It takes just one serious health crisis to severely drain you of your finances. Going into debt because of health care expenses is certainly something we want to avoid at all costs. When creating your retirement plan, it is critical to make provision for these 2 things:
Your health insurance premiums
Premiums increase as we grow older. We can downgrade our coverage but we should never give up our health insurance!
It is also important to know exactly what your insurance covers you for. Are you covered for private hospitals or only public hospitals? Do you have any insurance rider that will take care of the deductible and/or 10% co-payment?
If you have not enhanced your health insurance to a private integrated shield plan with comprehensive as-charged benefits, do so immediately.
The cost of your long term care
A severe disability caused by an illness or an accident can render a person unable to perform the Activities of Daily Living (ADLs – washing, dressing, feeding, toileting, transferring and mobility).
Often, the disability is a prolonged one and this would result in the need to stay in a nursing home or hire a professional nurse or domestic helper. The costs can be staggering so make sure you get adequate long term care insurance on this front.
According to the World Health Statistics 2017 report by the World Health Organisation (WHO), it ranked Singapore third in the world for average life expectancy, behind Japan and Switzerland. Women could expect to live for 86.1 years (second in the world), while the average male expectancy was 80.1 years (in tenth place).
With higher longevity, the need to plan early and save adequately for your retirement becomes ever more vital.
Many people are sceptical that they will live till the ripe old age of 85. But I reminded them that our time on this earth is not in our hands. So, rather than outliving our resources and ending up in unpleasant situations, isn’t it wiser to plan for a longer lifespan?
This also brings me to reiterate the point that every retiree’s portfolio must include an annuity plan to hedge against longevity risk.
Are you retiring with credit card debt? Can you pay off your mortgage before you retire?
If you are able to pay off your existing debts while funding your retirement, do it! If you are struggling with debts, you must have a debt repayment plan in place for all your good and bad debts.
No matter how robust your retirement fund is, it may be jeopardised if it is offset by an equally large amount of debt.
In Singapore, the number of people owing credit card debts are on the rise. They do not realise that by making only the minimum repayment, they are incurring an exorbitant interest amount (i.e. up to 24% p.a.) and potentially getting themselves into a vicious debt cycle.
They need to seek debt counselling immediately! The faster one gets the debts restructured or negotiated, the sooner one can get his life back on track.
There are several avenues available to a borrower seeking help. These include:
When there is a third party who can negotiate on one’s behalf for a debt consolidation plan and with lower interest rates, this can tremendously alter the state of one’s finances. When one is debt-free, this means more money can be channeled into one’s retirement savings and long-term investments.
When you are in your healthy years, the thought would be to work beyond retirement age. Yet, for many, this enthusiasm wanes with age as frailty, disability and chronic health conditions develop. What sounded good in your younger years may not sound good in your 60s, 70s, or even 80s.
On the flipside, the thought of idling away 20 or 30 years is not everyone’s idea of retirement bliss. Some people would actually be happier and healthier when they continue to work part time so that they can still be productive, stay physically and mentally involved, and remain connected socially. For these folks, working makes sense but only for as long as they desire to.
This brings to mind my father who will be turning 78 soon. He is blessed with good health and he puts in a full 8 hours everyday, 4 days a week as the nursing supervisor and mentor of the Brighthill Evergreen Nursing Home, Singapore. There is no stopping him from working! He could have called it a day when he turned 60 but his passion for what he does beckons him to continue serving the needs of elderly patients.
Well, the rule is this – Keep your options open and don’t depend on post-retirement work to fund your retirement.
I always share this with my clients:
Treat earned income during retirement as a nice bonus that can enhance your retirement lifestyle. You must have proper retirement planning for your savings and income needs so that you will be financially secure should your attitude towards work change. Work during retirement because it is fulfilling and enjoyable – not because you have to.
Learn more about the other blindspots of retirement planning at ‘Secure A Comfortable Retirement by Avoiding These 12 Mistakes – Part 3’.