Ageing population series: Are YOU your parents’ retirement plan?

Are your parents able to retire without your help?

Retirement can be an uncomfortable topic for children to discuss with their parents as it is challenging to accept the inevitable effects of ageing, and the impact it has on the family. Peace of mind in old age revolves around the three key elemental needs of: basic income, housing and healthcare. As a compulsory national savings scheme, the CPF is designed to assist Singaporeans to support themselves through their retirement. Is that sufficient for Singaporeans to retire comfortably?

In a retirement survey done in 2017, we found that 1 in 5 Singaporeans intend to rely on their children for financial support in retirement. This discovery might be an indication of a looming retirement crisis that is starting to manifest in Singapore. We see that people are planning to receive financial support from individuals that are currently 18 to 35, who are basically just entering the workforce now. This trend, possibly shows that there are elements of a retirement crisis in the brewing, and will require very good planning of those 18 to 35-year-old workers to manage their own finances as well as support their seniors.

In Asian culture, it is not uncommon for children to support their parents as most Asian children have been brought up in extended or multi-generational families. There is a strong trend where families have their children live at home well past their 30s if they are unmarried. Parents’ assistance in meeting the children’s education and living needs usually serves as a ‘social contract’ for the children to reciprocate as their parents become unable to work later in life.

In the same survey, it is also found that 1 in 3 Singaporeans intend to work through retirement. Many baby boomers are facing the reality of their retirement planning underdelivering on their early assumptions. Running the numbers has shown the bitter reality of what might be a disappointingly underfunded retirement or a postponed one.

Policies/Assets

The first thing to check with your parents is about their insurance, savings or investment policies. Pull them out to know the various kinds of policies and the extent of their coverage (for insurance policies).

There is a possibility that your parents might have assets that they are unaware of. This includes stocks, saving deposits, fixed deposits etc. that they may have bought years ago. Find out the types of assets they own and evaluate how these may come in handy for their retirement.

Estate planning

Estate planning refers to the process of arranging for the management and disposal of someone’s assets after their death. Discussion about death is not something anyone enjoys however, not planning the distribution of assets after one’s death may actually cause more trouble in the future for your loved ones. In the absence of any valid will, assets left behind will automatically be distributed in accordance to the Intestate Succession Act.

Expected amount for retirement

Have your parents worked out how much they need for retirement? If not, it might be time to work it out with them. It varies based on the type of 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 – keeping in mind medical expenses, travel or any other big-ticket items.

Retirement funds

Funding for a retirement is not something that can be built in a short span of time. It is a conscious process that takes about 25 to 30 years – it is essentially the building of a nest. Do your parents have money saved up? How much do they have in CPF? Help them figure out what needs to be done so that they can retire comfortably.

To be able to help your parents retire, you need to know where they stand financially – only then can you best help them fill in the gaps and prepare for that major transition. Here are some measures that you can take to help your parents after having the above stated conversations with them.

One of the toughest transitions into adulthood is when you realise that you need to help your parents instead of the other way around. It may feel easier to assume that your parents have everything figured out for their financial future. However, that may not always be the case. Helping your parents prepare for retirement is one of the best gifts you can give the people who raised you.

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