Karen Tang, CFP®: Certified Financial Planner in Singapore

The Top 4 Priorities in Every Single Woman’s Financial Planning

Woman’s Financial Planning in Singapore

In my decade long experience as a comprehensive financial planner, I have had the privilege to serve a number of single women professionals who are highly driven and successful in their careers. I have come to appreciate the fact that single women have needs, financial goals and aspirations that are different from say, a married woman with young children. Hence, their financial planning will also be highly customised.

Their Unique Situation

  • These ladies could be self employed or working in long standing industries like banking, healthcare and education.
  • They have achieved a certain level of recognition in the work sphere.
  • They know what they want i.e. very goal and task oriented.
  • They have earned their financial freedom and cherish this independence that allows them to make decisions without constraints.
  • They enjoy a high standard of living – they value privacy and hence, would stay on their own in a private property, usually a condominium.
  • They would also prefer to invest in another property for generating passive income during retirement.
  • They go on luxury holidays and do not mind splurging on themselves and parents.
  • Because they give parents an allowance every month, they are very particular about having sufficient death coverage so that their parents/siblings will be well taken care of in the event they pass away unexpectedly. And in recent times, pet owners are also including pets in their wills to ensure their wellbeing is not compromised. This I could see in my sister who has 5 cats under her charge!

The most important common denominator underlying all women is this – they live longer lives than men. Their life expectancy is 84.9 years according to 2015 Singapore Statistics as compared to men at 80.4 years. But they also suffer from ill health for a long period i.e. the last 6 years of their life is usually lived in ill health.

Because single women have no one to depend on as they age, they must have adequate risk management in place to mitigate cash flow issues that could arise as a result of a disability or illness.

In planning for single women, there are 4 vital areas to address.

Vital Area #1: Get Your Health Protection In Order

It is while we are living that we need money the most. Insuring against illnesses ought to be a top priority not just for singles but also for everyone in general. Having sufficient health insurance and major illness protection will allow one to focus on recovery without worrying about money or being a financial burden to the family. A comprehensive health protection program should have these 3 components:

a. Hospital & Surgical Insurance

Hospital & Surgical (H&S) insurance is also commonly referred to as hospitalisation or medical insurance.

Life is unpredictable. We can be healthy one day and be told we have an illness the next. Critical illnesses like cancer, stroke and heart related diseases are no longer conditions reserved for older folks. A financial planner who has your interest at heart will insist that you get comprehensive medical coverage first before any life insurance.

Reason is this – medical bills can potentially run up to hundreds of thousands of dollars. Having adequate coverage can help to eliminate or reduce the chances of being caught in financially stressful situations.

If you have not yet upgraded your health insurance, take action now! I will be happy to guide you to select a plan that is most appropriate for your needs.

b. Lady’s / Female Insurance

Just like men, women, too, face specific health challenges. Illnesses affecting women range from cancer of reproductive organs and the breasts, rheumatoid arthritis, systemic lupus erythematosus (SLE) to osteoporosis.

Lady’s insurance, usually in the form of a standalone yearly renewable plan, aims to cover women’s critical illnesses (limited number of conditions though) and helps defray some medical costs. A selling point is the free biennial medical check-up. This encourages proactive health management and early detection of any illness is key to early medical intervention, hence, increasing the chances of full recovery. Survival rates have improved dramatically – if detected early, survival rate of 5 years and beyond can be in the range of 80%-100%.

However, in my planning experience, a term or whole life plan which provides coverage for early, intermediate and advanced stage illnesses could be more comprehensive and cost effective in the long run. Another limitation of lady’s insurance is that its premiums increase with age.

c. Critical Illness Insurance

Your greatest asset is your ability to work. Needless to say, when an illness hits you, your financial plans will indefinitely be thrown off track.

The lump sum payout from critical illness cover comes in handy to pay for additional medical expenses not covered by hospitalization insurance, for example, alternative therapies or treatments, supplements, nursing assistance, devices and equipments etc. In some cases, the payout has enabled the patients to seek medical expertise overseas.

Nobody will complain that the insurance payout is too much when he or she needs it the most. When considering critical illness insurance, remember these 3 components:

  • Actual treatment costs
  • Out of hospital Costs
  • Loss of income

And don’t forget that medical inflation in Singapore is increasing at a rate of 10%-15% (Source: Insights: Straits Times June 13, 2016). This means that at 15%, the same treatment at $10,000 today will be $11,500 the next year.

For those with outstanding mortgage loans, I strongly recommend that you have mortgage insurance in place. A mortgage is typically the biggest liability that anyone can owe. Monthly repayments will not stop when you are ill or disabled. So don’t skip this step in your financial planning.

Vital Area #2: Fund your retirement lifestyle with a guaranteed lifetime income or retirement income solution

The word ‘retirement’ does not form part of the vocabulary of my female clients. They see themselves staying actively engaged in the corporate and social spheres even after age 55 or 60, if health permits. They will slow down so that they can have free time to do what they want, when they want.

One thing is for sure though – they will not compromise on their retirement lifestyle. This is why having a guaranteed income that pays for life is so important.

Ideally, this guaranteed lifetime income should be enough to provide for all the basic needs so that you can have the freedom to work or not work. And if you choose to work, the extra income is a bonus.

An effective way to have a guaranteed income for life is through a guaranteed life annuity plan. This is a lump sum savings plan that pays out a guaranteed income during your retirement years. The payout comprises of a guaranteed amount and a non-guaranteed portion (or bonus) which increases with time.

Depending on your preference and needs, another way to secure guaranteed income is through a retirement income plan. In general, this type of plan pays out a specific amount on a monthly or annual basis. The non-guaranteed bonus is usually given to you at maturity. Here, there is flexibility for you to select the payout age, payout duration, the savings term and income amount and even the option to peg the income to inflation (i.e. 3.5% p.a.) or not.

While some prefer to grow their retirement nest egg through investment vehicles like stocks, unit trusts, ETFs and property, this guaranteed income approach serves as a perfect complement to the non-guaranteed nature of investment returns.

Vital Area #3: Maintain financial independence through Long Term Care cover

While it may not be possible to always be physically independent, being financially independent can still be achieved with prudent planning. The thought of losing one’s physical independence usually do not go down well with single women or anyone for that matter. In fact, they prefer not to think about it but as their financial planner, it is my duty to highlight the importance of making provision for this.

Vital Area #4: Plan ahead – Your Will and Lasting Power of Attorney

Nobody likes to talk about death but by addressing how you want your estate to be distributed after you pass on (through a will), you leave no room for misinterpretation and ugly fights over your estate. And unless you are happy with the way the state distributes your estate according to the Intestate Succession Act Chapter 146, you need to get a will done.

A lasting power of attorney, on the other hand, allows the person you have appointed to make decisions on your behalf – pertaining to your personal welfare and property & affairs – if you should lose mental capacity one day.

Your Financial Future is in Your Hands

The campaign theme for International Women’s Day 2017 was “Be Bold For Change”. Well, this need not be just a 2017 theme but a theme that is evergreen and always ‘fashionable’. May you be empowered to take bold steps to enhance your personal financial health!