Retirement Planning Guide: The Basic Insurance Checklist For Retirees

There are so many issues that trigger us as Singaporeans, that it’s hard to keep track of things. Taxes, ERP, COEs, health… The list seems to go on and on. But let me get real with you on something which we just don’t talk about because it’s too hard. That topic is: Retirement.

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I like to simply call it: Old liao, so how?

Can we afford to get old?

By 2030, the number of Singaporeans aged 65 and above is projected to double to 900,000 people. The vast majority of these people will be past their prime working age. A recent Nielsen research piece commissioned by NTUC Income showed that 66% of parents polled were MOST concerned about having insufficient savings, and there being unable to afford proper healthcare.

Here at Providend, we think there is a solution to this problem if you act now. You can’t wait till the last minute and expect other people (especially the government) to sort it out for you.

How to start investing? Start here.

Step 1: Get an Integrated Shield Plan

Your standard MediShield Life may not be sufficient as it mainly covers public hospitals B2/C class wards. Furthermore, its benefits and pay-outs are capped and limited. Having the Integrated Shield Plan gives you more options for better healthcare treatment.

As we age, we are more likely to enter the hospital as illness and sickness becomes a more common part of our life. Medical expenses as a percentage of income is also increasing. In 2017, it is estimated at 9.6% and growing. By 2030, this percentage is likely to increase.

With these numbers in mind, without a proper Integrated Shield Plan in place, you will need to cover all these expenses just using your MediShield and savings. An expensive proposition for anyone!

So how do you get a good, cost effective, Integrated Shield Plan in place? Get one early, and stick to it. Premium rates for Integrated Shield Plans get exponentially more expensive as you get older. And once you switch, any pre-existing conditions will no longer be covered. If the premiums are truly an obstacle, you can consider downgrading to Restructured (Govt) Hospitalisation coverage. It’s not perfect, but it’s better than not being covered and having to use cash and savings when a major illness occurs.

Behavioural investing? Find out what it means here.

Step 2: Consider Long Term Care

A recent study by the Ministry of Health estimates that 50% of healthy Singaporeans aged 65 and above could become severely disabled during their lifetime. Statistically speaking, that means either you or your spouse could be severely disabled sometime this lifetime.

Currently, the typical monthly costs for a Nursing Home is between $3,000 to $4,000. Home care services cost up to $1,000 per month. These costs will naturally increase over time because of inflation.

The Ministry of Health launched the ElderShield and CareShield plans (starting 2020) to provide elderly people with a monthly benefit in the event of severe disability. But the payout is only $400 to $600 per month, which doesn’t even come close to covering the costs of home care. To make things better, some of those on an ElderShield plan have an option to purchase supplement plans, to bump up the monthly payout to around $1,000 to $3,000 per month. Those lucky enough to qualify should seriously consider this option.

The bottom line is, in the event of a severe disability, the ElderShield and CareShield plans should form part of the solution, but there is more to do to realistically cover the costs.

Step 3: A Critical Illness Plan

At Providend, we have always believed in planning for sufficiency. The main purpose of a Critical Illness Plan is to cover the loss of income in the case of a catastrophe, during your working years so that you can continue to build a nest egg for the future.

During retirement, the Critical Illness Plan is no longer so important as you’ve stopped earning. The bulk of your treatment costs are covered by shield plans, whilst your living expenses should be covered by your retirement nest egg.

Nevertheless, some people still prefer to have their Critical Illness Plans coverage to stretch beyond their normal working years in order to cater for other alternative treatments that shield plans do not cover. This option is an expensive one and should only be considered if you have the means to do it.

In the market, there are generally 2 ways to obtain Critical Illness coverage during old age. These 2 ways differ in premium costing/benefits and you should consult an adviser before making any decision.

• Standalone Critical Illness Term Plan to cover till a nominal age of 75, 85 or 99.

• Whole Life Policy for lifetime Critical Illness coverage.

When investing, don’t just focus on your return on investment. Find out why.

Summary

These three basic steps should be considered by everyone in all walks of life, of all social and economic status.

Inadequate preparation in these 3 steps typically will result in 2 things:

• Disability or illness during old age may cost much more than what you planned for. You will end up drawing down a much higher amount than planned for from your savings and retirement funds just to pay for care and treatment.

• Your family, friends and/or loved ones may have to step in to cover your financial shortfall.

This is an original article written by Dennis Hoe, Insurance Planner at MoneyOwl, Singapore’s 1st Bionic Financial Adviser.

MoneyOwl is a social enterprise and a joint venture between NTUC Enterprise Co-operative Limited and Providend.

Providend is a licensed financial advisory firm and a registered fund management company with the Monetary Authority of Singapore.

Over the last 17 years, we have come to be known as a specialist in retirement planning and the first and probably still the only fee-only independent financial advisory firm in Singapore.

As a family of people driven by passion, we exist to serve our families of clients to fulfil their dreams and achieve their life purpose by providing them with the most honest, independent and competent advice.

For more information, you can reach Providend at communications@providend.com and 6309 2488.

(By Providend)

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