January 2023 – Personal Wealth Life Cycle Management (PWLCM)

Comparing FRS in RA plus BRS in SA vs ERS in RA, Part 4

This blog post is part of a 4-part series:

Refer to the list of acronyms on CPF in the following blog posts:
https://pwlcm.wordpress.com/2022/01/06/acronym-cpf/

I am a CPF Volunteer. If you find this blog post providing useful information about CPF matters and it leads you to using CPF online services, you may fill in my full name “Tan Choong Hwee” in the “Referrer Name” field in some selected CPF online services.

In a comment to my Part 1 post, a Seedly community member Nicole suggested additional scenarios to look at, i.e. CPF LIFE payout deferred to age 70. As such, I have added 2 more scenarios to the comparison:

Scenario 1: FRS ($198,800 for 2023) in RA plus BRS ($99,400 for 2023) in SA
Scenario 2: ERS ($298,200 for 2023) in RA
Scenario 3: Scenario 1 with Payout deferred to Age 70
Scenario 4: Scenario 2 with Payout deferred to Age 70

I wasn’t able to use the CPF LIFE Estimator to get the monthly payout amount at age 70 for ERS (which would have grown to $555,063) because the estimator currently has a limit of $500,000 on the RA amount. Therefore, I use the yearly 7% increase to compute the deferred payout amount for scenario 3 and 4.

The Excel spreadsheets to compare scenario 3 and 4 for the 3 CPF LIFE Plans are shown below:

I wanted to put all 4 scenarios side-by-side for comparison, but the table became too wide to view the content legibly. Therefore I break it down to 2 tables comparing scenario 1 and 2 as well as scenario 3 and 4. I have also added more information (Cumulative Income, Income Breakeven Level, Age Income Drop Below, Age Income Breakeven, Age Bequest Become Zero) to facilitate my analysis.

Here is the comparison for scenario 1 and 2:

And here is the comparison for scenario 3 and 4:

However, I still want to do a comparison among all 4 scenarios. It dawned on me to use chart instead of table for comparison. I recalled the initial CPF LIFE Estimator had the useful feature of showing the information against the age in a line chart. So I decided to use that format for Retirement Income, Cumulative Income and Bequest as follows:

I believe these 3 charts will help you see which scenario will generate what kind of retirement income and bequest, when your retirement income for FRS+BRS scenario (scenario 1/3) will drop below ERS scenario (scenario 2/4), and when your cumulative income will breakeven, and when your bequest will drop to zero.

You can make a better informed decision for your own unique situation.

Comparing FRS in RA plus BRS in SA vs ERS in RA, Part 3

This blog post is part of a 4-part series:

Refer to the list of acronyms on CPF in the following blog posts:
https://pwlcm.wordpress.com/2022/01/06/acronym-cpf/

After comparing 2 scenarios in Part 1 and Part 2, naturally the next step is to compare with CPF LIFE Escalating Plan. As a recap, the 2 scenarios are:

Scenario 1: FRS ($198,800 for 2023) in RA plus BRS ($99,400 for 2023) in SA
Scenario 2: ERS ($298,200 for 2023) in RA

With the CPF LIFE Estimator set to a male born in 1968 (i.e. age 55 in 2023), I get the monthly payout amounts for Escalating Plan to be $1,270 and $1,860 at age 65, and the payout would increase at 2% rate per year, with $1,880 and $2,760 at age 85, $2,300 and $3,370 at age 95, for FRS and ERS respectively:

The different in monthly payout for the 2 scenarios is $590 at age 65, and would increase as the payouts increase, meaning that the drawdown from SA to match up the shortfall would also increase until depleted. Here is the Excel spreadsheet to compare the 2 scenarios side-by-side:

With Escalating Plan, scenario 1 monthly income couldn’t catch up with that of scenario 2 at age 92, the same time when its bequest is dropped to zero. This happens later than that of Standard Plan, but earlier than that of Basic Plan.

Let’s put the income (payout plus drawdown) and bequest of the 2 scenarios for the 3 CPF LIFE Plans side-by-side for comparison:

As we can see clearly from the summary table, here are a few observations:

Scenario 1 is able to keep up with scenario 2 income until its SA is depleted.
Once SA depleted, scenario 1 income would only come from CPF LIFE payout, definitely less than that for scenario 2.
The age when scenario 1 income drops below that of scenario 2 are different for the 3 CPF LIFE Plans, the earliest is age 91 for Standard Plan, the latest is age 96 for Basic Plan, and Escalating Plan is in-between at age 92.
Scenario 1 is able to keep the bequest much longer than that of scenario 2.
The age when bequest drops to zero for scenario 1 are at age 91, 96 and 92 Standard Plan, Basic Plan and Escalating Plan respectively.
The age when bequest drops to zero for scenario 2 are at age 80, 91 and 82 for Standard Plan, Basic Plan and Escalating Plan respectively.

Now, let us get back to the original question people asked: “Should I top up my RA to ERS from my SA at 55?”

I would say, there is no straightforward answer to this question. It really depends on individual situation and preference. Some questions to ponder:

Which do you deem as more important: Income or Bequest?
What is your baseline income amount?
How much do you budget for your retirement expenses?
Do you have other sources of income to supplement CPF LIFE?
How is your health?

Pros for Scenario 1:

It seems to be able to maintain the same income as scenario 2 until at least age 90.
It has higher bequest amount than scenario 2 until fully depleted.
It does have the flexibility in terms of the drawdown amount from SA, meaning we can drawdown varying amount on needs basis, not necessarily must match up to scenario 2 payout.

Cons for Scenario 1:

Its income will drop below that of scenario 2 after SA is depleted.

Comparing FRS in RA plus BRS in SA vs ERS in RA, Part 2

This blog post is part of a 4-part series:

Refer to the list of acronyms on CPF in the following blog posts:
https://pwlcm.wordpress.com/2022/01/06/acronym-cpf/

In Part 1, I look at 2 scenarios with CPF LIFE Standard Plan. Now I want to compare the 2 scenarios with CPF LIFE Basic Plan. To recap, the 2 scenarios are:

Scenario 1: FRS ($198,800 for 2023) in RA plus BRS ($99,400 for 2023) in SA
Scenario 2: ERS ($298,200 for 2023) in RA

Again with the CPF LIFE Estimator set to a male born in 1968 (i.e. age 55 in 2023), I get the monthly payout amounts for Basic Plan to be $1,460 and $2,150 initially, then drop to $1,390 and $2,080 at later age for FRS and ERS respectively:

In CPF LIFE Basic Plan, only 10~20% of RA is deducted at age 65 as premium for CPF LIFE, and the initial monthly payout is paid from the remaining balance in RA. The drop in monthly payout is affected by the drop in extra interest due to RA balance falling below $60,000.

The difference in monthly payout for the 2 scenarios is $690, or $8,280 in a year. This shortfall is matched up from SA drawdown. Here is the Excel spreadsheet to simulate the 2 scenarios:

I don’t know how the CPF LIFE premium for Basic Plan is determined, so I just pick 15% (the mid value of the range 10~20%) for the Excel simulation.

I also assume a linear interpolation of monthly payout amount from the time RA hit $60,000 till it is depleted. After RA is depleted, CPF LIFE takes over payout and I assume it remains at the last payout amount for life.

With Basic Plan, it seems like the initial payout amount can be maintained till age 86, then gradually drop to last payout amount at age 90. For scenario 1, SA is depleted at age 96, later than the case for Standard Plan.

Similar observation for bequest with Basic Plan as Standard Plan, i.e. scenario 1 have more bequest amount than scenario 2, and it takes later age to deplete the bequest in scenario 1 than scenario 2.

Same summary as in Standard Plan, i.e. scenario 1 has higher bequest amount, but suffer lower payout after SA depleted; whereas scenario 2 can maintain higher lifetime payout.

Comparing FRS in RA plus BRS in SA vs ERS in RA, Part 1

This blog post is part of a 4-part series:

Refer to the list of acronyms on CPF in the following blog posts:
https://pwlcm.wordpress.com/2022/01/06/acronym-cpf/

One common question people asked is: “Should I top up my RA to ERS from my SA at 55?”

One might consider both SA and RA interest rates are the same at 4% p.a. and wonder what would be the benefits of moving BRS amount from SA to RA. Obviously such move would increase the CPF LIFE monthly payout amount, but at the expense of losing the liquidity of withdrawing cash from SA at our discretion.

So, I set out to compare between 2 scenarios:

Scenario 1: FRS ($198,800 for 2023) in RA plus BRS ($99,400 for 2023) in SA
Scenario 2: ERS ($298,200 for 2023) in RA

Using the CPF LIFE Estimator set to a male born in 1968 (i.e. age 55 in 2023), I get the monthly payout amounts for Standard Plan to be $1,600 and $2,360 for FRS and ERS respectively:

The difference in monthly payout is $760, or $9,120 in a year. To match up the shortfall in payout, we would need to drawdown from SA. When would SA be depleted in this manner? I set up an Excel spreadsheet comparing the 2 scenarios to find out.

I have simplified the calculation for SA interest and drawdown using annual values in scenario 1, but do take note that SA balance would be reducing every month due to monthly drawdown to match up the shortfall in the monthly payout. The actual SA interests earned would be less than those shown in the spreadsheet.

Both scenarios would payout $28,320 annually up till age 90. For scenario 1, SA only has $3,960 available for drawdown at age 91, beyond which SA is depleted and annual payout drops to $19,200.

In terms of bequest, scenario 1 would always have more bequest amount than scenario 2. The bequest amount would drop to zero at age 91 for scenario 1, and age 80 for scenario 2. The additional bequest amount comes from the interests earned in SA.

In summary, scenario 1 is good for those who want to leave more bequest to their loved ones, but would suffer a drop in payout if they outlive the depletion of their SA. On the other hand, scenario 2 is better at maintaining a lifetime payout to address longevity risk.

Crypto Investment Update – December 2022

This is a performance update to my crypto portfolio posted here:
https://pwlcm.wordpress.com/2022/12/01/crypto-investment-update-november-2022/

Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products mentioned in this post.

Performance Update

I was traveling in early January 2023 and only managed to capture the crypto charts in mid January 2023:

Crypto market remained flat in December 2022, with BTC and SOL below their 20000 and 28 support-turned-resistance levels respectively, while ETH continued to stay above its 1040 support level.

By mid January 2023, both BTC and ETH had broken above their Ichimoku Clouds, with LUNA2 and SOL also recovering into their Ichimoku Clouds, potentially breaking them in second half of the month.

Here is the the performance update as of 31 December 2022:

Overall allocation of the crypto portfolio dropped further to under 3%. Both return % and XIRR since inception dipped further into red.

Referral Links

Tokenize Exchange: https://tokenize.exchange/topic/invited/?invite_code=Vn58M

Robo War Experiment (RWE) Update – December 2022

This is a performance update to my Robo War Experiment (RWE) posted here:
https://pwlcm.wordpress.com/2022/12/03/robo-war-experiment-rwe-update-november-2022/

Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products mentioned in this post.

Performance Update

Here is the December 2022 Performance Update:

The year 2022 ended with a losing month and full year returns in the red. XIRR since inception are also in the negative territory, with Endowus Equity 100 portfolio suffered the least loss greatly helped by its excellent market-beating performance in 2021.

Key Observations

All 5 robo advisors and 3 benchmark indices in the red for the month of December 2022.
Endowus Equity 100 portfolio is the worst performer with -5.90% in December 2022, but it beats all the 3 benchmark indices and has the best returns in terms of XIRR since inception among the robo advisor portfolios.
Among the 3 benchmark indices, S&P 500 index took the lead in XIRR performance since inception. It beats both MSCI World and MSCI ACWI indices in good year (2021) and suffered similar losses in bad year (2022).

Referral Links

Endowus: https://endowus.com/invite?code=J6YV3
Syfe: https://www.syfe.com/invite/wealth/SRPTRJTFQ
StashAway: https://www.stashaway.sg/referrals/choonght43
MoneyOwl: https://moneyowl.com.sg/app/accounts/sign-up?referral_code=5FZY-58AG
SquirrelSave: https://app.squirrelsave.com.sg/Start/Referralcode?referralid=2996