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Layers of financial protection that matter.

Sunday, September 24, 2023

I produced a couple of videos on the CPF MA recently.

I was wondering if I should do it because people are less interested in the CPF these days.

Also, many people think CPF MA is money trapped while CPF SA is money they would get to use in retirement.

I went ahead and did it anyway because I wanted to remind myself of the importance of the CPF MA.

As expected, only a small number of viewers were interested in the videos.

However, they did get some interesting comments.

Someone asked me why didn't I talk about Careshield or Eldershield in the videos.

Well, I really don't care much for Careshield and I only got Eldershield because a friend convinced me that I would be doing my part to bring down the cost of the group insurance by taking part.

AK likes helping if it is not too costly.

I don't need Eldershield and I have blogged about this before.


Regular readers might remember that I blogged about how passive income is the best insurance in life.

Meaningful passive income.

After so many years, I believe that my passive income stream has become a river.

I should have no trouble with meeting day to day expenses even if I should become physically challenged.

However, I do worry about big financial bombs.

A constant stream of passive income is good at dealing with day to day expenses.

It isn't going to be able to cope with atomic bomb events.

This is why I keep an emergency fund.

A large emergency fund.

This is why I supplement Medishield Life with Incomeshield.

I shield myself from huge medical bills which could one shot my bank account.

When working on the blueprint for retirement adequacy, I was very much aware of my limitations.

Some things we need and some things we don't.

Must be judicious.

I want to be sure to have layers of financial protection which matter, and not anything superfluous or unnecessary through being more than enough.

If AK can do it, so can you!


mysecretinvestment said...

Good morning AK,

Healthcare cost can be broadly divided into two types. One is the "atomic bomb" type like a sudden emergency medical procedure and / or hospitalisation that most insurance would be able to cover. Then there is the "slow burn" type that can last many years and can be costly as well.

S'poreans' lifespan is one of the longest in the world at around 83 / 84 but the healthy lifespan is up to 73 / 74 so far. Meaning we have about 10 years in unhealthy life span or "sick span". The monthly expenses during this "sick span" period can be more than what a person would typical spend during the healthy life span especially if one was frugal.

I see many people plan and project their retirement expenses well into the future based on their current healthy self without considering the period in "sick span". In the "sick span" period, one could need to employ a full time caregiver or be staying in nursing home or both (ie stay in a nursing with a dedicated caregiver). As you can imagine, the costs to do either is not low.

I planned our retirement this way to fit the three phases of ageing:

Phase 1 (60 - 73) : Go - go phase. Still in healthy span. Front load the expenses for travelling and doing things that will enrich our lives. Build memories and relationship. Basically the last chance to enjoy life, pamper ourselves and see the world.

Phase 2 (73 - 80) : Go - slow phase. Likely no car, short trips to nearby places, eat much less

Phase 3 (80 and beyond) : No - go phase. Likely to be in "sick span". The money once budgeted for travelling during the go - go phase will now be shifted to cover the long term care expenses.

In this respect, I dont really see expenses going down as we aged. The expenses just get shifted from area to another.

Further more, as we aged and eat less, we should and would want to eat better - better food and in better ambience. So food expense would not go down but may increase. Likewise during the go - go and go - slow phases, you may want to travel in better comfort, so again the travelling expenses may not dip.

I have a real life data point. My mother was healthy until 91 and then she had fall and now stays in a nursing home, requiring constant nursing care. The nursing home cost is around $5K pm not including the cost of regular check ups at hospitals. And the waiting list for nursing home is long.

In my retirement planning, our retirement expense estimate came up to $6.6M up until age 100. We hope it will eventually be less, but with current rate of inflation, we never know! In my view, it is always to plan for the worst and hope for the best.

AK71 said...


Thanks for another thought provoking high quality comment. :D

I think I have sufficient financial resources to take care of expenses in my old age.

My passport expired a few years ago and I am not getting a new one since I don't like travelling.

If I should struggle financially, I think most Singaporeans would be in trouble, all else being equal.

As for having a long life, I don't want to live to be 100 but who knows?

Still, I suspect that I would say bye-bye to this world before I turn 80, knowing my health.

I worry more about my parents.

This is why I am setting aside more of my passive income for parental support and unlikely to grow my passive income in future years.

Not growing portfolio.

Henry said...

Hi sifu AK
I canceled my ElderShield some years ago after some calculations that the compensation is not worth it. Not sure if I had made.a mistake?

AK71 said...

Hi Henry,

I just think of it as doing charity by keeping my Eldershield policy.

If we don't need it, it is not worth the money.

However, if we think of it as charity, then, it is OK. ;)

pukermon said...

Hello AK

As you will be reaching the age of 55 years old soon, can you talk to yourself about the CPF RA options, FRS, BRS, ERS and standard plan.


AK71 said...

Hi pukermon,

I blogged about these before:

1. Unfair FRS and ERS CPF LIFE payouts compared to BRS.

2. Which CPF LIFE plan for me: Basic, Standard or Escalating.

CK said...

Hi Henry,

I chanced upon this blog entry tonight. I am not sure how old are you and you said you cancelled your Eldershield some years ago. If I am not wrong, those without eldershield, careshield is mandatory. I have a friend who never enrolled in Eldershield, she is automatically enrolled in Careshield, whereas the rest of us who are still sitting on the fence on whether to convert to Careshield or not.

AK noted that he has enough passive income for such purpose. That is the reason why some of us are for sticking with Eldershield. (main diff btw EShield vs CareShield : max 6 years payout vs as long as one lives. Also, the payout remains the same for all 6 years vs inflation adjusted payout - I think)

You might want to check if you are auto-enrolled.

(note:we turn 55 this year)

Henry said...

I terminated ElderShield in 2015/16.
CareShield is not compulsory for some group of people.. It's still sitting there waiting for me to enrol, with a $1,500 carrot dangling . Lol..
There's a 60% chance men won't use it and 40% chance for women. You can ask Mr Google for help under Long Term.Care.
I'm older than you.

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