Financial planning can be stressful especially when it affects your dependents. In this context, dependents refer to anyone that is relying on you financially, usually, they are either your kid or parents or both. When both your kid and parent are relying on you for income, then you are part of the sandwich generation.

Being sandwiched between the demands of both generations can be suffocating, but there are some ways that can help you ease your load a little. In this article, we will share how you can help your parents retire so life might be a little easier for you.

To make this article more valuable to everyone, here are some assumptions made:

1. You are the only child (so full responsibility on you)
2. Your parents own a home
3. You are your parent’s retirement plan

Planning with the end in mind

Understanding their ideal retirement

Before getting down to the numbers, we advise you to talk with your parents. Understand what is their ideal retirement lifestyle and what is good enough for them. If they are contented with a simple lifestyle, it would be easier to make plans. And if they desire to have a more luxurious retirement, might be good to tone down their expectations. So to start things off, ask them “What do you want to do when you retire?”

Get the numbers

After getting the ideal retirement lifestyle, it would be good to attach a monthly price tag to it. Don’t be too stressed about being accurate, this step is just to ensure that you have a target to work towards and won’t be chasing figures mindlessly.

After doing all these, let’s assume that your parent’s ideal retirement lifestyle is valued at $2,000 each.

Calculating the gap

**Looking into existing cash flow
**Now that you have the ideal figures in mind, next work on understanding the shortfall. When it comes to retirement, it is the cash flow that is more important than assets (unless your parents are “richie rich”). So at this stage, spend some time finding out, how much your parents can get from CPF. If they have purchased any annuity plan(s), do find out when and how much they will be receiving it as well. If you need help understanding how to calculate this part, feel free to send us a message on Instagram.

Draw out the timeframe
If you’re lucky, their CPF life itself would amount to quite a significant portion if not all of their ideal retirement amount. If this is the case for your parents, then the only concern is the time between the age the CPF payout starts and the retirement age.

Utilising current resources

After getting a clearer idea of what you are dealing with, the next step would be to look into maximising the current resources that your parents have.

Typically, these are some of the potential resources that your parents may have:

1. CPF OA & SA
2. Property
3. Insurance plans with cash value

Maximising CPF life payout

We are a big fan of CPF and there is a good reason for it. One of the biggest uncertainty about planning for retirement is longevity. CPF life can handle that risk for you because it will pay your parents a monthly allowance for as long as they live. So when it comes to planning for retirement, CPF life should form your foundation.

There are many schemes that can help you and your parents with their retirement. Here are some notable ones:
1) Transfer OA to SA for higher interest
- If your parents are still young and have paid off their mortgage loan, consider helping them to make the transfer from OA to SA. With the higher interest in your favor, it will help to increase their payout from CPF

2) Matched Retirement Savings Scheme
- A dollar-for-dollar matching grant for any top-up to the RA (capped at $600).
- Tax relief of up to $16,000

3) SA Shielding
- This isn’t an official CPF scheme, but a popular hack to help your parents stretch their dollar
- The idea is that after 55 years old, your parents are free to withdraw the amount above their selected retirement sum
- Since SA gives an interest of 4% p.a. and OA is at 2.5% pa, the ideal would be to leave what’s excess in the SA rather than the OA.

Property

Our parent’s generation has a sense of attachment to property so it can be a little sensitive but it can significantly help them in their retirement planning.
Here are some of the possible ways to utilize property in retirement planning:

1. Lease buyback scheme
   - TLDR; you “sell” some of the lease back to the government for some cash

2. Downgrading the house
   - Downgrading of a house can be in terms of location and/or size.
   - It’s ideal if your parents’ ideal retirement lifestyle doesn’t require them to be in a good location.

3. Renting out a spare room.
   - Not every parent is comfortable with this, but it can be a steady stream of income.

Insurance with cash value

It is common for insurance to have cash value. Spend some time understanding what insurances your parents have. In our experiences, your parents may have bought life plans that come with cash value. What that means is, that when they surrender the plan they would get some cash back. However, this varies from individual and plans, do check with your parent’s financial advisor or reach out to us before doing any action.

Savings

If your parents have built up enough savings that’s great. Now you’ll just have to find ways to stretch the dollar. Keep in mind that the nearer your parents are to retirement, the less ideal it would be to put it in a volatile investment. But, in general, investment asset that gives regular payout such as dividends or coupon-paying insurance can be helpful during their retirement phase. REITs would be one potential investment worth looking into and easy to get started. If you need more guidance on this, we may create more resources to guide you on this in the future. Otherwise, feel free to drop us a text

You being the retirement plan

You are your parents’ last layer of retirement plan, regardless you like it or not. But before you sign up for multiple side hustles and feel miserable about your life, there’s still one way to cope with this — property. Once you have a property you would have the ability to rent. However, though, doing this does have its risk and it’s not recommended for everyone. But if done correctly, it can help with your cash flow significantly.

If you are in a stable relationship that’s great. Look into purchasing a bigger HDB home (within your means) and allow your parents to stay with you or to rent an extra room. By utilizing the HDB loan, you can tap into financing it entirely with your CPF which can ease your cash output — a priority for you while gaining some cash in terms of rent.

If after doing all these, you still find it a struggle, then you will have to tone down your parent’s retirement expectations. Perhaps look into taking a side hustle as a passion project or work on increasing your income. There isn’t an easy way out of this, but things will get easier as you build a system around it.