How to Financially Prepare Your Parents for Retirement

Most Singaporeans nowadays can expect to live to a ripe old age, but along with that comes some big challenges. As of 2017, Singaporeans’ life expectancy was said to be about

One of the implications is that our healthcare needs will rise – this is because we’re living longer and requiring more medical treatment.

The other implication is that we’ll need more for retirement; living longer also means a greater risk of outliving our pension and savings. In fact, half the Singaporeans aged 65 today areexpected to live beyond the age of 85.

All of this means it can be much harder to look after your aging parents.

If our parents outlive their pensions and savings, then it would fall to us (and our siblings) to support them in their twilight years. The risk of this is higher as lifespans increase, and healthcare costs inflate.

Some of us may also have parents who come from more humble backgrounds – if our parents could only make limited CPF contributions, or couldn’t save much in their working days, then we have to be ready to lend more support during their retirement.

For now, there are some steps you can take to improve your parents' future retirement situations:

Make top-ups to your parents’ CPF, if you have the means

Through the Retirement Sum Topping Up (RSTU) scheme, you can top up your parents CPF by transferring from your own CPF, up to the full retirement sum (if your parents are below 55), or directly to their Retirement Account. You can also make a cash top-up to your parents’ CPF. This also gives you tax relief of up to $7,000 per calendar year, if you top up for your parents, in-laws, grandparents, grandparents-in-law, spouse, and siblings.

You can find out how to do this on the CPF website.

There are two main advantages to topping up your parents’ CPF, versus just holding cash for them.

First, their CPF Retirement Accounts (or Special Accounts if they are below 55) have a guaranteed interest rate of up to six per cent, according to CPF. Your parents’ retirement fund will always be growing, regardless of wider economic conditions.

Second, you could put some money in your parents’ CPF, and give them some of it in cash. It may not be the best idea to give them all the money in cash. Money locked in their CPF is safe – it cannot be stolen by scammers who target the elderly, for example, or accidentally misplaced.

Remember that the more you contribute to your parents’ retirement now, the less you’ll struggle to provide for them later.

Have a frank and equitable arrangement with siblings, if you have any

By discussing how you’ll split the cost of looking after parents, you can also make the situation more equitable among you and your siblings. This also allows each of you to plan accordingly to your own areas, so there are no gaps in your parents’ retirement needs. For example, if you’re prepared to be the one to handle your parents’ hospitalisation expenses, you will know to get your parents a good hospitalisation plan, and your siblings could be in charge of other expenses.

Ensure you’re properly insured yourself

You can’t look after someone else, if you’re not looking after yourself. There’s no way you can pay for your parents’ retirement, if you’re hit by medical bills you can’t cover, or if you lose the ability to work.

A basic need is life insurance – this will provide a pay out to your parents in the event that you pass on, or if you suffer a terminal illness.

You can also consider getting an Integrated Shield Plan (IP) with a rider. With a rider, you only pay up to five per cent of your hospitalisation bill. This lowers the amount you need to set aside in an emergency, and you can contribute it to your parents’ retirement instead.

You should also have Critical Illness insurance coverage; this provides a payout if you suffer a critical illness like stroke or cancer. This ensures you will have enough to maintain your parents, even if you need to stop working.

AXA offers a wide range of critical illness solutions, such as AXA Criticare for Her/Him and AXA Super CritiCare.

Take advantage of government schemes and community services

Do find out what level of Community Health Assist Scheme (CHAS) your parents qualify for, and teach them to use it when going to clinics. If your parents were in low-income groups during their working life, do understand the benefits of their Silver Support Scheme, and work in into your provisions for them.

There are more advanced options available to boost your parents’ retirement sums. For example, HDB’s lease buyback scheme can allow your parents to sell back a portion of their flat’s lease, to boost their retirement income (if you already have a home of your own, and you don’t need or want to inherit their flat, this could be an excellent way to enhance your parents’ retirement savings).

Speak to your designated community leaders (e.g. your MP or grass roots leader) often; they can help you to help your parents.

Include your parents in financial consultations

If your parents permit, let your financial consultant review their retirement situation as well. In a way, your portfolio and your dependents are tied together. A financial consultant can help you tweak your plans to accommodate major costs, such as if one of your parents is starting dialysis treatment; or if they are planning to sell their flat and move in you or a sibling. All of these will impact how you continue to provide for them.

Providing for your parents requires ongoing planning

Unfortunately, you can’t come up with one plan and then consider everything “settled”. Your parents’ needs and aspirations will change as they grow older, as will yours. As such, you need an ongoing plan, that’s periodically reviewed and changed every year.

As planning for multiple dependents can get complicated, it’s best to speak to a qualified professional. Get your policies and investments reviewed often, and don’t be afraid to speak to more than one financial consultant for second opinions.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.