How to Help Your Parents Prepare for Retirement

With the life expectancy of Singaporeans among the world’s highest at 85.7 and 81.4 for women and men respectively in 2019, this means that your parents will have approximately 20 years to kick back and take it easy after their official retirement age of 62.

To make this happen smoothly, it is important to plan ahead and help your ageing parents prepare for their retirement so they can properly enjoy their golden years.

Start the discussion properly

Communicating with your parents about their retirement plan is important, as it will also affect your future planning. Start by discussing their retirement plans and expectations, and ask them about their existing insurance policies and investments.

However, be sure to navigate this topic with tact. When it comes to the topic of money, things can be sensitive. Let your parents know that you genuinely care about their well-being and financial state, so you can also make contributions to their retirement nest egg.

Make sure your parents’ health coverage is sufficient

Singapore is notorious for its expensive healthcare, and you certainly wouldn’t want to wait until something happens before you get your parents insured. Should something untoward happen, you will also have to bear the brunt of your parents’ hefty medical bills.

If your parents already have existing health insurance plans, find some time to sit down with them and a financial advisor to review their existing coverage and whether the situation has changed. For instance, if their health condition has deteriorated since their last review, you may want to consider purchasing additional cover or contribute to their insurance premiums.

Other insurance policies including life insurance and critical illness plans are also worth thinking about, although the plans can be more costly at their age. Before making a purchase for these plans, be sure to check with your parents if they already have the coverage.

Set up basic plans or enhance hospitalisation plans with MediSave

Did you know that you can use your MediSave to set up basic plans for your parents? In fact, you can even use it to enhance hospitalisation plans and upgrade your parents’ ElderShield (old age disability insurance).

For the enhancement of hospitalisation plans, you can use your MediSave funds to pay, but only up to the following limits. The excess will have to be paid in cash.

Age on your next birthday Allowable withdrawal limit
40 years and below $300
41 to 70 years $600
71 years and above $900

For the upgrade of ElderShield, the allowable MediSave withdrawal limit is at $600 per individual.

Top up your parents’ CPF accounts and enjoy tax rebates

Even if your parents are still working at the moment and can fend for themselves, you could still consider making top-ups to their Central Provident Fund (CPF) Special Account (SA) or Retirement Account (RA). By doing so, you will be helping them achieve their Minimum Sum sooner, so they can withdraw payouts under CPF Lifelong Income For the Elderly (LIFE) upon turning 65 years of age.

That’s not all — you can stand to benefit too! By topping up your parents’ CPF accounts, you can also enjoy up to a maximum of $7,000 in tax rebates for the year of assessment. A total win-win.

Review your parents’ investments

Investments are a good way to build your parents’ retirement nest egg. Chances are, they have already done their own investments.

Play your part by having a comprehensive understanding of their investments, so you can determine whether you are required to step in. At your parents’ age, it would be wise for them to be invested in low-risk portfolios.

At your parents’ age, it would be wise for them to be invested in low-risk portfolios.

Since investments need time to potentially grow, high-risk portfolios may not be ideal as a result of the markets’ volatility, which may affect their requirement liquidity.

Another tip would be to diversify their investments instead of putting all their eggs into one basket. Since bank interest rates are not enough to combat inflation, the sensible option would be to properly diversify their investment portfolio and balance their assets to ultimately reach their retirement goals.

A happy retirement is a well-planned one

As the saying goes, if you fail to plan, you plan to fail.

If you’re preparing for your parents’ retirement with the above steps, you’re less likely to face financial struggles and unpleasant surprises that could interfere with your parents’ retirement.

Once you’ve gotten the retirement planning out of the way, you could also check with your parents if they have done their estate planning.

With retirement and estate planning checked, you know that your parents are in good hands and can truly enjoy their retirement.

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