As an Asian country with a mixture of races, Singapore belongs to what we call a high context society. This means in our culture, we make assumptions about the thoughts and views of the people around us without always explicitly asking them directly. This applies to family relationships, including those between adult children and their elderly parents.
Many a time, as adult children, we find ourselves not knowing much about the retirement plans of our parents. Perhaps, we don’t discuss about their finances as much as we should. Some parents may even prefer to keep important financial matters to themselves, rather than to confide in their children and risk worrying them.
Though common, it isn’t exactly healthy, and doesn’t really help either the parents or their children, who may ultimately still have to take care of them one way or another.
We will share 5 questions on retirement planning that we should be asking our parents today.
1. Have they done their estate planning?
Estate planning refers to the process of how someone’s assets would be disposed off after he or she have passed away.
Estate planning is more important today in Singapore mainly because the current generation (i.e. those in their 50s, 60 and 70s) will be leaving assets behind when they pass away.
These assets could be in the form of cash, stocks, an HDB flat, private properties and jewellery. Some assets, such as properties or even businesses, are not easily divided. Hence, the probabilities of a forced sale of assets are high, when the parents pass on without a Will.
In the absence of any valid Will, the default Intestate Succession Act will kick in. Assets left behind by your parents will automatically be distributed in accordance to this act, regardless of any wishes your parents may have privately shared with you.
2. What are the insurance policies they have?
How many of us are aware of the insurance policies that our parents have?
This is a more serious question than what most of us may realise. When our parents fall ill and require hospitalisation, not knowing the type of health insurances our parents are being covered for and the extent of the coverage will leave us scrambling to worry about the hospital bill. Rather than panic when that happens, find out what type of coverage your parents have now. Otherwise, you may end up opting for a lower class ward when your parents could have already been covered under a higher-class ward. Or worst, you might have to fork out a large part of the hospitalisation bill on your own.
Insurance policies go beyond just hospitalisation matters. There are policies that include death, critical illness, disabilities and eldercare. Should such incidents happen, your parents might be entitled to payouts based on the coverage of the policy. Find out what policies your parents have today and if the coverage is adequate, given the rising medical costs.
3. What other assets do they have?
This may not be a very nice question to ask directly but it is equally important.
It is possible that your parents may have assets that you are not aware of. This could include stocks that they have bought a long time ago, saving deposits, fixed deposits or even safe deposit box. For example, it was reported that SGX had about $68.3 million in unclaimed shares and dividends as of 2013. These include cheques for dividends that were simply not cashed in. Sometimes, your parents may have even completely forgotten about it themselves.
Find out the type of assets (and loans) that your parents have. In the event that they pass on before they could liquidate these assets into cash, you and your siblings would be able to track it down.
4. How much do they need for their retirement?
Have your parents worked out how much they need for their retirement yet? If not, it could be time for you to do so with them. This amount vastly differs from individuals, depending on the lifestyle they hope to maintain in their retirement.
Regardless of the amount that your parents think they need, it is best to spend some time working it out. Don’t forget to set aside money for medical expenses, holiday trips or other big-ticket items expenses, as a form of contingency plan.
5. Do they have enough for retirement?
Funding a retirement that could easily stretch from between 25 to 30 years is not going to be cheap. Your parents need a strategy that would help ensure a regular stream of income.
For example, let’s assume your parents have worked out the amount that they need for the both of them to be $3,000 a month (or $1,500 per person). If they have both set aside the Full Retirement Sum of $161,000 in their CPF Retirement Account by the age of 55, they will be able to start receiving payout of about $1,250 per person at age 65, or about $2,500 in total, assuming they opt for the CPF LIFE Standard Plan.
The remaining $500 could come from other assets that they have. This could include dividends from stocks or coupon payments from bonds. In the absence of these assets, it is also possible to consider other alternatives such as downgrading from a 5 room flat to a 3 room flat or to offer a room up for lease to supplement their income in the absence of a job.
Talk about retirement today
Sometimes, we think that talking about retirement with our parents is a taboo topic. We may think that our parents will come to us if they really want to talk about it or need help. However, our parents could very well have financial insecurity that they are just afraid to share. They may be worried about inflation eroding their spending power or the escalating health bills that they are racking up due to their deteriorating health.
Have a conversation with them today. Let them share with you their future plans. Be a listening ear, if that’s what they need.
The Central Provident Fund (CPF) Board has created a website called the CPF-BigRChat. It’s a campaign that encourages people to discuss about their retirement with their families and friends. The website also prompts you to ask important questions relating to people in your age group, be it a 21-year old or a 65-year old.
Here is a short video illustrating how ordinary Singaporeans can discuss about their retirement. It depicts the type of conversations that all of us should not be afraid of having with our loved ones.
The most important message to remember is that retirement is an essential part of all our lives. And that makes it something worth thinking about, and something worth talking about.
This article is sponsored by the CPF Board. All views expressed in this article are the independent views of DollarsAndSense.sg
Top Photo By Benjamin Lim