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Straits Times
2 days ago
- Business
- Straits Times
Are you set to retire comfortably in Singapore?
Sign up now: Get ST's newsletters delivered to your inbox Generic photo of an elderly couple strolling near Clementi 448 Market & Food Centre, on Aug 26, 2024. Can use for story on ageing population, senior, independent, health care, Geriatrics, Elder care, Assisted living, Nursing home, Retirement, Dementia, Alzheimer disease, Longevity, Palliative care, Mobility aid, and Chronic illness. SINGAPORE – You're in your 50s, the kids are grown and off your hands, the mortgage is nearly paid off and a comfortable retirement beckons, but life's next chapter can bring unexpected challenges. A friend who thought he had more than enough to retire on had to stop work earlier than planned to care for her elderly parents and a dependent sibling. Such surprises, along with longer life expectancy and higher living costs, can derail the best-laid plans, making preparations for your golden years more critical than ever. The road to retirement requires immediate attention, from understanding how far your savings will stretch to making sense of the Central Provident Fund (CPF) and various government support schemes. Healthcare becomes a key focus. A comprehensive insurance plan covering critical illness and long-term care is crucial, says Mr Harpreet Bindra, chief executive of HSBC Life Singapore. This can help offset the financial impact of unexpected medical emergencies and ensure access to necessary care without depleting your savings. Ms Irma Hadikusuma, chief marketing and healthcare officer at AIA Singapore, reminds us that 'retirement isn't just a finish line; it marks the start of a new, potentially decades-long chapter in your life without an active income'. So how much do you really need for a comfortable retirement? Experts have sobering advice on this and whether it makes sense to those close to retiring to take up new insurance plans. Top stories Swipe. Select. Stay informed. Singapore PM Wong calls on S'poreans to band together for nation to remain exceptional in National Day message Singapore Nation building is every Singaporean's responsibility, not the work of one party alone: Pritam Singapore Four foreign leaders to attend NDP 2025 at the Padang Singapore 'This is home', for retired shop owner putting up 11th flag display in Toa Payoh to mark SG60 Singapore Singapore leaders send congratulatory letters to South Korean counterparts to mark 50 years of ties Singapore Relaxed rules 'not a silver bullet', but a step in right direction, say nightlife businesses Business Singapore's digital banks trim deposit rates, mirroring moves by incumbent players Singapore Chief Justice allows founder of site that ran fake KKH story to be called to the Bar So how much? A nest egg of $1 million has long been a common aspirational retirement target. With this much in cash and liquid assets, a retiree can expect a comfortable withdrawal of more than $4,000 a month over 20 years after retirement. Other retirement sums have also been bandied about – from $550,000 to $1.9 million. Fortunately, CPF Life, a national longevity insurance annuity scheme, provides Singaporeans and permanent residents with a monthly income from age 65 for as long as they live. If you hit 55 in 2025, you can give your retirement income from age 65 a big jump if you plan for the current CPF Enhanced Retirement Sum of $426,000. Doing so will enable you to receive $3,300 a month. A DBS study found that the median CPF payout covers over half the median expenses of its retiree customers. According to the 2023 Household Expenditure Survey, households with non-working individuals aged 65 or over spent an average of $2,349 per month. This means aspirational needs will have to be supplemented by income-generating solutions such as unit trusts or other investments to complement the CPF payouts. What constitutes 'enough' is deeply personal. 'For some, it may include travel, dining out frequently and pursuing hobbies. For others, it could simply mean covering essential financial needs without worry,' says Mr Bindra. 'What remains important to remember is that individuals need to plan not just for today's cost of living, but for years to come.' The focus shouldn't be on hitting a universal number, but more on building a plan that is tailored to your needs and flexible enough to evolve through life stages. Integrating both wealth and health to help you face the future with confidence, he says. Mr Jason Lim, head of product management at Prudential Singapore, suggests that you ask yourself some questions to determine your financial readiness: What is your desired retirement lifestyle and the estimated expenses? Do you have sufficient income streams or savings to fund this lifestyle? Do you have adequate health insurance coverage for retirement? How much debt or liabilities will you have and how will you service them? Do you have an emergency fund to cover unexpected expenses? Common mistakes in planning Mistake 1: Thinking it's too late to start The most pervasive myth among late starters is that if you've missed the golden window for compounding in your 20s or 30s, it is pointless to start now. But financial planning is a journey, not a race. While you may not be able to fully harness the magic of compounding, you can certainly avoid the paralysis of inaction. 'No matter what their horizon, there are always steps that pre-retirees can take to ensure that they are prepared for retirement,' says Mr Thomas Lee, chief product officer at Manulife Singapore. Even modest action such as calculating your current net worth, for example, lays the groundwork, he adds. From there, a clear-eyed inventory of assets, liabilities and likely future income can transform a sense of helplessness into agency. The next step is to map out your goals and determine realistic actions which can range from topping up your CPF account to setting up a regular savings plan. Mistake 2: Assuming spending will decrease with age It is a fallacy to think that as life slows down, so too will our expenses. The CPF's Retirement and Health Study shows that spending often accelerates in later years, driven by healthcare, housing modifications and, increasingly, helping out with grandchildren or enjoying the leisure previously deferred. Planning with rose-tinted glasses and assuming your cost of living will magically halve only set up nasty surprises. Instead, aim for conservative estimates on spending, and factor in inflation, new hobbies, travel or unexpected family obligations. Mistake 3: Grossly underestimating healthcare costs The most common mistake pre-retirees make is underestimating healthcare costs and overestimating how long their savings will last. While Singaporeans are covered by Medishield Life or Integrated Shield Plans, and have access to government subsidies, these safety nets are not enough as not all expenses are covered. 'Outpatient costs, for example, can add up, especially if one is suffering from a major illness that requires substantial cash outlay,' Mr Lee says, adding that a critical illness policy may be helpful. Working Singaporeans who rely on company-provided insurance coverage while employed must remember that this will typically lapse upon retirement, just as higher medical needs emerge. Mistake 4: Too conservative It is common for pre-retirees to move all their investments into conservative ones or assets with guarantees. Ms Hadikusuma says while these options may offer higher certainty, their returns are often low and may not keep up with inflation. As we are living longer, retirement can stretch over 20 years or more, so your money needs to keep growing throughout that time. Higher-risk assets have the potential to withstand inflation and market fluctuations and deliver better long-term returns. 'A better approach is to gradually reduce your investment risk during your retirement years, rather than making an abrupt shift, and to ensure you secure a sufficiently diversified source of income before and during retirement,' she adds. Mistake 5: Not reviewing plans Early and consistent planning is essential as retirement is not a one-off event but an evolving strategy that requires regular reviews and adjustments, ideally with a trusted financial adviser, Mr Bindra says. This ensures that your plan remains robust and relevant throughout retirement, providing confidence, dignity and freedom in later life. Is it too late to buy insurance? It's never too late to review your protection needs, but as you approach retirement, it's important to focus on healthcare coverage. Health risks increase with age, so ensure you have suitable medical insurance to manage expenses and reduce out-of-pocket costs. Buying life insurance in your 50s may not be the best choice if you have no dependants or debt, says Ms Hadikusuma. 'It may be more practical to direct those funds towards health-related coverage, topping up your CPF, building income-generating investments or strengthening your emergency fund,' she adds. If you do need life insurance, choose plans with shorter premium terms and ensure you can afford the premiums with your retirement cash flow or MediSave balances. That said, if you have dependants, you can consider plans with shorter premium terms of five or 10 years that allow you to complete your financial obligations before retirement, she says. The goal is to identify a plan that offers adequate protection without over-stretching current finances, Mr Bindra adds. Getting on track A good gauge to see if you are on track to securing a comfortable retirement is to look at your projected monthly income in retirement, which includes CPF Life payouts, savings, investments and insurance. Compare them against your estimated expenses, which typically range from 70 per cent to 90 per cent of your current spending, according to FWD Insurance Singapore. You are likely on track if your projected income meets or exceeds these needs, with added buffers for inflation and healthcare costs. Here's a list to help you: What to keep: Policies with fully paid-up premiums, as these continue to offer coverage without additional financial commitments. This includes your protection, savings and life insurance. What to review and adjust: Policies that require ongoing premium payments into your retirement years. If these payments are likely to strain your retirement income, consider adjusting the coverage amount, which may lower the premium payments, Ms Hadikusuma says. Health insurance premiums typically rise with age and if the cost becomes unsustainable, consider switching to a plan that aligns with both your healthcare needs and budget. Always seek professional advice from your trusted financial consultant before making any decisions. For both protection and health insurance, the critical consideration is premium sustainability – ensuring you can continue to afford the premiums comfortably during retirement. If necessary, consider adjusting your coverage level or benefits before retirement while your health status still qualifies you for plan changes. Safeguarding against unplanned medical costs often requires securing additional policies such as critical illness cover well before retirement. The earlier you apply, the more affordable (and certain) the cover. Relying solely on employer perks, or even public healthcare coverage, can leave significant blind spots. A Manulife Asia survey conducted in 2025 found that Singaporeans are acutely aware of the risks. Despite this, nearly half of their assets outside property are still kept in cash – hardly ideal when you consider the eroding effects of inflation over 20 years or more. Many realise the need for diversified investments for long-term income. Ms Koh Hui Jian, chief executive of Manulife Investments Singapore, says diversifying investments, building sustainable income streams and making better use of idle cash are essential steps in future-proofing your financial plans. 'With inflation and longevity top of mind, it's important to start early and stay invested, even into retirement,' she says. Ultimately, experts say knowing that our expenses are manageable and that our health is at its best provides the peace of mind to enjoy our golden years to the fullest. As Prudential's Mr Lim notes: 'As the saying goes, health is wealth. Maintaining good health through good diet, exercises, and regular check-ups can reduce the likelihood and severity of health shocks, which may need us to dip into our retirement funds.'
Business Times
30-06-2025
- Business
- Business Times
From greater liquidity to flexibility: How insurance can be a good entry point to legacy planning
THE conversation around legacy is shifting. Previously regarded as a matter for later stages of life, legacy planning is now being considered by individuals much earlier. It is no longer just about preserving wealth, but also about protecting loved ones and passing on values that support their future well-being. According to the HSBC Quality of Life Report 2024 that surveyed over 11,000 affluent individuals worldwide, eight in 10 respondents across generations agree on the importance of early legacy planning – but only two per cent have planned for their legacy needs in a holistic manner. This gap between intention and action highlights an unmet demand for more accessible, straightforward solutions to support individuals in taking the first step. Harpreet Bindra, CEO of HSBC Life Singapore, notes that many first-generation wealth builders are turning to life insurance as a simple and effective way to kick-start the process. He shares why there is growing interest in legacy planning and how life insurance can contribute to a smoother wealth transfer across generations. Q: Legacy planning seems to be on more people's radar today. What is driving this shift? Those focused on building their careers or businesses often did not give much thought to legacy planning until they were close to retirement, mainly due to time constraints. This mindset has changed because of a few factors. First, people today are better educated as financial literacy levels are much higher and information is more readily available online. Financial tools that were once limited to ultra-high-net-worth (UHNW) families are now more accessible. Second, demographic trends are also influencing this shift. By 2030, around one in four Singaporeans will be aged 65 or older – a sign of an ageing population that is prompting more individuals to plan ahead. At the same time, growing affluence in Singapore and across the region is bringing legacy planning to the forefront. According to McKinsey Global Wealth Pools 2024 analysis, UHNW and high-net-worth families in the Asia-Pacific region are expected to pass on an estimated US$5.8 trillion (S$7.4 trillion) in assets to the next generation between 2023 and 2030. With this significant wealth transfer underway, the need for legacy planning becomes increasingly important. Third, planning for the future is also evolving beyond just the financial aspect. Many individuals now see it as a way to pass on values, not just assets. Younger generations are also more likely to include charitable giving in their long-term plans, as shown in HSBC Quality of Life Report 2024. Meanwhile, family-owned businesses – many of which are central to the region's economies – are undergoing generational transitions. Unlike in the past, successors today may choose to pursue their own paths instead of continuing the family business. This means that founders will have to think about external successors while ensuring that the ownership structures remain within the family, and think about how best to support their children in whatever paths they choose. All of this is happening against the backdrop of an uncertain global environment – marked by geopolitical tensions, trade disruptions and rapid technological changes – which is prompting more business owners and professionals to prioritise legacy planning earlier. Harpreet Bindra, CEO of HSBC Life Singapore, the insurance arm of the HSBC Group. Photo: HSBC Life Q: Despite growing awareness about the importance of legacy planning, many still delay taking action. What is holding people back? The prevailing perception is that legacy planning is complicated – setting up legal structures can be perceived as costly, time-consuming and emotionally challenging, especially when family dynamics are involved. There is also a common misconception that legacy planning is only for the wealthy. In reality, it is relevant to anyone who wants to ensure their loved ones are cared for, minimise potential family conflicts over inheritance, and preserve their values for future generations. As such, it is understandable that people put off planning. The HSBC Quality of Life Report 2024 shows that most begin legacy planning at an average age of 44 so I would encourage individuals who are already thinking of planning their legacy to start early. It is always the first step that's the hardest – and insurance can be a practical, accessible way to begin the journey. Q: What role can insurance play in a well-rounded legacy plan? Insurance can be one of the most straightforward entry points to legacy planning. Firstly, it is often less complex than any other legacy planning solutions, and can work alongside them as part of a broader legacy planning strategy. Secondly, it provides liquidity. Some plans offer a unique combination of certainty, protection and cash value, or even a guaranteed payout that can be distributed immediately after one's passing, unlike executing a will, which involves compiling a list of assets, applying for a grant of probate and so on. Lastly, insurance can help streamline wealth distribution. Policyholders can have the flexibility to vary the death benefit for each beneficiary and these can be amended if circumstances change. For example, if you intend to leave a business to one child and property to another, you could leverage insurance to help balance the difference in value. Legacy planning comprises many components and insurance can serve as one of its foundational pillars. Q: What are some key features to consider when selecting an insurance plan for legacy planning? Coverage amount, flexibility and expertise of the insurer are important considerations. For affluent individuals, plans such as the HSBC Life Emerald Legacy Life III offer high protection coverage for death and terminal illness up to the age of 120. The policy can potentially span three generations – ownership can be transferred to a grown-up child, who may then name their own children as beneficiaries. The plan also provides guaranteed cash value of up to 100 per cent of the regular premiums paid, in addition to the non-guaranteed bonus payouts that will be declared periodically, subject to terms and conditions. Flexibility is another key consideration. Policyholders can choose between single or regular premium payments over five, 10 or 15 years. This makes it easier to begin legacy planning earlier – for instance, the premium can be as low as approximately US$2,750* (S$3,500) annually. The plan also offers the option to spread out the death benefit over multiple instalments. This is particularly helpful if dependents are not yet ready to manage a lump sum. These features of the HSBC Life Emerald Legacy Life III provide a level of adaptability to meet evolving and differing needs for different individuals. As the insurance arm of the HSBC Group, HSBC Life brings deep expertise and trusted capabilities to support high-net-worth clients in meeting their financial planning goals. We are proud to be recognised as the number one insurer by HNWI in the Affluential WealthLens Brand Affinity 2024 rankings, a testament to the trust that our customers have placed in us. Q: On a personal note, how does insurance play a part in your own legacy planning? Having worked in the insurance industry for two decades, I recognise the importance of ensuring my family's long-term well-being. That is why I have made insurance and health coverage a core part of my financial planning. I have also taken steps to plan for retirement and put in place strategies to build a legacy that empowers my children's aspirations. By starting with insurance years ago, I have been able to make adjustments along the way as my career progressed – from enhancing coverage and updating beneficiaries to customising how benefits are distributed. Ultimately, my goal has always been to ensure that my loved ones are comprehensively protected, even in my absence. Find out more about HSBC Life Emerald Legacy Life III here, or speak to any HSBC Life authorised distributors for more information. *Based on a 17-year-old male, non-smoker, who purchased a 15-year premium term plan, with US$500,000 minimum protection cover, up to age 85. Terms and conditions apply. This advertisement has not been reviewed by the Monetary Authority of Singapore.
