Nov 17, 2020

Cory Diary : CPF Life - FRS or ERS

Some period ago I have decided Basic Plan is the way to go considering my age and investment portfolio I have that choosing moderation will be preferred. What I did not mentioned is should I default FRS or go for ERS. And in this article we will try to find out.

" For members who turn 55 in 2020, their Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are $90,500, $181,000 and $271,500  respectively."

To hit ERS, I need additional $90,500. So basically multiples 1.5x of FRS.  Let's use FRS to see the returns.

Current FRS = $181, 000
Current Basic Plan : $1,272 - $1,404 starting at Age 65

Take note the Basic Plan payout is based on below notes form CPF through CPF Life Estimator Calculator.

"The monthly payouts, total payout received, and bequest amounts shown are estimated based on the Retirement Account balance provided, current CPF interest rates, and current mortality assumptions. They may differ from the actual figures. The displayed ranges are based on interest rates between 3.75% and 4.25%, and do not represent the lower and upper limits of the payouts"

Let's say lifespan of 80. (updated chart to correct year error)

Counted slightly more using 1st Jan for Bequest. Roughly XIRR of 4.4 %. Is that of any surprise to you all ? Do note that for worst case is 4%.

One thing to add, if you manage to live to Age 99, XIRR will be 4.9% which is investment returns equivalent of 4.9% for best case.

Should I go ERS ? Maybe I can do Top-Up after 55 to decide. CPF is more like a reasonable good safe harbor in case I become senile.... :)

Again DYODD as we explore the journey.


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