Published on Apr 21, 2013
To-do list: Make a will, get insured, appoint proxy decision-maker, name CPF beneficiaries
By Magdalen Ng
Some folks who contemplate retirement make the mistake of thinking it's all about the money and nothing else.
Sure, financial planning for your golden years is vital. You want to continue living in much the same style to which you've become accustomed.
But there are other important issues that should not be overlooked.
For instance, it is crucial to write a will, and also to nominate who should receive your Central Provident Fund (CPF) savings when you die.
Both these steps prevent unnecessary hassle for others when the time comes.
It is also important to think about giving someone a lasting power of attorney in the event that you lose your mental capacity.
Also, even though you would have stopped working, your insurance policy needs to continue and becomes even more important with the loss of income.
Lastly, retirees tend to find themselves with a lot of time on their hands and uncertain about what to do with it. Or the lack of routine in their lives may leave them at a loss.
Many organisations, such as the Council for Third Age (C3A), run events and activities for seniors. C3A promotes active living, with a focus on life-long learning and promoting senior employability.
Here are some of the big issues that those facing retirement should address:
Just saving money is not enough
Ms Joanne Yeo, head of product and funds development at AIA Singapore, says that it is never too late to start protecting yourself.
"We recommend making this a priority, especially if you do not have any insurance," she says. This ensures if you fall ill or anything unforeseen happens, your family will be financially prepared.
Mr Gerard Ee, chairman of C3A, says Medisave and MediShield are national health-care saving schemes designed to help Singaporeans with the burden of hospitalisation expenses and selected outpatient treatment.
He adds: "Seniors who would like additional and better coverage for better financial security should speak to financial consultants to understand their options, and get a family member's opinion when making an investment in insurance products."
Ms Cindy Huang, master financial consultant and wealth manager at Prudential Singapore, says that depending on each individual's needs, buying short-term term insurance may be more suitable than a long-term plan.
For those who already have insurance plans, it is also important to regularly review their insurance portfolio to ensure they are still relevant to their needs.
However, as you get older, the likelihood of poor health increases, which means premiums for protection plans are typically higher for those buying them at an older age.
And as an older person, you may also already have pre-existing health conditions. Depending on the type of coverage, insurers may either increase the premiums in exchange for full coverage or they may choose to exclude coverage on certain conditions.
An Aviva spokesman says: "Having some coverage is better than none at all. If you are reconsidering insurance because you feel the premiums quoted are too high, we urge you to consider how you might pay $5,000, $10,000 or even $50,000 in medical bills - and this can happen any time and recur at unpredictable frequencies.
"Ultimately, the cost of insurance premiums is far more manageable and predictable than unexpected expenses you would face in the event of hospitalisation, major illnesses or disability."
For those who are concerned about minor pre-existing conditions, Aviva Singapore offers moratorium underwriting, which means that no health declaration is required and certain pre-existing conditions will be covered after an absence of symptoms, treatments or medication for five years.
While certain conditions apply and not every pre-existing condition is eligible, this can still be beneficial for those with less serious pre-existing conditions trying to obtain full coverage.
2 Making a will
A will is a legal document where personal wishes are set out.
Prudential's Ms Huang says that writing a will is important as part of holistic planning.
She adds: "This ensures that your property and other personal possessions will be passed on to your loved ones in a manner of your wish or choice. It also provides one with peace of mind and reduces any undue worry, stress or arguments among the people you may have left behind."
There is a common myth that only a lawyer can help you write a will. Actually, anyone can do it and register it with the Insolvency and Public Trustee's Office.
The will should spell out the names of the people you entrust with the responsibility of taking charge of your assets and the proper distribution to the beneficiaries.
Those who do not have a will run the risk of their savings or estate not going to the people they would have wanted them to go to.
3 CPF nomination
However, monies in the CPF cannot be included in a will. To direct your CPF savings to the beneficiary of your choice, you will have to make a nomination.
If you do not do so, your money will be distributed to your family according to intestacy laws.
For example, if you leave a spouse and three children, half of your savings will go to your spouse, and the other half will be split equally among your children.
For singles who have not made any nomination, the money will be shared equally between their surviving parents.
Your CPF monies will go to the Government in the absence of a spouse, children, siblings, grandparents, an uncle or an aunt.
However, if you make a nomination, you can choose to leave everything to your spouse, or to your children, and even include your parents.
For Muslims, however, with no nomination made, CPF funds will be distributed differently, in accordance with the Inheritance Certificate, which can be obtained from the Syariah Court.
If Muslim CPF members make a nomination, the nominees are fully entitled to the savings bequeathed to them.
4 Lasting power of attorney
Unlike a will, which comes into effect only after you die, a lasting power of attorney (LPA) allows you to appoint a proxy decision-maker to act on your behalf if you lose mental capacity. The LPA will be revoked upon death and the will, if made, will come into effect.
LPAs can be made to appoint proxy decision-makers for personal welfare matters, which include where you should live and day-to-day care decisions. You can also appoint a decision-maker for property and affairs matters, which relate to decisions about property and insurance.
According to the Office of the Public Guardian, there are 3,200 applications to register LPAs as at January this year.
It costs $50 for Singaporeans and permanent residents to register a standard LPA. The standard LPA gives broad powers to your proxy decision-maker or donee. This form can be self-completed.
To register an LPA that allows you to specify restrictions and instructions on the powers of your appointed decision-maker will cost $200. You will also require the services of a lawyer to help you indicate your requirements.
C3A's Mr Ee says: "One can lose one's mental capacity at any time and at any age. The risk increases as one grows older. The LPA allows one to protect one's interests by indicating his personal, considered choice of a proxy decision-maker - someone he trusts to be reliable, competent and capable to act and make decisions on his behalf should he lose the mental capacity.
"The LPA can only be executed when one still has mental capacity to act. By planning ahead, it alleviates the stress and difficulties faced by their loved ones."
Similarly, Mr Richard Magnus, chairman of the Public Guardian Board, notes that Singaporeans have responded positively to the LPA as a planning instrument.
He says: "We also acknowledge that making an LPA is a personal choice, involving careful considerations in appointing someone they trust to decide and act on their behalf if they should lose their mental capacity."