Which CPF Life Plans To Choose? Part 1 of 2

Its amazing isn't it?

One would expect questions on CPF Life Plans to come from financially illiterate people or those not very into DIY investing or trading - not those from our community of financial freedom seekers...

I mean if one can't make an independent decision ourselves, it sort of brings into question our abilities to practice active DIY retail investing and trading, doesn't it?



Half the readers will leave in a huff now.



Good. Now that I've filtered out the freeloaders, lets move on...

I come with foreplay; I'm the man with the slow hands.



Its all our fault

Remember a time when seniors before us can withdraw their CPF savings at age 55 pronto without ifs and buts?

That worked well for the majority of seniors at that time were quite "obedient" in selling salted eggs at around age 65 - more or less exactly as what the actuarial science has predicted.

Then something went horrifying not according to plan...

People started living longer than "forecasted".  

CPF savings that were "enough" suddenly became woefully inadequate... 

Make a wild guess who is the party most concerned with everyone doing an Oliver Twist act and begged, "Sir, can I have more?"

Hence, the start of the "crash got sound" era of constantly moving goal posts.

But that came at a political cost...

Surely we can't move the goal posts indefinitely!?



Solidarity 

I do like our CPF system. 

When I were in Athens, Greece, I had the opportunity to witness how the pension system can be ponzi scheme like - those who collected the pension benefits early are better off than those who collect much later.

The Greek senior who retired 20 years earlier had the consolation he got 20 years of full pension benefits in contrast to that poor soul who just retired when the Greek economy blew up - and found out his "promised" pension is now cut by half...

Similarly, some cities and states in the US are near bankrupt... Would you like to be the young working adult contributing to social services to fund the generous pensions promised to seniors ahead of you? And knowing the kitty is pretty much empty when its your turn to collect? 

How about those rapidly aging countries like Japan, China (due to the one child policy), and Western Europe? I suspect when their pension systems were designed, it has 5 working adults (or more) supporting 1 retiree; not 1 working adult supporting 5 retirees...

No. I like our CPF system much better!

Our monies are clearly compartmentalised. My money is my money; its not mixed with my neighbour's. If my neighbour blew his money on wine, women, and song, that's his business! I'm not subsidising his indulgences!



Spreading the Risk

I ask you. Can you figure it out why CPF Life was introduced?

I stop my foreplay now. You finish off yourself.

Can read, can write, can count

No serious! You do it yourself! 

That's the purpose of our 10 years of primary and secondary education.

If you can't read, can't write, can't count, then you may want to jio me out for coffee. It will cost you though! 

For those who can, here's an excellent website from a professional fee-based financial advisor:

Which CPF Life Plan is Better?

I'll guide you a bit - especially those who tend to miss the forest for the trees...

For those who have read other blogs or websites on the same topic, you may noticed there's a lot of discrepancies in IRR calculation between everyone!? Can you spot where's the frequent mistake made?

I'm not surprised. I've poked enough financial bloggers on their "home-made" versions of XIRR calculation! LOL!

Here's another thing to look out for. 

Beyond the numbers, see if you can spot which CPF Life Plan is murky and grey where your money is mixed with your neighbour's in a dark pool pretty much like those pension schemes.

And which plan is more or less like our current CPF system where my money is my money, and your money is your money? Only the tail end is pension scheme like.

You show me yours; and I show you mine

If you game enough, it would be fun to hear what's your chosen plan, or what you intend to choose when you reach age 65.

Do add in a few short sentences your reasons why.

Those who have already made their choices but have regrets now, it would be most appreciated if you can also share with us why you have changed your mind too.

Of course I'll show my choice and reveal my reasons why in my part 2 post.