Mon, May 09, 2011
The Sunday Times
by Lorna Tan
International Women's Day is celebrated tomorrow so it's pleasing to report that women here not only feel more optimistic about the future after the economic woes of last year, but are also more proactive about setting themselves up for retirement.
These findings - from recent surveys - show that women have made some progress in terms of personal finances.
The Tsao Foundation-TNS an-nual Ageing Preparedness Survey polled about 300 respondents in the second half of last year, on how prepared they are for their retirement. Half of the 300 were female. It found that compared with the 2008 survey, more women believe that retirement planning is important, are saving actively and are realising they may have to work beyond 60.
This is evidence of a trend in the right direction and shows that the importance of preparing for retirement is getting through to people, says the Tsao Foundation.
Not surprisingly, the survey also notes that income security is the topmost concern for a happy retirement.
'It is heartening to know that preparing for one's retirement is increasingly becoming an important part of a woman's life,' says Tsao Foundation chief executive Tan Bee Wan.
This is because women very often have to make sacrifices for their families and end up neglecting to care for themselves.
'Awareness is the first important step. Next comes action and that is to get themselves equipped with the necessary skills to prepare for retirement,' adds Dr Tan.
Positive news comes from a second survey as well. The MasterCard Worldwide Index of Women's Advancement found that more women are taking charge in the household.
Throughout the region, an estimated 66.5 per cent of women are taking on the role of decision-makers, up from 45.6 per cent last year. Conducted early this year, the biannual survey measured consumer confidence in 21 markets.
Here are some things to consider for a woman reviewing her financial needs.
Broadly, these differ from those of men because of a woman's physical makeup and her family circumstances.
For instance, women live longer than men, earn about 20 per cent less on average and retire younger. They are more likely to work part-time and take time out to be caregivers. Women also tend to suffer from more debilitating diseases in old age.
1. Cover against critical and women-related illnesses
Financial experts highlight that women are more susceptible to critical illnesses. Besides, certain illnesses are more prevalent among females such as systemic lupus erythematosus (SLE), osteoporosis, arthritis and of course breast cancer.
So while health insurance is important to everyone, women should ensure they have sufficient coverage against certain illnesses while they are still healthy.
Mr Patrick Lim, associate director at financial advisory firm PromiseLand Independent, notes that Manulife's critical illness plan lists SLE as one of 30 illnesses in its coverage. 'Another plus from taking up Manulife's 30 critical illnesses cover is the additional free coverage of up to two children per policy for the sum assured of $10,000 for serious illness of a child.'
Besides critical illness plans which can be bought by men and women, the market offers plans targeted at women who wish to insure against female-related conditions. This is especially suitable for women who have a family history of female-related cancers, says Ms Cynthia Toh, senior executive life planner at Great Eastern (GE).
To sweeten such plans, insurers may bundle extra benefits such as no claims discounts, additional critical illnesses coverage and other female wellness privileges such as biannual health checks.
An example is GE's PinkLife health plan, which charges an annual premium of $970 for a 30-year-old female who opts for a sum assured of $50,000. Prudential Assurance offers a similar plan called PruSmart Lady II.
Ms Toh says the main benefits of such plans are that they pay a lump sum upon the diagnosis of the specific female illnesses, provide for surgical procedures and even cover certain reconstructive surgery such as breast reconstruction.
This is typically excluded in all hospitalisation plans as it is not deemed a medically necessary procedure to treat breast cancer.
The downside is that these plans typically provide cover until age 65 and the sum assured is commonly capped at between $50,000 and $100,000, which may not be enough for the long-term treatment of advanced female malignant cancers.
This is particularly so when prohibitively expensive drugs like Herceptin for breast cancer and Avastin for ovarian cancers are prescribed for treatment.
2. Cover for pre- and post-natal treatment and childbirth
PinkLife and PruSmart Lady II plans offer an option to insure mothers against maternity risks like pregnancy complications and birth defects of a newborn.
By insuring against such risks before childbirth, parents have a safety net with cover for pregnancy-related conditions like stillbirth and miscarriage due to an accident. It also covers congenital conditions of a newborn and infant mortality.
Prudential highlights that such birth defects are usually not covered when parents buy an insurance plan for the child after birth as the child has to undergo health declaration. The optional maternity risk cover also includes hospital care for the infant if incubation or intensive care is required.
3. Disability income cover
Both Mr Lim and Ms Toh stress that there are two types of disability plans. The first is an occupational disability income policy that covers an individual's income.
Ms Toh strongly recommends women with good income to consider buying an occupational disability income cover. 'This is to ensure that you will continue to receive a certain proportion of your monthly income stream should you fail to perform the duties of your job or related jobs on a prolonged basis, resulting from a health condition or disability.'
With more women working and contributing substantially to the household income, such policies will certainly provide peace of mind, she adds.
Such covers are offered by insurers such as Aviva, GE and Manulife. GE's Paysecure charges an annual premium of $1,192.50 for a 30-year-old female in an office job. This is based on a monthly benefit of $5,000.
In the case of Manulife, the disability income cover is an optional rider. Mr Lim says the annual premium for a Manulife term plan with such a rider, for a sum assured of $1 million, is $2,024. This is based on a 30-year-old woman who opts for the cover to cease at age 55. The other is a severe disability plan for people over 40, and it aims to provide a rehabilitative income to cover the expenses on contracting severe old age disabilities.
Besides offering the severe disability plan ElderShield, GE has a Long Term GoldenCare Policy where the cover is based on fewer restrictive health conditions.
It charges a female who turns 55 at her next birthday $5,733.50 a year, for a monthly benefit of $5,000 for life. Other insurers that offer similar long-term care policies are Aviva and NTUC Income.
4. Adequate insurance protection
If you are a housewife, it is only prudent to make sure that your husband has put aside sufficient insurance coverage for your family's financial needs if he dies prematurely or suffers from a disability.
An economical way is to buy term insurance on your husband's life as it covers huge sums for a small annual premium compared with other plans like whole life and endowment.
Another area often overlooked is mortgage insurance. If your house is not fully paid up, it is important to ensure the mortgage is adequately covered.
5. Managing investments proactively
Whether single or married, women should adopt a proactive attitude towards upgrading their financial know-how and managing their investments.
Surveys show that women tend to be good savers and are more conservative in their approach to money.
Mr Albert Lam, investment director of IPP Financial Advisers, cautions women investors that if they hold largely investments that are less risky in nature, it will not help them in the long run if the investments are unable to grow to the amount required for their retirement.
'Let's assume you leave $100,000 in a bank deposit now at an annual interest rate of 0.5 per cent. If inflation is 2 per cent, the sum will dwindle to $86,000 after 10 years. So safety need not always be the best thing. Inflation would have eaten away your principal,' says Mr Lam.
He suggests that all investors look towards the mega trends of the future and invest in a portfolio of instruments that will ride on these trends.
'Some of these will include Asian and emerging markets growth, commodities as a long-term hedge against inflation, and an allocation to physical gold. Investing in gold coins may be something that appeals to women investors... After all, she can leave them as a legacy to her children.'
More savvy female investors can do their own homework and select individual stocks, blue chips or real estate investment trusts that pay out regular dividends as viable investment alternatives.
6. Updating wills and nominations of beneficiaries
Know the contents of your husband's will and make sure that he makes adequate provision, particularly if you are a housewife.
Mr Lam advises married women to update their Central Provident Fund nominations as those done before marriage would have become void.
And if you become a widow, remember to update your will on your husband's death so that your share of his estate will be distributed according to your wishes, says Ms Toh.
7. Professional help
If you have inherited wealth from your husband's estate, it is vital that you appoint an independent corporate trustee rather than an indivi-dual.
Use a lasting power of attorney arrangement to direct the financial affairs and properties should you fall into dementia or suffer from other mental incapacities, says Ms Toh.
This can also be done by setting up a living trust arrangement and designating professionals to handle the management of those assets in the event of disability or critical illnesses.
'Such an arrangement will ensure a continuity of a comfortable lifestyle even after your husband is gone and you are too sick to take care of yourself during your retirement years,' she adds.
lorna@sph.com.sg
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