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Taking Care Of Retired Parents Who Have No Savings? – How Much It Might Cost You in Singapore

retirement planning singapore

Mark Cheng

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The discussion on retirement planning in Singapore is by no means at an end, but a new study by NTUC Income has shed some very important light on the other side of the fence – the sentiments of youth who have to prepare to take care of their retired parents. And unlike a lot of other studies which basically draw to the same conclusion that planning for retirement early is important, you are definitely going to want to pay attention to some of the key findings from this.

One of the major findings from the survey showed that only 20% of the youths surveyed indicated that their parents can rely on personal savings to finance their retirement. What was worse was only 15% believed that their parents had planned for retirement and they need not worry about them in their golden years.

On the flip side, 66% of parents that were surveyed were most concerned about having insufficient savings and the inability to afford healthcare and medical expenses. Even then, 90% of those surveyed were still willing to give up their retirement savings for their children’s education and development needs. Certainly an interesting point of consideration for youths now who have or are going to start families, and have a decision to make about retirement planning.

With that in mind, 66% of the youths surveyed factored in the cost of looking after their retired parents and only 8% of them were very confident of supporting them financially. To prepare for the latter, 70% of them foresaw downgrading their lifestyle to care for their parents in the future. But just what would these costs entail, especially if your parents aren’t financially adequate and aren’t drawing an income? We look at some of the key areas in which children might have to support their parents here:

 

Allowance and monthly expenditure

The research also revealed that the parents surveyed had set aside only about 35% ($1,146) of their intended monthly amount required for retirement ($3,314). Having to make up the other 65% of monthly allowance needed can take a significant toll on people who also have younger children of their own to support as well.

63% of the respondents who were parents cited travel and holidays as the top sacrifice they would make in order to meet their retirement needs, which really seems like a huge waste given that you’re supposed to be spending your retirement years enjoying life and doing things you might not have had the time to do whilst working.

 

Healthcare costs

Even with the implementation of schemes like CareShield Life and MediShield Life to take care of the costs associated with long-term care and hospitalisation, healthcare costs are bound to make up the bulk of expenses for children taking care of their parents.

With Singapore’s medical costs projected to rise much faster than most of the region, these schemes might cover costs at a baseline level, but the larger costs such as surgery charges (which incidentally experience the largest inflation rate) can easily run into the tens of thousands.

 

Outstanding debts

This is one of the areas that can have a severe impact on your finances. With your parents no longer earning a steady income, their ability to service unsecured loans such as credit card debt that has an incredibly high interest rate is going to be heavily impacted.

Considering debt consolidation vehicles such as a personal loan to pay off that debt is plausible, but that is something that you will have to take on, given that they won’t be able to get a loan without drawing an income. This will in turn impact your own ability to get important loans such as a housing loan as it affects your Total Debt Servicing Ratio (TDSR).

 

Miscellaneous expenses – Groceries, transportation, entertainment

If your parents are the sort that cook at home a lot, factoring in the cost of groceries will be necessary as well. This could add up anywhere from $400 to $600 a month, depending on how much they cook (and how many people they are cooking for).

That being said, this could also be a good way to save money from going out to eat, but at the same, could probably have a positive impact should you be living together with your parents, or in relative proximity.

Transportation and entertainment expenses also factor into the overall allowance needed to maintain their lifestyle during retirement, and as we mentioned earlier, this is a gap of 65% that needs to be made up based on current estimates. And this is before even factoring into account overall inflation, both in terms of absolute costs and lifestyle inflation.

 

What is the real question here?

The true insight of this study is really the question of opportunity cost – Is it really worthwhile for parents to give up a huge part of their earnings and spend on their children? For parents, the key motivation to prioritise their children’s future over theirs was to empower their children with the necessary academic qualifications and life-skills to level the playing field so that they could lead a successful and comfortable life in today’s competitive world.

And don’t get us wrong, there is absolutely nothing wrong with this perspective, but there is also the other side of not preparing for retirement early enough that this comes back and jeopardises your child in the future.

Mr Marcus Chew, Income’s Chief Marketing Officer, said “Based on the research findings, we have evidence that the inadequate retirement planning will have adverse implications on both parents and children. 80%of the youths surveyed agreed that parents should save for their retirement and spend less on tuition and enrichment fees.

This becomes a more pertinent point to consider when it is shared against the backdrop that 60% of the youths surveyed indicated that they were financially unprepared and would feel helpless if unforeseen circumstances were to happen to their parents,”.

Definitely a pertinent point to consider for people who not only have parents to take care of, but also have families of their own and have a decision to make as to how they allocate their finances. We will touch more on this and what you can really do to start planning for retirement in a separate article, but this study certainly uncovers some crucial food for thought on what “giving to your children” really means.

What are your thoughts on the study findings? Share them with us here!

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Mark Cheng

I rant and rave a lot, but when I'm not busy doing that, I'm managing the content for MoneySmart. I love Singapore, but I also believe in helping it to improve bit by bit, and that's where MoneySmart comes in. Have some thoughts? Drop me an email at [email protected]