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Retirement adequacy for a senior needing long term care.

Sunday, November 23, 2014

This was a recent email exchange with a reader:

Hi AK
My sis is 60 years old, single and stays alone. Recently, she fell very sick and was admitted to hospital for a few weeks. Now she is at home on medical leave.  We got a maid to look after her.  Don't think she will be fit enough to go back and work.

She doesn't earn much as an admin staff, but still managed to save quite a bit through many years of working and saving -  about $150,000 in Cash and $100,000 in CPF.  And she has also paid up fully for her HDB flat, so no debts except for some insurance premiums which she is still paying, her medical expenses and expenses to employ the maid @$720 per mth.  


She knows that her saving will not last her very long. She has asked me to invest her money so that she could collect some dividends and help pay for her daily expenses since she will have no income in future.  I am not a savvy investor.  Most of the times I bought stock based on reading your blog and some other financial blogs.  I have no qualms to invest using my own money but how to invest for her?

I still do not dare to invest for her as I can't afford to lose her hard earned money.

What were you do if you are in my shoes?  How can I help my sis? Safest is to put in FD but the interest rate is so low.

My reply:
If I were in your shoes, I would be very cautious too. Losing some of my money is one thing but losing my sister's money would be something else. I actually gave my sister a capital guaranteed privilege at one time. If the investments should lose money, I would bear the losses. Bad idea, I know.

Anyway, back to your case. What would I do?

If your sister needs $720 a month or $8,640 a year. Obviously, relying on her savings of $150,000, it would take only 17.36 years to be depleted. This is not considering any interest income earned during that time, of course. Add other expenses, maybe $800 a month, and her savings will take half the time to deplete. 9 years, perhaps? So, there seems like a need to invest for income.

However, we must not forget that she is eligible for CPF Life payouts in another 5 years from now at age 65. If she has $100,000 in her CPF retirement account (RA), she could be drawing $800 or so (this is a rough estimate and you should call CPF to check the exact amount) every month for the rest of her life and this would be enough to pay for her medical expenses and the maid.

In my opinion, there isn't any need to take on risk by investing your sister's money in the stock market now. 


Of course, I am not asking you not to invest on her behalf in the stock market. You could keep an eye on the stock market and buy some good dividend paying stocks for her when Mr. Market goes into a depression. In the meantime, your sister has enough financial resources to take care of her needs.
---------------------------------
To have peace of mind, always ask if it is money we can afford to lose. If it is not money we can afford to lose, don't invest it.

Related posts:
1. What happens at 55 and CPF Life?
2. The PM on retirement adequacy.
3. Free e-book: Retiring before 60 is not a dream.

15 comments:

pf said...

Hope her hdb flat is near mrt and have a room to rent out at 700 per mth. That would subsidize some of her expenses. Coupled with cpf life, hope that is enough.

I think when i am old and need long term care, i wld check myself into a old folks home or smthg and rent out my hdb flat to fund my stay there.

Investment is too risky.

AK71 said...

Hi pf,

I have the same thought about checking myself into a retirement village or something similar in my golden years. ;p

Renting out a spare room, if available, is probably a viable option but not everyone likes the idea of having a tenant sharing their home with them. Still, it is worth considering. :)

Kenji Fundmgt said...

Renting is a problem if the Tenant take advantage of her situation.

The best i can think of is to lower expenses as much as possible.

Before we go to the grants, we can explore what are in state for elderly from the below site:

https://www.moh.gov.sg/content/moh_web/home/pressRoom/pressRoomItemRelease/2012/more_affordable_intermediateandlong-termcareservicestohelpsingap.html

The next link is the Foreign Domestic Worker Grant, hope it will help.
https://www.silverpages.sg/money_matter_article.aspx?FID=376&CID=1262&Title=What%20is%20FDW%20Grant?#.VHGscdKUefU

Lower the levy below:

https://www.silverpages.sg/money_matter_article.aspx?FID=380&CID=1263&Title=What%20is%20FDW%20Levy%20Concession%20for%20Persons%20with%20Disabilities?#.VHGsFNKUefU


Selling the flat is not the best idea but an alternative to look at under Silver Housing Bonus.

http://www.hdb.gov.sg/fi10/fi10325p.nsf/w/MaxFinancesOverviewDowngrading?OpenDocument

Really hope the above do help.

AK71 said...

Hi Kenji,

These are great resources. Thank you so much for sharing. :)

Kenji Fundmgt said...

You are most welcome. I just hope all the mentioned points can really assist her in the long term.

pf said...

Aiyah. 山 穷 水 尽 疑 无 路 , 柳 暗 花 明 又 一 村。

If she can find a student to rent out a room to, maybe its good. Coz someone wld be at home and alert the brother if anything goes wrong.

Its not always negative experience to rent out room. And if your livelihood depends on it, then bo bian lo...make the best out of the situation.

If there is space at the brother's place, can move in w him and rent out her entire flat. This is actually the best solution. Least cash flow outlay and have income for her medical expenses.

E H said...

养儿防老。

Yan said...

Hi AK,
Have been following your blog for a while now, without making any comment.

I would like to add that apart from her own savings and her CPF savings, she is still able to claim a withdrawal from her DPS insurance bought by her CPF. As she is still below 60, please start the application soon, as the policy ends when you reach 61. She will need a Dr's letter to certify that she is not able to work anymore. Contact her DPS Insurance Provider (which will be either NTUC or Great Eastern) and they will instruct you how to make a claim. Do hurry. It will take time, and she is already almost 60.

kwee kok yeo said...

Hi AK

Just want to share my 2 cents worth and own situation, hope it can add some value.. my sis also at 60 yrs old and she stopped working since 40 yrs old to look after the family when my parents passed away.

Her savings not much then and CPF very little. Health is important and lucky she is still active and healthy, she has started work as temp cleaner for 3 hours earning $10 per hour, this help to past her time and earn some income as well. As for her savings, I did use some of it to buy into preference shares and bonds like Hyflux 6%, Capitalmall 3.8%, DBS 4.7%, Genting 5.125% and SIA 2.15%. Though all these are not earning much but I do feel that they are relatively not so risky and safer. After all she do notice that it is building up her hard earned savings than putting all into savings or fixed deposit accounts. Part of her savings i put in CIMB earning 0.8% pa for any emergency use.
Her HDB flat housing loan repayment is finishing soon but she not keen to rent out as she want privacy and currently staying there with me and my brothers. As for when she reach 65 years, her CPF is not much, so that is when I continue to support her till old age.

Just to share something in common and hopefully contribute something.

Thanks n Regards
ykk

owq said...

What about some safer investments? Like bonds? Structured deposits? There's also no need to invest all the cash right?

SMK said...

Elderly homes in singapore cost a lot. $1800 per month for a decent one. $900 per month for the care taker to beat you sporadically (google nightingale elderly care singapore)

The best care is still your own children. 养儿防老 is not primarily financial sense but really care and concern. No children, nephews and nieces. Better start loving and teaching them young.

For her, the best option is her to stay with the reader. And share costs, rent out the spare house.

If it were me, I would still put into blue chip stocks and take the pain killers while waiting for capital growth (call out to uncle 8888)

Kenji above had some good pointers.

SMK said...

Kok yeo, kudos

dorshii korshii said...

Pl seriously consider carefully each item listed here to see how your sister can be helped. Regarding co-residing with her brother, pl be reminded that the revised Means Testing Method is based on household income. So this will have implications should she need some social assistance like MediFund. Hope this helps.

https://www.silverpages.sg/money_matter_article.aspx?Fid=338#.VHKvd94uIeo
https://www.silverpages.sg/eldercare_services.aspx?Fid=147&Title=Eldercare%20services#.VHKwON4uIeo

qook said...

How about reverse mortgage her hdb flat? That should free up some money too

AK71 said...

Reader:
I am helping my aged bed ridden mom manage her finances and she currently has savings of about 200k without any other income source. Do you have any suggestions on where to invest and allocate this fund? 6% returns is possible in the stock market (by concentrating on reits) but I think that it is risky considering that it is her life savings.

AK:
Always ask if it is money you can afford to lose. If it is not money you can afford to lose, don't invest it.

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