You can't withdraw shit from your CPF

last SG · 2009-09-30T18:37:31+00:00

By then a 4 room HDB flat will cost a cool 1 million dollars. COE will be $200K for 1600cc or smaller cars. GST will be 25%. And the average Singaporeans' mo...

angel3070 SG

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.

maxtor SG

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.

maxtor SG

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

maxtor SG

repost

maxtor SG

repost

bladez87 SG

max. which co u working for? i from financial alliance

bladez87 SG

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.

maxtor SG

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.

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...

bladez87 SG

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

bladez87 SG

I agree with you on the point that everyone needs some form of annuity.

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.

bladez87 SG

btw max which company u from and how long have u been in this industry?

maxtor SG

btw max which company u from and how long have u been in this industry?

i have pm-ed you :)

Rock^Star SG

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.

charlize SG

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.

deepak.c SG

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.

xtreyier SG

Wow!!! Charlize and deepak, you both so good at foretelling wan ah???!!!

Please tell me what would be the stockmarket like in 10 years time too please.

I wanna bet on it. OR better still, vote you both in parliament so that you both will manage the economy, with such fantastic and out of this world foresight.

I will pay you peanuts now for the consultation. And hey, you know what they say about paying with peanuts. You both most certainly deserve it. No need to thank me in advance.

If your prediction fail, oh well, guess i will have to live on bananas...for believing in unevolved primates.

kalez SG

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).

bro nice work.. for your information you forgetten interest rate..

P.S : even you get 4% interest per annua it will not be able to cover the hose interest. reason being the figure difference

EG : $ 400 000 interest @ 2.6% cumulative by then you finish pay up interest is about $150 000

where your 4% in CPPF is base on per annua

maxtor SG

bro nice work.. for your information you forgetten interest rate..

P.S : even you get 4% interest per annua it will not be able to cover the hose interest. reason being the figure difference

EG : $ 400 000 interest @ 2.6% cumulative by then you finish pay up interest is about $150 000

where your 4% in CPPF is base on per annua

Sorry, i tried reading your msg over and over but i don't quite understand the context you refer to. maybe im stupid.

i understand that you are trying to point out that 2.6% of $400 000 is more than 4% of $100 000. But that's about it.

kindly enlighten me.

maxtor SG

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.

I would just like to clarify that for alot of financial plans, whether investment or insurance, alot of the returns/interest rates are non-guaranteed.

if you have any insurance policies or investment policies, take it out for a read when u're bored and u will see what i mean.

bladez87 SG

inflation has been factored in. in a way the interest rates they give you are a counter to the inflation rates. it is good compared to private sectors but catch is you dont really see it until later on. for the basic and balanced plans.

the interest private sectors give for annuities really cannot match up to inflation.

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