If you have not heard, CPF members who are on the older Retirement Sum Scheme (RSS) will now have payouts lasting up to age 90, down from the previous age of 95.
Here's a link to the article.
Illustration:
If you are retiring at age 65, is not on the CPF LIFE Scheme (aka you are on the RSS), and has $50,000 in your CPF Retirement Account (RA).
Previously, when the payout would last until you are 95 years old, your monthly payout would be about $235 ~ $295.
Now, after the changes, your monthly payout would increase to about $260 ~ $315, almost 10% increase!
Now, the numbers here are for illustration only because we don't have access to the actual calculation method, but we expect the numbers to be fairly close to our estimates.
This is great in 2 ways for those on the RSS scheme.
1) Those on the RSS scheme tend to be of the older generation (born before 1958) and the average life expectancy for this generation is estimated to be about age 83 or even longer.
Correction: So 90 years old sounds like a good enough number with some margin of safety.
2) Those born after 1958 but *do not have significant savings in their CPF RA* will also be under the RSS, and shortening the payout period would greatly increase their monthly payout - which is great.
*do not have significant savings in their CPF RA* are those who fit the condition below.
Source: CPF
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Commentary:
Now, this part is just how I feel, and not necessary is the Government's stance.
But I think this is a pretty good social experiment.
I feel that this is a test on how citizens would react when they realise that they have run out of retirement money in their golden years because they have used up their CPF money.
There are so many people complaining that CPF is their money and that the people should be able to choose if they want to withdraw the whole sum out at age 65 (or 55) or leave it inside CPF.
The CPF stance has pretty much been "We care for you and your retirement, we are afraid you might mismanage the money and end up going broke during your retirement. So we take care of your money and give it to you in monthly payouts so that you can live comfortably."
Unfortunately, not a lot of people are convinced by that narrative that CPF tries to sell us - even though it is true (many people cannot handle a sudden windfall of money and often end up broke within a few years after getting that large sum of money).
So to me, this is like an experiment to test if people would complain when they run out of money in their retirement.
It is tested out on a small group of Singaporeans (those born before 1958 or those with little CPF savings), so the negative impact of it is minimised.
And we have heard people say "If we run out of money during our retirement, it is our problem! You (Government or CPF) don't have to worry our us!"
Now, we might have a way to put that statement to the test 😉
If we hear complains from people saying that are miserable, they are suffering, that the Government and CPF is not helping them when they reached 91 years old and have run out of CPF/retirement money, then we know for sure that the general folks cannot handle their money, and maybe, it is best to leave it in the hands of professionals.
What do you think?
Do you think this is a good social experiment also?
Or do you think this is a good change and it shows that the Government is actually listening to our demands?
Let us know in the comments! 😊
Recommended Read: What is CPF Basic Retirement Sum (BRS)?
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Those who cannot plan ahead for their own retirement is likely to be those can't manage their large sum of money too
ReplyDeleteAccording to the dry SingStat statistics, those who are 65 today have a median life expectancy of another 20 years. I.e. Half of the 65 yo today will still be alive when they are 85.
ReplyDeleteYou can probably check out SingStat to get the numbers of S'poreans who are around 65 today, and hence the numbers who will likely still be alive (and needing money) in 2039.
I doubt it's a small number. And with the aging population the numbers will only get bigger.
Cap of 90 is a margin of safety. ICA & SingStat have probably monitored & modeled the survival rates and determined that those who survive beyond 90 are small enough to "manage".
Hi,
DeleteThank you so much for pointing out our mistake.
We realised we made an error - we misread the SingStats data on life expectancy.
We have made the corrections in the article.
Because most of the citizens will actually be on CPF LIFE (the retirement scheme that is meant to replace the RSS), so the actual cohort who will be under RSS will be fairly small.
Assuming those under RSS will be those 60 and above now, as of 2019 the population that fits that criteria is about 800,000.
Probably quite a number of these 800,000 will be under CPF LIFE.
But we do agree that the Government must have done some modelling to determined that those who will live beyond 90 will be a small enough cohort that they can "manage" should anything happen.
Thank you for your support! 😁