Our parents might believe that their personal savings and CPF will cover their retirement expenses. However, this is not a one-size-fits-all strategy, and based on their health and other circumstances, their retirement demands may change.
The average life expectancy in Singapore is 84 years, ranking among the highest in the world, according to the World Bank.
Singapore has a 63-year-old minimum retirement age. This indicates that most people will live in retirement for 20 years on average.
How much money is enough, even when your parents may have invested decades establishing their retirement funds? The money may not be sufficient to support them for twenty years, with living expenses and inflation having reached their peak levels in recent years.
Make Timely Contributions to CPF Accounts
As their primary source of retirement income, your parents' CPF savings must be maximised in order to get the most out of their retirement payouts. Making voluntary top-ups to their CPF accounts is one approach to do this.
On the first S$60,000 of their total savings in their CPF accounts, your parents can earn an additional 1% interest or up to 5% per year if they are under the age of 55. But keep in mind that the CPF OA ceiling is S$20,000.
For the first S$60,000 of their combined CPF funds, they can receive up to 6% interest each year if they are 55 years of age or older (capped at S$20,000 for CPF OA). That is 2% more.
Understand their Financial Situation and Needs
Additionally, you should openly discuss your parents' financial situation with them. You should be aware of your parents' savings, expenses, debts, assets, and insurance coverage, even though it can be challenging for them to be open about their financial status.
The outcome of the discussion offers you a clearer idea of whether they are prepared for retirement or if they require your assistance in lowering their liabilities.
Ensure Parents Have Right Insurance Coverage
Even if your parents create a budget that accounts for all of their costs, including housing, food, and transportation, unanticipated events like high medical costs, mishaps, and unexpected family changes might occur, endangering their retirement savings.
Additionally, as your parents age, health problems and diseases affect them more frequently. Because of this, it's crucial that your parents have enough insurance protection.