It is said that the greatest retirement crisis is when one is too frail to work and too poor to retire. Raising a family is hard work and it is heart wrenching to see old folks trying to make ends meet in the later years of their life. Many from our parent’s generation, including my own parents, may have used their hard-earned money on the children’s education at the expense of their own enjoyment in retirement.
For all the years of love our parents have given to us, wouldn’t it be nice if we can help them live as good a life in their retirement years?
Be ready for the long run
As a generation raised with a singular focus on providing for the family, some of our parents may not have the time or the awareness to realise the importance of retirement planning as we do now. But when it comes to retirement, failing to plan is as good as planning to fail.
Singaporeans today have a longer lifespan than ever. At the recent National Day rally, PM Lee Hsien Loong shared that the life expectancy is 80 and 84 for men and women respectively – almost 10 years longer than what it was 30 years ago!
The combination of the above means there is a chance that some of our parents may not have enough savings to see them through their golden years.
Healthcare costs in old age
In that same speech, PM Lee mentioned that Singaporeans may experience 8 years of ill health in their old age on average. As we grow older, we may spend more on medical expenses.
We should also cater for medical inflation too. That’s why it’s important to factor in future medical expenses when doing any form of retirement planning.
What can we do to help?
Topping up your parents’ CPF accounts is a good way to help them grow their nest egg. This is due to its advantages on two fronts – optimising returns and reducing volatility.
Money in our CPF accounts earn a higher interest than what banks give. The interest earned helps to combat inflation. As our CPF savings are guaranteed by the government, this makes it one of the safest places to hold our parents’ retirement funds as it is unwise to take on too much market risks at an elderly age.
Topping up our parents’ CPF accounts regularly will help them build up a retirement sum, which would provide them with a steady stream of retirement income for as long as they live through CPF LIFE. In fact, it doesn’t have to be a strain on your own finances as you can make small cash top-ups as little as $50 per month.
With this peace of mind, they’ll be able to retire with dignity rather than having to worry about running out of money before they run out of breath.
Top-ups are rewarding for you too
Do take note that any CPF top-up from you will be streamed out to your parents through monthly payouts. As an estimate, a $7,000 top-up to a 55-year old parent would increase their CPF LIFE payouts by about $50 per month* for life.
Apart from helping to build up your parents’ nest egg, topping up their CPF accounts also enables you to enjoy tax relief. For example, if your tax bracket is at 10%, and you topped up your parents CPF accounts with $7,000 cash in a 12-month period, you would save $700 in payable income tax.
Now that’s a win-win situation for both you and your parents.
*Payouts are estimates based on a male member on the CPF LIFE Standard Plan computed as at date of publication.
Kee Siew Poh
finexis Advisory Pte Ltd
Kee Siew Poh is a CERTIFIED FINANCIAL PLANNER™ and a Chartered Financial Consultant with over 17 years of experience in the financial industry. She is also the Co-Chair of the Marketing & Communications Board and the former chairperson of the Public Awareness Board of the Financial Planning Association of Singapore (FPAS).