Parents not financially savvy? Here’s how you can help them prepare for retirement.

Knowledge of financial planning may be commonplace nowadays, but it wasn’t always the case during our parents’ generation. I spoke to an army buddy recently who shared with me how his parents, who are in their 50s, only had a small amount of savings that sits in a regular bank account. With plans to get married soon, he was naturally concerned about his ability to support both his parents and his own family in the future.

If you find yourself in a similar situation, don’t worry. There are a few things you can do right now to help your parents plan for their impending retirement—including some really useful government schemes designed to help us build income streams in our golden years:

1. Time for The Talk

Asian parents are notoriously tight-lipped about their finances. Heck, starting a conversation with their kids about money can be even more awkward than talking about the birds and the bees! Taking into consideration that they may not feel great about their financial situation, it’s best to approach this subject gently and respectfully.

While your parents may not want to be upfront about how much savings they have, there are some specifics you can ask to get a sense of their situation:

• Outstanding mortgage balance/personal loan amount
• CPF balance
• Monthly expenses

Having this information will give you a better idea of their overall finances, and help you to see where expenses can be cut down or additional income can be generated. This will help you put in place a plan for their retirement years.

2. Ensure they have medical coverage

It’s inevitable that our parents will become more susceptible to ill-health as they age. Thus, it is important that they have sufficient insurance coverage to help pay for any medical expenses that might occur.

If your parents do not have any personal insurance plans, then you should make sure that they are at least on MediShield Life, which is a basic health insurance plan administered by the Central Provident Fund (CPF) Board. Premiums can be deducted via CPF from their MediSave account, and will help to greatly reduce cash outlay when staying in Class B2/C hospital wards.

You can also consider upgrading them to an Integrated Shield Plan, which provides additional coverage for Class A/B1-type wards in public hospitals or private hospitals. Premiums will naturally be higher, and you may have to pay a portion of it in cash. You will also be able to enhance coverage for your parents with additional riders as required.

3. Top up their CPF

As our parents approach retirement, their earning power will naturally decrease – which is why it’s important to ensure that they have regular streams of passive income. One way to do that is through CPF Life, which will provide them with a monthly payout for life.

You can help your parents to build up their retirement funds by topping up their CPF accounts. If they are yet to meet the current Basic Retirement Sum, the Matched Retirement Savings Scheme will match every dollar of cash top-ups made to the Retirement Account up to $600 a year, which can amount to $3,000 over five years.

Making cash top-ups to your parents’ Special Account or Retirement Account will also entitle you to additional tax relief of up to $7,000 per parent, which adds up to a maximum of up to $14,000 of income tax relief per year.

4. Monetise their home

If your parents have a fully paid up HDB flat, it can be a dependable way to generate additional income. Renting out a room or two can help to supplement their living expenses in retirement.

You can also help them look into schemes from HDB that unlock the monetary value of their home. The Lease Buyback Scheme lets them sell the remaining years of their HDB lease back to HDB, and receive monthly payouts while continuing to stay in their home for life. If your parents are willing to consider downsizing their flat, they can receive up to a $30,000 Silver Housing Bonus when they sell their existing home and buy a 3-room or smaller flat.

5. Create alternative income streams

Having more than one way to make money can be a great help when building up retirement funds. Sit down with your parents and brainstorm possible ways to generate additional income – every little bit helps! Some ideas include:

• Helping them sell unused items online
• Babysitting or pet sitting for friends/neighbours
• Turning their hobbies (like baking/photography) into a side hustle

Don’t neglect your own retirement

Finally, just because you’re helping your parents with their retirement, it doesn’t mean you should derail your own retirement plans. Make sure that you’re keeping to your budget and continuing to build up your own nest egg. After all, if your own finances are not in good shape, how can you help your parents with theirs?