) Bequest Left Behind Total Amount Received From CPF LIFE
70 $85,500 $167,480 $0 $170,816 $170,816
75 $85,500 $167,480 $64,860 $105,955 $170,815
80 $85,500 $167,480 $129,720 $44,056 $173,776
85 $85,500 $167,480 $194,580 $0 $194,580
90 $85,500 $167,480 $259,440 $0 $259,440

 

One key observation is that simply deferring your CPF LIFE payouts from 65 to 70, will increase your monthly payouts by close to 35%. For those who work past their retirement age or with the means to defer payouts to 70, this could be a good way to receive higher payouts when you get older.

Read Also:  CPF Medisave: Here’s How Your Basic Healthcare Sum Might Look Like When You’re 65

The main reason you get higher payouts is because your funds in your Retirement Account continue earning interest for a further five years compared to those who start withdrawing at 65.

There’s No ‘Best’ CPF LIFE Hack

The above tables and depictions are only meant to let you know how much you can expect to receive if you opt for the different choices available, as well as the strengths and weaknesses of each options.

There really isn’t one way that we should go about receiving our CPF LIFE payouts as each of us face diverse circumstances in life. We should understand our circumstances and choose the best option for receiving our CPF LIFE payouts.

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