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7 Common Oversights When Doing Retirement Planning With Your Parents

A HSBC report reveals that 1 in 2 Singaporeans said their elderly parents have suffered some financial difficulties in retirement, and that 8 out of 10 Singaporeans pay for their parents’ recurring costs. If your parents do not have a clear idea of their retirement timeline, do check out our retirement article to get them started!

READ MORE: How to Help Your Parents Prepare for Retirement

Let’s take a look at why oversights happen when planning retirement strategies, and how you can better prepare for the worst case scenarios.

1. Over reliance on savings

The first and most common oversight is an over-reliance on bank savings. 92% of Singaporeans store the bulk of their savings in banks. With consistently low interest rates in savings accounts, it is difficult to keep retirement funds protected from inflation.

There are other tools available such as robo-advisors with adjustable risk levels, ETFs, blue chip stocks and even insurance policies, which could yield better returns than the miserly 0.5% interest rates our bank savings accounts yield.

READ MORE: How Does Inflation Affect Your Bank Balance?

2. Being short sighted and not planning ahead

Our parents’ savings priorities may be more short term, focusing on family needs and emergency spending, instead of longer term goals like retirement. Balancing the amount that we save for short term goals like family and emergency spending versus long term goals like retirement requires frugal and practical estimation. Without planning ahead, there is a tendency to underestimate the amount needed for retirement.

Looking into retirement planning too late will also make retirement more challenging. Delaying retirement planning by just 10 years can cause a significant impact.

The chart below assumes that both persons here make an annual investment to a financial product that yields 4% p.a. Both plan to retire at age 65.

Starting age this yearTotal investmentRetirement fund at age 65
Absolute returns (Retirement fund / Total investment)
35$12,000 x 30 years = $360,000$699,9400.94
45$18,000 x 20 years = $360,000$557,4450.55

The investments made, although the same amounts, yield widely different results in absolute returns simply based on the effects of time.

3. Forgetting non-financial expectations

Even when we plan early, the plan may be lacking in other considerations that are not as obvious. As much as retirement conversations revolve around monetary concerns, we should not forget to discuss other aspects of retirement.

What do your parents expect their retirement to look like? Are they going to travel, indulge in their hobbies, or spend time with the rest of your family? Do they have a wide enough social circle? This may indirectly translate to higher costs in terms of time you spend with them, or they might require more funds to spend on their hobbies.

Other important non-financial expectations that should be discussed include if you expect them to take care of your children full- or part-time as a way to save costs as a family.

4. Not preparing for unexpected situations

How likely is it that your parents will require specialised elder care such as a live-in nurse or recurring treatments for chronic diseases, and are they adequately prepared for such situations? Scenarios like these are expensive and should be budgeted for carefully, namely through saving more, or applying for supplementary insurance and subsidies. Although they may already be covered under health and life insurance, familiarising yourself with what situations are covered as well as the claims process can further ease their burden in old age.

Another possible and likely scenario is “forced” early retirement due to unemployment. What if your parents were set to retire at 65, were laid off a couple of years earlier? Would your parents continue to seek work, or choose early retirement by adjusting their retirement budget? Bring up this possibility in advance to ensure that both your expectations are aligned if such a scenario were to arise.

Lastly, although there are robust schemes in place to support the elderly, it is possible that we may overlook qualifications for certain subsidies if you are unfamiliar with the terms. It’s better to get a foundational understanding of common retirement subsidies and schemes that you can take advantage of early.

5. Not taking full advantage of schemes and government services

There are a few retirement schemes to take advantage of, the main ones being the Pioneer and Merdeka Generation packages and HDB’s lease buyback scheme. In addition, the Silver Support scheme and GST voucher scheme are two other schemes targeted at lower-income families.

Additionally, the Long-term disability insurance coverage is offered by CareShield Life or ElderShield, depending on when your parents were born and if they applied for the newer CareShield Life.

READ MORE:  CareShield Life: How To Convert From ElderShield, and Everything Else You Need To Know

6. Forgetting to adjust your own plans

While you should strive to accommodate your parents’ needs and wants, you should also remember to communicate your own boundaries and goals. This can include discussions on the allowance that they expect you to give, as well as non-financial expectations such as how often you should visit and whether you’d be expected to do any specific errands for them.

How much allowance should you give? According to a parent allowance survey done by Answers SG, 10% of your income seems to be the median amount given to parents in Singapore, which amounts to about $400 to $700. However, depending on their savings and needs, you should make accommodations for this allowance. This might mean cutting down your own spendings elsewhere, or growing your income stream to provide more for them.

Letting your own timeline of goals be known to them helps you both get on the same page about expectations of how much support they can get from you. Ultimately, good planning precedes a good relationship with your parents into their later years.

7. Not teaming up with siblings and other family members

Having more family members would mean more support. Discuss with family members on how you can split up the roles and duties explicitly, so that no aspects of their lives are neglected – from basic needs to the occasional emergencies.

Some questions to ask each other. Who should be their first point of contact for a medical emergency? Who can they rely on for less urgent problems like insurance claims?

Some parents may not be conscientious about appointments and may require more frequent check-ins, and if you have siblings, splitting the duty can make taking care of them more manageable.

If your family is small, close relatives can also be an essential source of social support networks, and if you already have retired relatives, you could learn from their retirement strategies as well.

Conclusion

Retirement planning is woefully under-discussed within families, because it may not feel like a priority and it can get quite complex and overwhelming. We recommend starting to save for retirement as soon as you can as a lack of funds isn’t something that you can remedy easily with limited time. Keeping open channels of communication and building a habit of checking up on your parents frequently even before they formally retire can be something you start now.

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