In Singapore, the minimum retirement age is 62. Your parents might have been working and saving their earnings for decades, but how would you know if they have saved up enough for their retirement?
There is no one-size-fits-all answer to the question of how much is enough for your retirement. Different people have different needs based on the condition of their health, family status, and other factors that affect how much money they will need to live comfortably in retirement.
In this article we will be going through 15 things to do and avoid so that you can help your parents live comfortably in their retirement years.
10 do’s to help your parents plan well for their retirement
1. Have an open conversation about retirement
Retirement is not always a pleasant topic to talk about. Nonetheless, it’s important to address it openly before you realise that your current financial resources are not enough for their health and lifestyle needs. It would be better to do this a few years before they are set to retire. Schedule a time to talk to your parents face to face.
While sending text messages might be convenient, it is easier to clarify doubts and address questions when you have a discussion in-person. Ask them if they have thought about retirement before and if they have prepared retirement savings and listen to them when they discuss their plans.
2. Know what kind of lifestyle your parents would like to lead after retirement
Some individuals might want to continue living in mostly the same way they used to before retirement. Others may have grand ideas for a bucket list they have once they are free from the 9-to-5 commitment of a full-time job.
Perhaps your parents have not thought about how they want their lives to look like post-retirement. You need to know where your parents stand on the topic so that you can give them the targeted advice that they require. If they’re not sure about how they might want to lead their lives after retirement, you can ask them about what is important to them and budget accordingly from there.
3. Understand your parents’ financial situation
Regardless of their plans for retirement, your parents might be in different financial situations. Even if your parents had been earning a relatively higher salary when they were working, there can be different types of financial stresses in their lives that can impact their savings.
For example, the needs of dependent family members or an unforeseen event, like a road accident or a health crisis, may place a dent in their savings. Costs of medication and treatment for long-term health conditions may also affect your parents’ financial situation.
You will have to take into consideration what your parents have saved up and what they are likely to need to cover living expenses, medical expenses, and the needs of dependents if they have any.
4. Take note of pre-existing health conditions
Your parents’ health conditions will affect not just how much they will need to set aside for retirement, but what kind of lifestyle they can expect to have. Your parents may have medical conditions for which they might require specialised assistance, for example requiring regular dialysis if they have kidney failure.
As your parents age and become frailer, they might also be vulnerable and need to fork out more expenses to treat injuries. The expenses you would need for medical treatment both for present and future occasions are an important consideration in planning your retirement savings.
5. Find out what care options your parents want
As they age, your parents might require caregivers to take care of their increasing physical and psychological needs.
You can choose to hire a live-in domestic worker to look after your parents, or caregivers to visit when your parents need care. If your parents have specialised healthcare needs, they might be able to receive a higher quality of care in a care facility like a nursing home.
Don’t be quick to rule out any care options because of cultural stigma, for example of being unfilial because you’re considering care facilities as an option for your parents. Have an open discussion with your parents about what they want and need for you to make an informed decision as different care options have different prices and benefits.
Cost should not be the only factor you think about in deciding on your parents’ care options, but also your parents’ needs and preferences. Find out which care option is right for you in our article here on the differences between domestic helpers and respite caregivers.
6. Learn more about how you can maximise your parents’ CPF
Knowing about options for your CPF savings account near your retirement age is important to make the best use of your savings in your golden years. When one turns 55, they will receive a Retirement Savings Account into which savings are transferred from the Ordinary and Special Accounts.
From the time you reach 65, you can apply for monthly pay-outs based on your current Retirement Account Savings. You can also choose to defer your payments to receive the money over a longer period of time, which will help with financial security. You can find an online retirement calculator on the Central Provident Fund Board website that can help you see if your retirement savings goals are achievable.
7. Make sure your parents have sufficient insurance coverage
There are several insurance options available for people approaching their retirement age to boost their retirement income.
There are retirement income insurance plans which will provide pay-outs and long-term medical care coverage for life, a whole life insurance plan that incorporates savings which can be withdrawn upon surrendering the plan, and endowment policies. Check with your current insurance provider to see if they have special plans for individuals nearing their retirement age.
8. Get a lasting power of attorney
A Lasting Power of Attorney , or LPA, allows you to appoint someone aged 21 and above to make important decisions on your behalf when you are mentally incapable of doing so. This person is known as the donee and can be appointed to make decisions in two broad areas: personal welfare and finance.
9. Learn about what an Advanced Medical Directive is
An Advance Medical Directive (AMD) is a document that you sign in advance to inform the doctor treating you that you do not want to be placed on life assistive technology if you are unconscious.
This is vital for your parents in the event they have a serious medical emergency and face an end-of-life situation that they cannot respond to. You can get the AMD form online or from a doctor and would have to sign it with a doctor in the presence of a witness. More information can be found on the Ministry of Health (MOH) website.
10. Review your parents’ retirement beneficiary information
Retirement beneficiaries refer to individuals who are chosen to receive benefits from a retirement account after the account holder has passed on. It is important to review the information of your recipient beneficiaries as different rules apply to people who are related in different ways to the account holder.
For example, if the beneficiary is an employer, the account holder can choose to exclude some distributions that relieve them from the need to pay annuity. More information can be found on the Inland Revenue Services (IRS) website.
5 don’ts to help your parents plan well for their retirement
1. Don’t forget to set aside extra emergency savings
Many people assume that their retirement spending will only be about two-thirds of what they spent when they were working. However, as one’s health fails when they age, spending might increase as they incur more expenses for treatment.
For older people, even a simple fall may lead to severe consequences like broken bones and hospitalisation. Always set aside some emergency savings for a rainy day so that you will not be caught in a difficult situation when you have urgent medical fees to pay.
2. Don’t ignore your debt
If uncleared, debt will keep increasing because of interest and lead to an unpleasant burden on your parents’ retirement savings. Possible sources of debt include credit card debt, mortgage, and car loans.
Make sure that as much outstanding debt is cleared as much as possible as you near retirement. When you have addressed all your outstanding debts, you can have more resources to spend on things you need to sustain your desired lifestyle.
3. Don’t make assumptions about what your parents’ spending will be like after retirement
It can be easy to assume that people would be spending less when they retire. This may not necessarily be true as the amount of spending varies with a person’s desired lifestyle. Retirement expenses may increase based on unforeseen events like medical emergencies or deteriorating health.
Whatever your parents’ budget for retirement would be, you must make sure that you can account for disruptions that could make more spending necessary.
4. Don’t make decisions on your parents’ behalf without seeking permission
Do not make top-down decisions about your parents’ retirement spending without consulting them. Regardless of how well we may think we know our parents; they need to be informed about the options they have so that they can ultimately decide what is best for them.
If they are able, always discuss important finance-related decisions with them beforehand. If your parents are mentally incapable of making decisions about matters like finance, only the trustee appointed under their LPA is legally allowed to make decisions for them.
5. Don’t make spending decisions without a plan
It can be easy to default to the options that our friends or family recommend to us without taking the time to see if they are a good fit for our circumstances. Before you sign up for a new insurance plan or select a particular care option, evaluate the other options available to see if your choice meets your needs.
Planning for our parents’ retirement is not an overnight thing, but rather it is something that is thoroughly planned and decided. This is one way of showing how much we value the sacrifices and efforts our parents did for us when we were still young. Now that you already know the do’s and don’ts, it’ll be easier for you to brainstorm the best retirement plan for your parents.
This article was first published in Homage.