For your parents’ golden years to be fruitful, they should ideally already have a sound retirement plan in place by the time you speak to them.
At the base level, CPF LIFE will provide a lifelong monthly payout for your parents’ daily living expenses. As this sum only covers basic expenses, they may still require additional funds to supplement their retirement income.
You can ask them about their current CPF Special Account or Retirement Account balances and calculate how much they will likely receive during retirement. If they do not have immediate cash flow requirements, but may have a shortfall during their retirement, contributing to their CPF account today is a good option to boost their future retirement income.
Make their savings work harder to earn a return through investing in stocks, bonds and funds or by making more CPF contributions. When reviewing a retirement plan, it is important they do not take excessive risks in the market as they near their retirement age and may not have enough time to ride out a downturn.
Your parents can also choose to beef up their retirement security with retirement plans, such as AIA Retirement Saver (III) – choosing when to start receiving retirement income, how long they wish to receive their preferred retirement income and how long they want to pay premiums for. AIA Retirement Saver (III) also provides a capital guarantee on every dollar your parents contribute at their selected retirement age, that will go towards a guaranteed retirement income over their choice of 15 or 20 years. Your parents can also protect this retirement nest egg by purchasing a Critical Protector Waiver of Premium or Early Critical Protector Waiver of Premium rider to take care of all future premiums if they are diagnosed with any of the 42 major stage or 103 multi-stage critical illnesses respectively.
When the time comes, they can also choose to rightsize their existing property, rent out spare rooms or live with one of their children while renting out their property to free up more cash to spend in their retirement. They should not forget to pare down their debt before they retire, as having heavy debt obligations can create unnecessary stress.
By speaking to them early, you will be able to buy your parents crucial runway to fix an inadequate retirement plan or to maximise areas that can be improved on. Even if they are set, charting this out can also be useful exercise to visualise the necessary steps to take and prepare themselves as they approach retirement.