Why CPF LIFE with escalating payouts is better! (UPDATED 2020)

CPF created the new CPF LIFE with escalating payouts in 2016.

The scheme provides buffer against inflation in exchange for lower or delayed initial payouts.

Of course, there are cynics suggesting that it is a ploy to delay us from getting our CPF money.

In this post, I will share my personal interpretation and why I believe this is a superior option for you. *Thumbs up to the advisory panel for coming up with this recommendation.

Aim Enhanced Retirement Sum (ERS) and escalating plan option in 2020

In 2020, CPF full retirement sum FRS is $181,000. Hence ERS is $271,500

There are 3 payout methods which are Basic, Standard and Escalating.

Starting payout amounts for Escalating plan option at ERS will be $1,556/m - $1,714/m.

Pretty decent amount for most basic needs and your amount will also escalate at 2%p.a. so as to protect against inflation. The other 2 options have that risk.

What if you live longer than you originally imagined?

Have you heard this: Renowned scientists believe that the first person to live to 150years old is already alive (i.e. born already!). Check out this cool prediction!

If you would like a reputable system to figure out how long you will live to, you may use this life expectancy calculator by ABARIS.

It’s developed by professions at the University of Pennsylvania. I did mine and wow, I’m actually expected to live to age of 94. There’s also a 75% chance that I will live older than age85!! 

In financial planning, I'd recommend to use "living to the age of 85 for males" and "age of 88 for females" when calculating for the retirement shortfall. 

This figure will have to be continuously revised upwards as medical advancement has made living longer an undeniable trend.

Choose CPF LIFE with escalating payouts

The trade off for choosing escalating payout vs level payout (standard or basic plan) is that you will receive less in the initial years.

The illustration (which is based on payouts per month) shows Mr Eng choosing the escalating payout plan and he starts off with 20% less than Mr De Souza who chooses the level payout plan.

Mr Eng’s payout amount gradually rises at 2% and by the age of 87, he will actually be getting 20% more than Mr De Souza. This advantage gets larger with each passing year!

Mentioned above, there is a strong probability that you will be living past age87. You'd likely to live longer than you had expected…. 

Thus, the escalating payout plan will likely pay more in total. It is hard to predict the pace of medical advancement.

Choose CPF LIFE with escalating payouts

The proposal has 2 ways for you to avoid getting a lesser initial payout if you choose the escalating payout plan rather than the level payout plan. They are to

  1. Defer the payout period by 5years
  2. Top up 30% extra into the starting CPF life amount

Personally, I think option 1 is certainly worth exploring if you are still working part time from age 65-70 or that you have passive income sufficiently from investments.

If you want to learn more on CPF LIFE BASIC OPTION (which has merits too!), check the video below.

How to further complement your retirement?

There are plans that pay cash benefit for life time.

We've done reviews on regular premium retirement plans


and also on a single premium retirement plan


If you have questions on your retirement needs, 

drop an email to me at josh.tan@promiseland.com.sg​​

Last updated on January 16th, 2020 at 05:03 pm

The Astute Parent: A parent who has a sharp acumen on sieving through 'alien' financial jargon to dish out bite size financial tips from a parent's perspective.
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