Eldershield: Is it really necessary?

What is the correct answer to the question?

This was a recent email exchange I had with a reader:

Reader's email:

Hi AK,  
Did you get any private insurance to complement your eldershield?

Thanks.







My reply:

Nope, I didn't. 

I don't need Eldershield but I gave in to a friend's persuasion to do collective risk sharing. :)

Reader's reply:

Thank you.

I'm a short time away from getting on eldershield. And i'm still trying to decide if i should stay in or hop outa the pool. 

My reply:

Well, insurance should be bought on a need basis.

If we are reasonably sure that we will have enough resources to see us through years of reduced physical capacity, we don't need Eldershield. 

This is true for me but I decided to help lower the cost of risk pooling for others who might need Eldershield. ;)





First, we should understand what is Eldershield:

"ElderShield is an affordable severe disability insurance scheme which provides basic financial protection to those who need long-term care, especially during old age. 

"It provides a monthly cash payout to help pay the out-of-pocket expenses for the care of a severely-disabled person."
Source: Ministry of Health

So, it is a disability insurance scheme and I know friends who bought such insurance to give themselves an income in case of disability, permanent or temporary. 





However, not everyone needs disability insurance.

Why? 

We don't need disability insurance because we are Superman (and just have to cross our fingers that we do not come into contact with Kryptonite)?

Source: NTUC Income.

Logically, if we own income generating assets which are able to provide meaningful and regular income streams, we do not need disability insurance. 

Hence, we do not need Eldershield.





This was what I meant by having "enough resources" in my email reply to the reader.

So, is Eldershield necessary? 

It might not be necessary for some of us but we might want to have it.





Related posts:
1. Tea with AK: Eldershield. 
(Read the comments too.)
2. Get free medical insurance in Singapore.
3. What is the best insurance to have in life?

CPF Annual Limit and voluntary contributions.

2016 Update:

CPF Annual Limit is now $37,740, up from $31,450 in 2015.
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An exchange of comments with readers on my FB wall highlighted something that could be overlooked by some. 






In March this year, I shared a screen shot in my blog:

Why did I voluntarily contribute $4,000 and not much more?

Reason:

The maximum amount of CPF contributions, including mandatory contributions your employer pays on your behalf, is $26,393.
 
The maximum amount of voluntary contributions a person (employee or self-employed) can make in one calendar year is subject to the CPF Annual Limit. 




All CPF contributions, whether mandatory or voluntary, will form part of the CPF Annual Limit.

From 2011, the CPF Annual Limit is $30,600.

No further voluntary contributions can be made if the mandatory and voluntary contributions have already reached the CPF Annual Limit of $30,600. (From 2015, the limit is $31,450.)

Source: CPF



Latest on CPFB's website:

The maximum amount of mandatory and voluntary contributions that a person (employee or self-employed person) can make in a calendar year is subject to the CPF Annual Limit. 

From 2016, the CPF Annual Limit is $37,740.







So, from 2016, maximum amount of VC = $37,740 – Mandatory Contributions

Mandatory contributions are compulsory contributions required under the CPF Act and include our own monthly contributions from earned income.

Use this calculator for VC:
https://www.cpf.gov.sg/eSvc/Web/Miscellaneous/ContributionAllocation/ContributionAllocationCalculator







Related posts:
1. Securing risk free returns early for retirement.
2. National Day Rally 2014: Retirement adequacy.