For most Singaporeans, CPF LIFE will form an important part of our retirement income. From age 65, we can start receiving monthly payouts for as long as we live.
Since CPF LIFE is designed to provide us with an income for life, how long we eventually live can significantly affect how much we receive from the scheme over our lifetime. Someone who starts payouts at 65 and lives to 95 could receive CPF LIFE payouts for 30 years. In contrast, someone who passes away at 70 may receive payouts for only about five years.
Nobody can predict with certainty how long they will live. However, our health at retirement can still influence how we think about longevity risk. Someone who is in good health at 65 may place greater weight on the possibility of living well into their 80s or 90s. Someone already dealing with serious or critical illnesses, on the other hand, may place greater emphasis on the payouts they receive during the earlier years of retirement.
This matters because CPF LIFE offers three plans: the Standard Plan, Basic Plan and Escalating Plan. While all three provide lifelong income, they differ in how payouts are structured over time and, ultimately, in how much a CPF LIFE member may receive over their lifetime.
CPF LIFE Standard Plan
The CPF LIFE Standard Plan provides a steady monthly payout for life. For a male who sets aside the Full Retirement Sum of $220,400 in 2026 at age 55, the estimated monthly payout is about $1,750 from age 65 onwards under the Standard Plan.
If we assume that the individual lives until age 95, he would receive 360 months of CPF LIFE payouts, amounting to $630,000 in total based on a monthly payout of $1,750.
By this point, the total payouts received would already exceed the CPF LIFE premium used to fund his retirement income. As a result, there would be no remaining CPF LIFE premium to be paid out as a bequest.
CPF LIFE Escalating Plan
If we opt for the CPF LIFE Escalating Plan, we will start with a lower monthly payout of $1,380 at age 65. However, this payout increases by 2% every year for life, helping our retirement income keep pace with rising costs.
By age 85, the monthly payout would increase to about $2,060, and by age 95, it would reach about $2,510. In other words, it is only a matter of time (around age 78) before the monthly payout under the Escalating Plan overtakes the $1,810 monthly payout under the Standard Plan.
Based on our calculation, the total payouts received under the Escalating Plan would exceed the Standard Plan at around age 89 to 90.
CPF LIFE Basic Plan
For the CPF LIFE Basic Plan, monthly payout will start at $1,600. However, it will progressively decrease once your combined CPF balances fall below $60,000. This is because most of your Retirement Account savings are used directly to fund your payouts in the earlier years, while a smaller portion is set aside as the CPF LIFE premium to continue providing payouts from age 90 for the rest of your life.
You do not need to be a mathematician to see that, if a CPF member lives until age 95, the total payout received under the CPF LIFE Basic Plan would likely be the lowest of the three plans. It starts with a lower monthly payout than the Standard Plan and unlike the Escalating Plan, there is no annual increase in payouts to make up for the lower starting amount. In fact, its payouts can also gradually decrease over time.
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What Happens If We Pass Away Earlier?
One reason the CPF LIFE Basic Plan may be more attractive to someone who expects to have a shorter retirement is that most of their savings remain in the Retirement Account rather than being transferred upfront into the CPF LIFE premium.
Under the Basic Plan, about 80% to 90% of Retirement Account savings continue to sit in the RA and are gradually drawn down to fund monthly payouts until around age 90. While the money remains there, it continues to earn the prevailing Retirement Account interest rate of 4% per annum, as well as applicable extra interest.
By comparison, under the Standard and Escalating Plans, all Retirement Account savings are transferred upfront as the CPF LIFE premium when payouts begin. While these premiums also earn CPF interest, the interest is factored into CPF LIFE payouts and pooled as part of the scheme. Any interest that has not been paid out does not simply form part of the bequest.
How Longevity Becomes A Potential Financial Decision?
Ultimately, the three CPF LIFE plans reflect different trade-offs.
The Basic Plan may appeal more to someone who values leaving a larger bequest, since more of their savings remain in the Retirement Account for longer and continue earning CPF interest.
The Standard Plan provides a higher and more predictable payout from the start, while the Escalating Plan sacrifices some income in the earlier years for payouts that increase over time.
If we live well into our late 80s or 90s, the higher lifelong payouts from the Standard or Escalating Plan may become increasingly valuable. If we pass away earlier, however, the Basic Plan’s structure could leave more of our CPF savings for our beneficiaries. This is why our expectations about longevity, including what our current health may tell us, can be relevant when deciding which CPF LIFE plan suits us best.
Read Also: How Much More CPF LIFE Monthly Payouts Would You Receive If You Deferred Till 70
