In Singapore, the minimum retirement age is 62. Your parents may have worked and saved their income for decades, but how do you know if they have saved enough for their retirement?
There is no single answer to the question of how much is enough for your retirement. Different people have different needs depending on their health, family circumstances, and other factors that affect the amount of money they will need to live comfortably in retirement.
In this article, we’re going to go over 15 Dos and Don’ts so you can help your parents comfortably retire.
10 things you can do to help your parents plan for retirement
1. Have an open conversation about retirement
Retirement is not always a pleasant subject to discuss. Nonetheless, it’s important to approach it openly before you realize that your current financial resources are not sufficient for their health and lifestyle needs. It would be better to do it a few years before they retire. Schedule a time to talk face to face with your parents.
While sending text messages can be convenient, it’s easier to clear up doubts and answer questions when you’re having an in-person chat. Ask them if they have ever thought about retirement and if they have prepared some retirement savings, and listen to them as they discuss their plans.
2. Know what lifestyle your parents would like to lead after retirement.
Some people might want to continue living the same way they did before retirement. Others may have great ideas for a bucket list that they have once they are free from the 9 to 5 commitment of a full time job.
Maybe your parents haven’t thought about how they would like their life to be like after retirement. You need to know your parents’ position on the subject so that you can give them the targeted advice they need. If they’re not sure how they might want to lead their post-retirement life, you can ask them what’s important to them and budget accordingly from there.
3. Understand your parents’ financial situation
Whatever their retirement plans, your parents may be in different financial situations. Even though your parents earned a relatively higher salary when they worked, there can be different types of financial stress in their lives that can impact their savings.
For example, the needs of dependent family members or an unforeseen event, such as a traffic accident or health crisis, can put a damper on their savings. The costs of drugs and treatments for long-term health problems can also affect your parents’ financial situation.
You will need to consider what your parents have saved and what they are likely to need to cover living expenses, medical costs, and dependent needs, if applicable.
4. Take note of pre-existing health problems
Your parents’ health will affect not only how much they need to set aside for retirement, but also the lifestyle they can expect to have. Your parents may have health problems for which they might need specialized assistance, for example requiring regular dialysis if they have kidney failure.
As your parents age and become more fragile, they may also be vulnerable and need to pay more to treat injuries. The expenses that you would need for medical treatment for both present and future occasions are an important consideration in planning your retirement savings.
5. Find out what child care options your parents want
As they get older, your parents may require caregivers to take care of their growing 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 specialized health care needs, they may be able to receive better quality care in a care facility such as a retirement home.
Do not be quick to rule out any child care options because of cultural stigma, such as being non-filial because you are considering child care facilities as an option for your parents. Talk openly with your parents about what they want and need so that you make an informed decision, as different child care options have different prices and benefits.
Cost shouldn’t be the only factor you think about when deciding 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 home helpers and caregivers.
6. Learn more about how you can maximize your parents’ CPF
Knowing your CPF savings account options as you approach retirement age is important to getting the most out of your savings in your golden years. At age 55, they will receive a retirement savings account into which savings will be transferred from regular and special accounts.
From the moment you turn 65, you can request monthly payments based on your current retirement savings account. You can also choose to defer your payments to receive the money for a longer period, which will help your 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 attainable.
7. Make sure your parents have sufficient insurance coverage
There are several insurance options available to people approaching retirement age to increase their retirement income.
There are retirement income insurance plans that will provide long-term medical care payouts and coverage for life, a whole life insurance plan that incorporates savings that can be withdrawn upon surrender of the plan and policies. endowment. Check with your current insurance provider if they have any special plans for people approaching retirement age.
8. Obtain a lasting power of attorney
An Enduring Power of Attorney, or LPA, allows you to appoint someone aged 21 and over to make important decisions on your behalf when you are mentally unable to do so. This person is known as the donee and can be appointed to make decisions in two main areas: personal well-being and finances.
9. Find out what an advanced medical directive is
An advance medical directive (AMD) is a document you sign in advance to let the doctor treating you know that you do not want to be placed under assisted living technology if you are unconscious.
This is vital for your parents in a serious medical emergency and facing an end-of-life situation that they cannot respond to. You can get the AMD form online or from a doctor and will need to sign it with a doctor in the presence of a witness. Further information is available on the website of the Ministry of Health (MOH).
10. Check your parents’ pension beneficiary information
Retirement beneficiaries are individuals who are selected to receive benefits from a retirement account after the death of the account holder. It is important to review your beneficiary information because 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 may choose to exclude certain distributions that exempt them from paying an annuity. You can find more information on the Inland Revenue Services (IRS) website.
5 things to avoid to help your parents plan for retirement
1. Don’t forget to set aside additional emergency savings
Many people assume that their retirement expenses will only be about two-thirds of what they spent while working. However, as health deteriorates with age, expenses may increase as they incur more expense for treatment.
For the elderly, even a simple fall can lead to serious consequences such as broken bones and hospitalization. Always set aside emergency savings for rainy days so you don’t find yourself in a tough spot when you have urgent medical bills to pay.
2. Don’t ignore your debt
If left unpaid, the debt will continue to grow because of the interest and place an unpleasant burden on your parents’ retirement savings. Possible sources of debt include credit card debt, mortgages, and auto loans.
Make sure that as much of the unpaid debt is written off as much as possible as you approach retirement. When you have settled all of your unpaid debts, you will be able to have more resources to devote to the things you need to maintain the lifestyle you want.
3. Don’t make assumptions about what your parents’ expenses will be after retirement.
It can be easy to assume that people would spend less in retirement. This may not necessarily be true, as the amount of spending varies depending on the lifestyle desired by a person. Retirement expenses can increase based on unforeseen events such as medical emergencies or deteriorating health.
Whatever your parents’ retirement budget, you need to make sure you can accommodate any disruptions that may require additional spending.
4. Don’t make decisions on behalf of your parents without asking permission.
Don’t make top-down decisions about your parents’ retirement expenses without consulting them. It doesn’t matter how well we think we know our parents; they need to be made aware of the options available to them so that they can ultimately decide what is best for them.
If they are able, always discuss important financial decisions with them beforehand. If your parents are mentally incapable of making decisions on matters such as finances, only the trustee appointed under their LPA is legally authorized 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 right for our situation. Before purchasing a new insurance plan or selecting a particular care option, evaluate the other options available to see if your choice meets your needs.
Key points to remember
Planning for our parents’ retirement does not happen overnight, rather it is something that is carefully planned and decided. It’s a way to show how much we appreciate the sacrifices and efforts our parents made for us when we were still young. Now that you already know the dos and don’ts, it will be easier for you to think about the best retirement plan for your parents.