Today's post will be on how CPF is actually four insurances in one.
Instead of looking at the CPF Retirement Sum (CPF RS) as a target where you can withdraw money at a certain age, look at it as a Savings + Medical + Life + Annuity insurance plan.
It is a Savings Insurance
It helps you save up money for housing, medical, kids' education, and retirement.
Furthermore, it pays pretty good interest.
It is a Medical Insurance
1) We have got Medishield Life, Eldershield, and other medical insurance schemes that are paid by the MediSave Account. These insurance plans can pay for your hospitalisation fees when you need them.
2) You can also use your MediSave funds to pay for the cost of treatment for your immediate family members.
Recommended Read: Why are there 2 Schemes to Top Up CPF?
It is a Life Insurance
1) In the event that you passed away, all your CPF money will be passed to your dependents.
2) If you bought the Dependents' Protection Scheme (DPS) for yourself, in the event of you passing away or becoming mentally or physically unable to work anymore, you will receive an insurance payout of $46,000.
3) There is also a Home Protection Scheme (HPS), a housing insurance that will pay your mortgage in the event that any mishap falls on you and result in you no longer able to pay your mortgage. However, we think this is not a great plan and we explained it in detail why in our previous article.
It is an Annuity Insurance
1) An annuity is an insurance that you pay premiums to an insurance company every month, and in return, when you reached a certain age (usually retirement age), the insurance company will pay you a fixed monthly payout for as long as you live. However, if you die early/young, the payouts will stop, which is not worthwhile if you paid 20 years of premium and took only 10 years of payouts (although there are plans available that pays out the unused portion of the premiums to your dependents/beneficiaries in the event of your passing).
2) When you reach 65, CPF automatically enrols you for CPF LIFE, which is an annuity plan that pays you a fixed monthly payout when you reached the payout age of 65.
3) However, it is better than just an annuity plan. In the event that you passed away before fully utilising the funds in your CPF accounts/CPF Life, the money unused will be passed over to your kids just like a Life Insurance. This feature is usually unavailable for annuity insurances.
Conclusion
CPF covers most of the important areas of finance pertaining to an individual, from having forced savings to healthcare, to retirement.
Are you now slightly more convinced that CPF is a pretty good scheme overall?
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Recommended Read: What Should I Invest In This Bear Market?
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I am sure u have not accurately described the last para on cpf life "the money unused".
ReplyDeleteHi,
DeleteLet us know in what ways have we not accurately described this part?
We would update the information accordingly if there is a more accurate description of it :)
Thank you