Previously we published an article on why You Should Not Choose the CPF LIFE Basic Plan.
Then we got readers coming back to us asking which is the best CPF LIFE plan.
So we decided to write about it to let our readers know. 😉
Numbers Behind the 3 CPF LIFE Plans
We used the CPF calculator to calculate the payouts and bequest one would get.
We used a male profile born in 1966 with 186k in his RA when he is 55 years old in 2021.
Fig.1. Source: CPF
Fig.2. Source: CPF
Basic Plan?
From a yield perspective, the Basic plan is definitely a good plan because more of the money is kept in the members' own RA, earning interest that goes back into their own RA.
But we don't think this is a good plan because what an average retiree should want is to have more in their monthly payouts, not more for their dependents.
If one's retirement plan is to ensure one has sufficient/maximised monthly income to sustain his/her lifestyle, then the Basic plan would not make sense.
The bequest for the Basic plan last longer than the other 2 CPF LIFE Plans (Fig. 2).
In exchange, the retiree gets a lower monthly payout forever.
So the higher yield plan benefits the dependents slightly more than the retiree.
You can read more about it on why You Should Not Choose the CPF LIFE Basic Plan.
Recommended Read: Is CPF A Scam?
Standard or Escalating Plan?
Now that we hope we got you to ignore the whole 'bequest' thing, let's focus on how to get more money for retirement from CPF LIFE.
This depends on how long one expects oneself to live.
There's no single straightforward simple answer to that actually.
Fig. 3. Source: CPF
This is the cumulative total payout a retiree will get over time.
As you can see, the Standard plan will give a cumulative higher monthly payout UNTIL the retiree is almost 90, in which case the Escalating plan will have a higher cumulative payout.
If you look back at Fig. 1, you can see that if the retiree chose the Escalating Plan instead of the Standard Plan, he would get more in monthly payouts at close to 78 years old.
Basically,
1. If you have a history of family members living really long lives (beyond the average life expectancy of their cohort).
2. If you think/believe you can live beyond 90 years old.
3. You are fine with a lower starting monthly payout.
Then choose the Escalating Plan.
Otherwise, choose the Standard Plan
To Each Their Own
Of course, everyone's circumstances are different.
Some might be better with the Standard Plan, others the Escalating or Basic Plan might suit them better.
There's no one-size-fits-all policy.
But if you are like a normal person, think about your own retirement, not what you want to leave for your children.
It'll be better if you have more in monthly payments so that your children can save their money for their own retirement instead of giving you money to support you.
Avoid making your children the next sandwich generation.
Your kids are not your retirement plan.
Recommended Read: Answering 2 Common CPF “Complaints”
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