Retirement plans

[boredboiboi]

Hi all,

just wanna ask, for endowment plans once the term is up, would the money be automatically credited to our bank account? or do we have to approach them?

Depends on your mode. Can be via cheque too.

 

[BrandonnC]

Hello, can I ask if I have savings of $1.5 mil (excl CPF Life) at the age of 55, would I be comfortable to stop work from that age and not work anymore? Assuming all loans are paid for and I expect to live till a projected age of 90. I figured I will have enough for living expenses but unsure of how I need to budget for medical expenses (despite having basic hospitalisation coverage from an insurance company).

 

[BBCWatcher]

Hello, can I ask if I have savings of $1.5 mil (excl CPF Life) at the age of 55, would I be comfortable to stop work from that age and not work anymore? Assuming all loans are paid for and I expect to live till a projected age of 90. I figured I will have enough for living expenses but unsure of how I need to budget for medical expenses (despite having basic hospitalisation coverage from an insurance company).

That depends primarily on how far you are from age 55 (the real value of $1.5 million erodes with time due to inflation) and your lifestyle requirements and tastes.

As a “sanity check” go price an escalating, immediate life annuity purchased at that time, translate the initial monthly payout amount to current dollars, and decide how comfortable you think you’d be living on that amount of income.

 

[dork32]

That depends primarily on how far you are from age 55 (the real value of $1.5 million erodes with time due to inflation) and your lifestyle requirements and tastes.

he already say he is 55.

 

[dork32]

Hello, can I ask if I have savings of $1.5 mil (excl CPF Life) at the age of 55, would I be comfortable to stop work from that age and not work anymore? Assuming all loans are paid for and I expect to live till a projected age of 90. I figured I will have enough for living expenses but unsure of how I need to budget for medical expenses (despite having basic hospitalisation coverage from an insurance company).

you can provide these numbers, i can help a bit

1. what is inflation rate. (2% ?
2. how much you spend at month or a year (40K?)
3. how much interest do you think your 1.5mil is earning? (2%? you can get some advice from our financial advisor here)
4. you cpf is at ers? it will add to your income

we can make some projections with these numbers provided.

 

[BBCWatcher]

he already say he is 55.

Uh, no, he did not — not in this post at least. Here’s what BrandonnC actually wrote:

Hello, can I ask if I have savings of $1.5 mil (excl CPF Life) at the age of 55, would I be comfortable to stop work from that age and not work anymore?

Moreover, in my reply I allowed for the possibility, even if unlikely, that BrandonnC is age 55 now.

 

[BrandonnC]

Thanks guys for your interest in my question.

I am 52 this year, and I am considering retirement in 3 years' time (if I feel like calling it a day by then). I reckon I will need about $50k annually in today's dollars. I have done some basic calculations, and I thought it seemed sufficient (from a ballpark figure perspective based on my rough estimates).

I am a single, worked hard in my earlier years, and i will have no need to leave money for anyone else when I pass on. I would just want to retire in a carefree way (without the need to do active investments) but would like to know that there is always money in the bank in my retirement years.

Probably to be more specific based on BBCWatcher and Dork32's comments,
a) what inflation rates should I use to calculate for my future years?
b) how much money should i reserve for unforeseen medical expenses?

 

[BBCWatcher]

I am 52 this year, and I am considering retirement in 3 years' time (if I feel like calling it a day by then). I reckon I will need about $50k annually in today's dollars. I have done some basic calculations, and I thought it seemed sufficient (from a ballpark figure perspective based on my rough estimates).

Yes, I agree. As the basic formula you’d likely stuff as much into CPF as allowed — now, in your 55th birthday month, then every January thereafter — and keep the rest prudently invested with reasonable portfolio diversification. Defer CPF LIFE payout start to age 70, then (assuming the same payout plans are available) consider the Escalating Plan if you’re in good or better health or the Standard Plan if you’re in poor health.

a) what inflation rates should I use to calculate for my future years?

That’s up to you, really, but another way to model your retirement is to make a real rate of return assumption, for example “I feel I can average a real rate of return of 0.5%.” And assume constant dollar spending, presumably. Then you can make your model more complicated if you think it needs to be, but that’s a reasonable starting approach.

b) how much money should i reserve for unforeseen medical expenses?

All of it. It’s unforeseen.

More seriously, nobody really knows for sure. However, it appears that you’re decently insured for hospitalization and related acute care — look at today’s premium tables and add an inflation assumption, which I suggest should be higher than general inflation — and model that way. I recommend not trying to ride the private medical sector into the sunset. But you can model that ride if you wish and judge how scary it looks.

 

[dork32]

Thanks guys for your interest in my question.

I am 52 this year, and I am considering retirement in 3 years' time (if I feel like calling it a day by then). I reckon I will need about $50k annually in today's dollars. I have done some basic calculations, and I thought it seemed sufficient (from a ballpark figure perspective based on my rough estimates).

I am a single, worked hard in my earlier years, and i will have no need to leave money for anyone else when I pass on. I would just want to retire in a carefree way (without the need to do active investments) but would like to know that there is always money in the bank in my retirement years.

Probably to be more specific based on BBCWatcher and Dork32's comments,
a) what inflation rates should I use to calculate for my future years?
b) how much money should i reserve for unforeseen medical expenses?

judging by your savings, i can assume that you have more than ers in cpf. going for ers will ensure the first 20k of the requirement.

how do you intend to invest your money? what are the rates that you are looking at? if i assume that your investment returns = inflation, then your 1.5 mil will maintain its value throughout in today's dollars. this will make calculation much easier as you can take out interest earn and inflation rates from your equations.

from 55 to 65. you will be surviving solely on your savings. in 10 years, you will deplete 500k. after 65, cpf life comes in with 20k of payout. you will require another 30k per year. your 1 mil left could last you another 30 years. i take out 100k to battle the lost in value of the cpf payout due to inflation. that will bring you to age 95.

detailed calculation can be done to see the exact amount instead of just using the 100k. but too lazy to do it.

yes you do have enough.

 

[mummynew]

Hello, can I ask if I have savings of $1.5 mil (excl CPF Life) at the age of 55, would I be comfortable to stop work from that age and not work anymore? Assuming all loans are paid for and I expect to live till a projected age of 90. I figured I will have enough for living expenses but unsure of how I need to budget for medical expenses (despite having basic hospitalisation coverage from an insurance company).

Can you still upgrade and get rider/s for your hospitalization coverage on top of the ‘basic’?

Given a person with about 1.5 million and suffer a major illness that a private hospital ‘claims’ to have a better cure success rate as compared to the ‘basic’ care, this person is likely to go for it and then the key sum will be affected significantly to derail the retirement plan (cancer treatment estimate in private care averaged is about $250,000).

Medical expenses are always wild cards in retirement planning (for those with aged parents, these parents’ medical expenses are also wild cards in own retirement planning). It maybe a pity that you cannot enjoy the fruit of your hard labour after you retire at 55 yo if you are plagued with major illnesses along the years after that (to me it’s highly probable).

 

[mummynew]

Hi all,

just wanna ask, for endowment plans once the term is up, would the money be automatically credited to our bank account? or do we have to approach them?

Don't need to do anything.

Once matures, the sum will be sent via cheque or direct crediting.

 

[nautilus]

Can you still upgrade and get rider/s for your hospitalization coverage on top of the ‘basic’?

Given a person with about 1.5 million and suffer a major illness that a private hospital ‘claims’ to have a better cure success rate as compared to the ‘basic’ care, this person is likely to go for it and then the key sum will be affected significantly to derail the retirement plan (cancer treatment estimate in private care averaged is about $250,000).

Medical expenses are always wild cards in retirement planning (for those with aged parents, these parents’ medical expenses are also wild cards in own retirement planning). It maybe a pity that you cannot enjoy the fruit of your hard labour after you retire at 55 yo if you are plagued with major illnesses along the years after that (to me it’s highly probable).

Any upgrade of your existing health insurance plan will need to undergo health re-assessment again even though it's with the same insurer.

As for upgrading to a private hospital plan, I would suggest taking a look at the annual premiums as you age. Once you hit 65 years and above, the increases in annual premiums becomes exponential.

Lets take one of the most expensive health insurers in Singapore, AIA, for comparison.
https://www.aia.com.sg/content/dam/...a-health-shield-gold-max-english-brochure.pdf

At 55 years, the annual premium for the insurance+rider is $630 + $1165 + $930 = $2725

At 90 years, the annual premium shoots up to $1530 + $7597 + $4564 = $13691

It's down to whether can you afford the premiums as you age. Many people don't realise this when they are younger as the premium differential between Private and Restructured plans are minimal, only to be shocked at the premiums once they hit 70 years old.

I've recently done a calculation for some of my family members and taking AIA as an example again, for a restructured hospital A-ward plan, the total premiums from 55 to 90 years will cost about $167K. I've not done the maths for the Private hospital plans but I would guess it would be easily double of this amount. Good only if you've deep pockets.

 

[BBCWatcher]

Given a person with about 1.5 million and suffer a major illness that a private hospital ‘claims’ to have a better cure success rate as compared to the ‘basic’ care, this person is likely to go for it and then the key sum will be affected significantly to derail the retirement plan (cancer treatment estimate in private care averaged is about $250,000).

What is the precise claim, and who is making it? Do you have a link to this claim?

 

[mummynew]

At 55 years, the annual premium for the insurance+rider is $630 + $1165 + $930 = $2725

At 90 years, the annual premium shoots up to $1530 + $7597 + $4564 = $13691

It's down to whether can you afford the premiums as you age. Many people don't realise this when they are younger as the premium differential between Private and Restructured plans are minimal, only to be shocked at the premiums once they hit 70 years old.

If BrandonnC budgeted about $50K of present value for annual expenses, he seems to be able to afford the premiums to guard his main nest.

At 90 yo, he may not be able to splurge that $50K annually anymore (assuming he has a car and the car has to go or he has to stop travelling).

 

[mummynew]

What is the precise claim, and who is making it? Do you have a link to this claim?

Just based on my knowledge of experiences via relatives and friends.

 

[BBCWatcher]

If BrandonnC budgeted about $50K of present value for annual expenses, he seems to be able to afford the premiums to guard his main nest.

Hospital and medical insurance premiums rise a lot faster in Singapore than general inflation. They rise sharply with advancing age, and they also are rising because medical costs (particularly in the private sector) are rising faster than general inflation.

Just based on my knowledge of experiences via relatives and friends.

You'll have to do a lot better than that if you're going to make extraordinary claims like that.

 

[mummynew]

You'll have to do a lot better than that if you're going to make extraordinary claims like that.

Maybe I need to further qualify that the averaged $250,000 is for late stage cancer treatments (early stages cost lesser in the short term unless relapse). Organ transplant as shared before is more than $1 million in pte hospital (all relatives' and friends' experiences).

My late mum's stage 3B cancer cost about $100,000+ about 20 years ago in pte hospital. She survived and lived for another 15 years before passing.

I don't think my claims are that 'extraordinary'.

 

[nautilus]

If BrandonnC budgeted about $50K of present value for annual expenses, he seems to be able to afford the premiums to guard his main nest.

At 90 yo, he may not be able to splurge that $50K annually anymore (assuming he has a car and the car has to go or he has to stop travelling).

That’s the problem. As we grow older, inflation and other expenses start chewing away at our savings. The annual allocated budget may not be enough as early as in the 80’s. Also not forgetting once you’ve passed the last entry age , you are locked into the plan and cannot change to a lower plan.

 

[nautilus]

Maybe I need to further qualify that the averaged $250,000 is for late stage cancer treatments (early stages cost lesser in the short term unless relapse). Organ transplant as shared before is more than $1 million in pte hospital (all relatives' and friends' experiences).

My late mum's stage 3B cancer cost about $100,000+ about 20 years ago in pte hospital. She survived and lived for another 15 years before passing.

I don't think my claims are that 'extraordinary'.

Then don’t go private. If you do then be prepared to pay for it one way or another.

 

[BBCWatcher]

I don't think my claims are that 'extraordinary'.

Here's what you wrote (emphasis added):

Given a person with about 1.5 million and suffer a major illness that a private hospital ‘claims’ to have a better cure success rate as compared to the ‘basic’ care, this person is likely to go for it and then the key sum will be affected significantly to derail the retirement plan (cancer treatment estimate in private care averaged is about $250,000).

A private medical provider charges whatever it charges. That's not extraordinary, but that's not the only claim you made. I'm asking for evidence of the particular claim you made, bolded above. Which private hospital is claiming a better cure success rate, for what major illness, and better than what alternative providers and therapies?

Also not forgetting once you’ve passed the last entry age , you are locked into the plan and cannot change to a lower plan.

This part is not true, at least not for Integrated Shield plans. If there's a "lower" category plan available, then you can "downgrade" to the lower category plan. That said, it doesn't generally seem wise to sign up for "Plan 1" with the intention of switching to "Plan 2" in the future. Obviously "Plan 2" is acceptable if that's your starting intention, so why wouldn't you save premium dollars along the way and sign up for "Plan 2" from the start?