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The cost of taking care of parents

Besides giving allowances, protect them from scams, bad investments

Tan Ooi Boon on 25 Oct 2020

The Straits Times


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How much is the cost of filial piety in Singapore?


Of course, you would say that the love and care that you shower on your parents are probably priceless.


If you want to put a value on the monthly allowances Singaporeans give to their parents, the going rate now ranges from $200 to $1,000, depending on how much the children earn.


But this is not all the money that we will spend on supporting our parents. A recent HSBC survey showed that 84 per cent of Singaporeans will contribute and pay part, if not most, of their parents' recurring costs such as living expenses and medical bills.


While this figure exceeds the global average of 69 per cent, it trails behind families with a strong Chinese culture of filial piety, such as those in Hong Kong (94 per cent) and China itself (88 per cent).


The regional survey polled workers aged 40 and above with parents likely to be in their 60s to 80s, if not older. It looked at contributions from two groups - "mass" workers who earn US$30,000 (S$40,700) to US$99,000, and "affluent" people earning more than US$100,000.


The money Singaporeans spend on their parents is determined by how much they earn - almost half of those in the affluent group said they would pay for most expenses, while only 24 per cent of the mass group would consider paying a large part of the costs.


But the survey revealed some disconcerting trends on the adequacy of retirement planning as well as the financial prudence of Singaporeans, including those in higher-income families.


Many people underestimate their needs in old age


The parents of about half of all Singapore workers polled say that they have some degree of difficulty in coping with retirement due to insufficient savings. These include parents of families with high-income earners.


There is a reason why many people find themselves short of money in old age - they do not realise that even as they work, they have to ensure that they have saved enough to last them for another 20 to 30 years of their lives when they don't work.


For instance, if you start working after graduation at about 25 and you work until 65, your 40 years of income must be able to pay for your expenses for 60 years, and that is just up to the age of 85. If you live longer, you will need even more.


Many people do not realise that their retirement years can be as long as their productive years, especially if they stop working earlier.


This fact is supported by a separate HSBC survey on retirement, which found that only 33 per cent of working Singaporeans actively plan for retirement and old age.


The rest mainly focus on meeting near-term goals such as buying homes and cars or even splurging on overseas holidays.


Despite not having any plans for old age, 54 per cent of these same folks actually have the mistaken belief that they will automatically have "a comfortable retirement" in later years.


Indeed, the bank notes that many young workers have a "Peter Pan" mentality - 66 per cent of them don't see themselves as "old", meaning they have never thought of preparing for how they will retire in old age.


A third of them actually say that "they feel younger than their actual age", which further boosts their confidence, thinking they can work for many more years.


Hence, 25 per cent of these workers say it is better to "enjoy life now" than to save for retirement. If such mindsets persist, the current generation of workers are likely to be worse off than their parents.


To be fair to seniors, many fall into poverty in old age because financial planning and education were not as pervasive three or four decades ago as it is now.


Moreover, many retirement schemes in the old days were not as sophisticated and effective as the ones available today.


So if the current young generation of workers also choose to ignore the importance of prudence and planning for their future, they have only themselves to blame if they have to continue working through old age, even as their enlightened peers enjoy their golden years in comfort.


Many seniors are still vulnerable to being misled into parting with their money


The HSBC poll reveals that 42 per cent of the affluent workers and 56 per cent of the mass workers say they are actually not confident that their parents will be able to say "no" to attempts to make them part with their money.


Despite all the campaigns to warn people of scams, more people actually fell for such ruses in the first eight months of this year.


While it is not known how many of the victims are seniors, more than 10,000 people lost $157 million to the crooks.


This figure probably does not include cases of seniors who were misled by investment managers into putting their money into high-risk products that eventually led to losses when all they wanted was to put funds into a fixed deposit.


Without fail, for the past three decades, cases involving retirees suing over investment losses or complaints that they have been misled into buying bad investment products find their way into this newspaper every year.


The bad news is that for every case that comes to light, there are probably a lot more that go unnoticed because the "victims" have bought into these investment products willingly with hopes of high returns, despite having absolutely no clue how they work.


So for those folks who are not confident that their parents will be savvy with their money, it is time to take these two drastic steps to prevent them from losing their cash.


• Don't talk to strangers, period. This evergreen good advice seems to have come full circle. While parents usually advise their children not to talk to strangers, it's time for grown-up children to tell their elderly parents not to talk to strangers as well, especially those who call or e-mail them at home.


Just like how your parents used to scare you with stories of the bogeyman who would kidnap you as a child, you should tell them now that the same bogeyman now thrives on cheating retirees of their money. So every stranger who calls is a potential bogeyman and their standard reply to all of them should be: "My son/daughter told me not to talk to strangers. So can you leave your name and number so that he/she can call you back?"


• Don't let them go to banks or finance companies alone. If you value your parents' savings, you should always accompany them whenever it's time to perform their annual ritual of renewing their fixed deposits. In this way, you reduce the chance of them inadvertently signing up for a product that has a risk of reducing their savings.


Even if you are a savvy investor and think your parents might be better off investing their money than putting it in another year of fixed deposits with dismally low interest, know that unlike you, your parents do not have the luxury of time to recover from a fund hit by a downturn. And if they are short of money as a result, guess who will be paying for their expenses - YOU.


Use CPF schemes to help your parents


Not every dollar is equal when it comes to showing your parents that you love them.


You can give them cash every month or you can use some of the money to let them enjoy the benefits of Central Provident Fund (CPF) schemes for seniors.


If your mother has been the main caregiver of the family for many years, chances are, she will have little or no savings in her CPF account, so she will miss out on the benefits of receiving a regular monthly payout.


But it is not too late to enrol your elderly parents in the CPF Life scheme, so long as they are below 80. This will enable them to receive a monthly payout for life, with the amount depending on how much you contribute.


For instance, if your mother is 72 now, a $30,000 contribution to her retirement account will enable her to receive a monthly payment of $200 for life, while a contribution of $60,000 will give her $400.


You might ask: Would it not make more sense to give your mother the whole $60,000 so that she can decide how to spend it?


Of course, you can do that. But the difference is a lump sum cash amount is finite and even if she spends only $400 a month, the money will be gone by the time she hits 84. But if she is on CPF Life, she will continue to receive this amount for as long as she lives.


Imagine that she maintains a healthy lifestyle and continues to take part in silver generation events at 90 - by then, she would have collected $86,400 from CPF Life. That is about 44 per cent more than the original sum given to her. No other investment can provide this kind of return that is risk-free and guaranteed by the Government.


For many people, $60,000 is not something readily available in their bank accounts, so making a big lump sum contribution may not be a viable option.


This is where the annual top-ups of the CPF retirement fund comes in: You can hold a family conference and get all your siblings to chip in to give your parents a good retirement.


If possible, every child can aim to top up at least $7,000 for their parents' CPF.


Why $7,000? As an incentive, the Government will allow you to claim this sum for tax relief if you do a top-up for your kin, such as a spouse or parents.


So if you have two other siblings, in just three years, all of you would have given your mother a good retirement gift and she will continue to enjoy this for as long as she lives.


Get careshield life for your parents


This is another good scheme you can take up to help your parents.


Come next year, those aged 41 and older can choose to sign up for this scheme if they are not severely disabled and able to perform at least three of the basic essential tasks of life.


These tasks are the ability to take a bath or shower, put on and take off clothes, eat, use the toilet, walk or move around, and transfer to a chair, bed or wheelchair.


This new scheme, which replaces ElderShield, also offers lifelong payouts once a claim has been approved.


If your parents are already enrolled in ElderShield, you can help them convert it to CareShield Life once the Government releases more details on how to do so late next year.


If they are not on any scheme, you should consider signing up for them because getting frail and needing a caregiver is something that is going to happen to most Singaporeans as they live longer.


Just like CPF Life, which aims to provide seniors with money every month to spend during their retirement, CareShield Life aims to provide those who require more help an additional $600 or more every month so that their families can help pay for the services of a caregiver, if needed.


As generous subsidies are likely to be given to both Pioneer and Merdeka Generation seniors, the premium for even those who sign up for the first time is estimated to be less than $1,500 annually.


And you need to pay this for only 10 years. But if a successful claim is made during this period, there is no need to pay any more.


Ensuring your parents are well provided for by these government schemes benefits you too because the regular payouts will help ease your family's cash flow, which can then be used to pay for other expenses.


To be fair, there are many seniors who are well prepared for their own retirement and do not need their children to support them.


These are seniors who not only have sufficient savings in the form of fixed deposits, but also know how to maximise their returns in their CPF. A number of seniors have written in to Invest to ask how they can put more money back into CPF to enjoy the high interest rate, even though they are in their late 60s and 70s.


A third have also opted for CPF Life's Basic payout plan, so they choose to receive less money when they are alive so that more can be given to their children upon death. Frankly, such devoted parents need not do this - for all their great sacrifices as the Pioneer Generation, they deserve to have a more comfortable retirement.


After all, the best gift they can give their children is not money but the wisdom to lead a good and honest life.


Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.



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