Recently, there’s been some hoo-ha about when CPF starts paying out one’s retirement money. Apparently, it started when someone posted a picture of a letter from CPF informing an account holder that if they wished to have their payout start at 65 (the earliest possible age), they need to inform the CPF Board of this. Otherwise, the default payout age would be 70.
This naturally led to some people saying that the CPF payout age had been raised to 70 from 65 and this led to the CPF Board issuing a statement to debunk this “myth”.
Can you blame the people?
I mean, if CPF had set the default payout age to 65 instead of 70, there wouldn’t be this issue in the first place. And if the default is set at age 70, then we can assume that the intent of the CPF board is to have people draw down monies from their Retirement Account only starting from age 70.
It’s been quite well established in the behavioural economics community that defaults are a way of nudging people into certain behaviour. The best and most often cited example is how an opt-out programme results in a higher proportion of people donating their organs after death as compared to an opt-in programme. In other words, default options matter because as humans we are lazy and tend to stick with the default.
What I think the CPF Board should do
Instead of coming out and saying the technical and legally accurate thing, the CPF Board should have come out and explained why the default payout age is set to 70. Their argument will probably be a combination of extra years of compounding (5 years) which is result in an extra X number of dollars paid out each year.
People may or may not agree with the CPF Board’s argument on having a default at 70 but at it least it would be a reasonable explanation of their choice of default payout age.
Right now, it just seems like they are nitpicking on the facts but skirting around the issue of their intent.
Ryan Goh: Life through these eyes 