today is the last day for topping up CPF/SRS and Jan 1 is the first day to top up again

[malcontent]

Also, I believe joint-survivor option (in other countries, USA for example) is most advantageous when one spouse didn't work or there was a large difference in lifetime earnings. If both spouses earned the same and one passes on, the other doesn't get both payments (please correct me if I am wrong - I believe the surviving spouse will get the higher of the two payments).

In the case of social security, yes - the surviving spouse gets the highest earning spouse’s payment for life.

All these years I have been in a weird situation where my Singapore employer (a subsidiary of a U.S. corporation) is required to cover all U.S. citizens working here under social security. That means 7.65% FICA tax is deducted from me and matched for a total 15.3% remitted quarterly to the U.S. government.

When the time comes to get retirement benefits, my spouse will be considered non-working (she did work in the U.S. briefly after college, but not enough to qualify on her own). So for example, in 15 years when I reach full retirement age, I expect to get around $5k monthly with COLA between now and then. My spouse will get an additional 50% or $2.5k monthly. If anything happens to me, she will only get the $5k monthly (plus inflation) for the rest of her life.

[NYY1]

In the case of social security, yes - the surviving spouse gets the highest earning spouse’s payment for life.

All these years I have been in a weird situation where my Singapore employer (a subsidiary of a U.S. corporation) is required to cover all U.S. citizens working here under social security. That means 7.65% FICA tax is deducted from me and matched for a total 15.3% remitted quarterly to the U.S. government.

When the time comes to get retirement benefits, my spouse will be considered non-working (she did work in the U.S. briefly after college, but not enough to qualify on her own). So for example, in 15 years when I reach full retirement age, I expect to get around $5k monthly with COLA between now and then. My spouse will get an additional 50% or $2.5k monthly. If anything happens to me, she will only get the $5k monthly (plus inflation) for the rest of her life.

Thanks, makes sense.

I think both plans have scenarios where they are better and where they are exposed (in the prior example I gave, I believe they are essentially the same). I guess your view is more about "improving the insurance coverage," especially when there is a surviving spouse with different earnings history and that person needs the money (vs. getting premium back).

The thing about longevity insurance is that it "pays off" (the insurable event happens) in a good state of the world (you are still living). This is the opposite of most insurance products (for example, your house burns down). Ultimately, the question is how much of this insurance do you want to buy? I think it depends on a number of factors.

[malcontent]

In the case of social security, yes - the surviving spouse gets the highest earning spouse’s payment for life.

All these years I have been in a weird situation where my Singapore employer (a subsidiary of a U.S. corporation) is required to cover all U.S. citizens working here under social security. That means 7.65% FICA tax is deducted from me and matched for a total 15.3% remitted quarterly to the U.S. government.

When the time comes to get retirement benefits, my spouse will be considered non-working (she did work in the U.S. briefly after college, but not enough to qualify on her own). So for example, in 15 years when I reach full retirement age, I expect to get around $5k monthly with COLA between now and then. My spouse will get an additional 50% or $2.5k monthly. If anything happens to me, she will only get the $5k monthly (plus inflation) for the rest of her life.

Thanks, makes sense.

I think both plans have scenarios where they are better and where they are exposed (in the prior example I gave, I believe they are essentially the same). I guess your view is more about "improving the insurance coverage," especially when there is a surviving spouse with different earnings history and that person needs the money (vs. getting premium back).

The thing about longevity insurance is that it "pays off" (the insurable event happens) in a good state of the world (you are still living). This is the opposite of most insurance products (for example, your house burns down). Ultimately, the question is how much of this insurance do you want to buy? I think it depends on a number of factors.

I think for most people in Singapore who lead a healthy lifestyle and have reasonably good genes, topping up RA makes sense if that is the only government pension you have access to. Ideally, make CPF LIFE the sole retirement income you rely on, then you can invest more of whatever you have left (to self-insure long-term care or leave to heirs). That should go mostly into a broadly diversified, low-cost index fund, depending on risk tolerance, objectives and time horizon.

[NYY1]

I think for most people in Singapore who lead a healthy lifestyle and have reasonably good genes, topping up RA makes sense if that is the only government pension you have access to. Ideally, make CPF LIFE the sole retirement income you rely on, then you can invest more of whatever you have left (to self-insure long-term care or leave to heirs). That should go mostly into a broadly diversified, low-cost index fund, depending on risk tolerance, objectives and time horizon.

I don't disagree. Still, I think there is a question even on the FRS vs. ERS. For 20-30 years horizon, one can likely do just as well or better in some form of self-insure (say the difference between ERS and FRS or in your case, if you could take a lump sum and cut your SS payment in half), but of course that is not certain.

However, one needs to be cognizant of mental decline. It is also possible that one of the spouses isn't as capable of managing this on his/her own (should the other one pass on).

As a baseline, guaranteed payment, there is something there in both programmes.

[PNGMK]

However, one needs to be cognizant of mental decline. It is also possible that one of the spouses isn't as capable of managing this on his/her own (should the other one pass on).

As a baseline, guaranteed payment, there is something there in both programmes.

I prefer a set and forget base pension to cover my costs of living. I'll almost certainly do ERS (or more) into the escalating CPF Life plan.

[malcontent]

However, one needs to be cognizant of mental decline. It is also possible that one of the spouses isn't as capable of managing this on his/her own (should the other one pass on).

As a baseline, guaranteed payment, there is something there in both programmes.

I prefer a set and forget base pension to cover my costs of living. I'll almost certainly do ERS (or more) into the escalating CPF Life plan.

Can you really do much more than ERS? That is the what I refer to as the “maximum sum” as opposed to the more frequently referenced “minimum sum” which is FRS unless you pledge a property.

I think simpler terminology would be better. Even the plan names like Basic and Standard are not meaningful. The choice between Basic & Standard is really a longevity question, with Standard giving you a longer, stronger runway if you make it that far. Max Longevity has a nice ring to it.

The bequest has always stuck out to me — it is like a declining life insurance feature that doesn’t really fit with longevity protection. Some people don’t even have a beneficiary, and this is a growing demographic. If a higher payment is possible by opting out, it could be an attractive way to boost payments.

If Singapore really wanted to innovate beyond what other countries are doing, they could consider something called the “retirement smile” which refers to the tendency to spend more in the early and late years of retirement, less in the middle. Payments that follow this smile pattern would better match spending needs.

[PNGMK]

I agree the choices are not ideal. I'd like to understand more about the underlying instruments and security.

[malcontent]

I agree the choices are not ideal. I'd like to understand more about the underlying instruments and security.

While I don’t know for sure, I am under the impression that CPF uses their own actuaries and the annuitization is entirely in-house, which would mean that the underlying instruments and security do not change from pre to post annuity, it just gets restructured and reallocated internally.

My understanding is that for standard and escalating, all of the interest you would normally earn on your RA balance gets diverted into a common pool to cover longevity risk for those who exhaust their principle, which occurs after roughly 15 years of payments. In other words, if you die within those 15 years, all interest earned is forfeited - but you’ll get back 100% of your principle (whatever you don’t get it back in payments gets refunded via bequest). After around 15 years, your payments can only continue by drawing from the common pool. That is where the actuaries and lifespan estimates come into play to ensure viability of the common pool. From my own analysis, it appears to be managed very conservatively and I would imagine they have a sizable buffer well beyond what is needed for current lifespans. In other words, they should be running a healthy surplus versus just paying out 4% interest and not annuitizing. Again, this is just based on my own analysis, there is no way to know for certain unless you’re an insider.

[NYY1]

I'm not entirely sure what is meant by "the underlying (instruments and security)." Anyways, see one of the FAQs in the first link along with a couple of questions in the second link (Q35, Q36, Q37).

https://www.gic.com.sg/who-we-are/faqs/

https://www.mof.gov.sg/policies/reserve ... bligations

Keep in mind, as balances move from the SA to RA to CPF Life, the liquidity profile of the funds is changing. For the SA, some of the amounts cannot be accessed for decades (e.g. a young worker's SA contributions or top ups), whereas the CPF Life premiums are kind of a mix (a portion is due next month, other amounts are not due for 20+ years).

[PNGMK]

Thanks. My impression was that some of the annuities were privatised or externally sourced. Hopefully not.

[malcontent]

While it doesn’t always resonate with the man on the street, Singapore is probably the most financially savvy government on the planet.

It might not sit well with some that CPF savings is being reinvested and will achieve a far higher long-term rate of return than what is paid out in CPF interest… but if lower tax rates can be maintained due to this process, everyone benefits. Even as an individual investor, everyone needs to allocate a percentage of their portfolio to safety. CPF should be counted as such — freeing you up to invest more aggressively (much like GIC does). Sadly, too few here do that.

[PNGMK]

Just a reminder. Only 4 weeks roughly left. SRS, CPF VC, any tax deductible items to be bought and any tax deductible donations need to be made ASAP.

[PNGMK]

In addition; with the switch on from 3 x BRS to 4 x BRS for the ERS.... you may want to think about special accounts balances - if you need the cash now from the SA best with draw it before Jan 1. It will be scooped out into the RA if your balance is below FRS I believe. This applies to people doing SA shielding esp. Move from external investment back into SA and then withdraw ASAP or... when you withdraw from external investment after Jan 1 there will be no SA to put it in... it will auto go to RA and be locked up. Over 55 withdrawals come from SA first and then OA.

[PNGMK]

(Above assumes no property pledged).