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A financial strategy for the elderly with spare cash.

Sunday, September 27, 2015

I am sure many of us are good children and worry for our parents.

Dear AK,

I have been reading your blog for a while and I do agree with a reader that there are many pieces of gold to pick up regardless how we traverse your site.

I would like to seek your thoughts on doing financial planning for elderly. To be specific, my mother (70 years old) has recently struck a windfall. As she is not good with her money and I believe that within one or two years, that money would have been vaporized if she were to donate some to temple, give some to children, grandchildren , overly indulge herself and so on.

She has stopped working few months ago and her children have been giving her monthly allowances (regardless if she is working or not). Her CPF does not give her monthly payout as she does not qualify for the minimum sum (the amount is $60,000 during her time).

I would like to help her draft out something such that she can still receive monthly 'salary' from her windfall. By having monthly salary, it would gives her the feeling of being independent and have control on what she wants to spend on, instead of relying on her children. Having said that, her children will still continue to give her the monthly allowance.

This amount of money, besides being able to give her monthly payout, would at the same time be earning interest and to 'grow' more money as well. I am not sure if she should do a voluntary top up to her CPF account such that she can receive monthly payout, or she should keep it in fixed deposits of varying duration.

Would appreciate if you could help to throw some light.

Thank you

Best regards

Hi LT,

Your mom is very lucky to have good children. :)

OK, know that I am not a qualified financial adviser or something. I can only talk to myself:

"For the elderly, they should be more concerned about not losing money instead of growing money. They should not be taking too much risk.

"If they are not investment savvy, they could consider contributing to their CPF account. The money will be split into the OA, SA and MA. Since they are 55 years or older, they can withdraw the money when they need (except for money in the MA). If they don't need the money, leaving it in the CPF means getting 2.5% to 4% in interest income.

"For the more elderly, those who are 65 and older, I think this is a good enough option and is something I have asked my parents to do.

"For the younger seniors, those who have just turned 55, they could consider Top Ups to their CPF-RA if they believe in an annuity that will pay them a monthly income for life from age 65."

I hope I have not confused myself. -.-"

Best wishes,

Also read this:
Improving retirement adequacy for my dad.

Related post:
Make my money last longer? A senior's example.


caelitus said...

She can qualify to open a Retirement Account. Download the form online and submit it to CPF Board. I am not sure how large is the windfall but no harm putting in the majority in RA. You earn good interest on it and she can draw on it monthly if she wishes.

How about a small percentage donation to an orphanage or Singapore Children Society at ? Children are our future. A good start gives them the best shot in life. Donation to SCS is tax exempt. There are many orphanages who do not have Institute of Public Character (IPC) Status, they may need help.

AK71 said...

Hi caelitus,

For the elderly without an earned income, it doesn't matter if there is any income tax relief for making donations. They would be doing it because they want to support causes they believe in. Of course, they must be financially quite comfortable to do so. I know that is what I would do. :)

caelitus said...

I assumed LT will be executing both the cash top ups to his/her mom's RA and any potential donations on behalf of the mom =)

Happy mid-autumn to all from over here!

AK71 said...

Hi mr AK, for your kind sharing. If you are 65 years old now, has $200k excess fund. How would you use this fund for growing your retirement nest? (Excluding top up CPF)
Thanx and have a gd long weekend ahead.

Everyone's circumstances are different.
What works for me might not work for others.
To be safe, at 65, beyond contributing to our CPF account, I won't suggest anything else.
Being too adventurous in our golden years might not be a good idea.

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