Enhancements to ElderShield scheme

Long-Term-Care-at-home

Some of you might have heard – our national long term care insurance scheme, ElderShield, will be enhanced and renamed as CareShield Life. This is a good move as Singapore’s population is rapidly aging with shrinking family sizes, hence a declining old-age support ratio.

To be launched in 2020, some of its key points are below:

  • CareShield Life will be universal for all future cohorts of Singapore citizens and Permanent Residents, starting from age 30 and including those with pre-existing disability.

 

  • Higher and lifetime payouts, as long as the insured remains severely disabled (i.e. unable to perform 3 out of 6 Activities of Daily Living, also known as ADLs). Payouts start from $600 per month, and will increase overtime as premiums are paid.

 

  • The government will provide premium subsidies and financial support for CareShield Life.

Since the news was announced, here are some FAQs that I have met with and the respective answers:

 

1. What will happen to existing ElderShield (ESH) policyholders before CareShield Life is launched?

They will continue to be covered and enjoy the benefits under the current ESH policy as long as premiums are paid. No action is required in the meantime. Similarly for policyholders of ESH Supplementary Plans, they will continue to be covered.

 

2. Will universal coverage be extended to existing ESH policyholders?

Existing ESH policyholders will be given the option to join CareShield Life from 2021, pending further details form the Government.

 

3. Should I buy the current ESH Supplementary Plans before CareShield Life is launched?

If you have a need for long term care above the current ESH coverage, you should consider enhancing your coverage with ESH Supplementary plans.

 

Long term care, whether in the form of home care or nursing homes, can incur huge expenses in the long run. Such expenses however, are not covered by the usual hospital & surgical insurance most people have. For more information, I have written a separate article on how to cope with long term care.

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The Lifecycle Financial Planning Approach

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The lifecycle financial planning approach places all your financial activity into distinct time periods, or stages, with retirement acting as the final phase in the financial lifecycle.

This approach is powerful as it provides you a clear framework for evaluating different decisions. Here are the 5 standard financial life stages encompassed in the lifecycle approach. Keep in mind the stated age ranges are merely guideposts, some of you will pass through stages more quickly or more slowly depending on your circumstances.

1. Early Career
Ranging in age from 25 to 35 years old, early career phase adults are starting to build a foundation for a strong financial future. You may be planning to start a family, if you have not done so already. If you do not yet own a home, you might be saving for one. At this stage, keeping income in step with expenses is a struggle, but it’s important to lay the groundwork for retirement saving now.

2. Career Development
From ages 35 to 50, earnings rise, but so do financial demands. Keeping expenses in line with income is a challenge in this stage. Many families are concerned with covering college costs and paying for ongoing expenses while also increasing the pace of saving for retirement.

3. Peak Accumulation
In this stage, from the early 50s into the early 60s, you typically reach your maximum income level. It may be a time of relative freedom as your children have graduated from college. Without college tuition and with lower expenses, you can accelerate savings rates to position yourself for a more secure retirement.

4. Pre-Retirement
About 3 to 6 years before winding down professionally, you should start restructuring assets to reduce risk and increase income. By this point, mortgages are usually paid and children are independent. This is the time to evaluate retirement income options and the tax consequences of investments.

5. Retirement
The final financial lifecycle phase occurs for people in their mid-60s and beyond. Once you stop working, your focus shifts from wealth accumulation to income preservation. In this stage, the goal is to preserve your purchasing power and enjoy your desired lifestyle. Estate planning and legacy considerations also gain importance as you age.

As we transition through each life stage, we should adjust our focus each step of the way to ensure our financial plan remains appropriate for our risk tolerance, age and goals.

Maximizing Your Return in an Up-Down Market

grafiekomhoog_01There has been a lot of stock market volatility recently and people have been asking me what should they do with their investment portfolio. While no one has a crystal ball and everybody has their own specific situation, there are some general questions below you can ask yourself when the stock market gets a little choppier than normal.

1. Did the goal for the money change?
Maybe you’ve originally invested the money for the long term such as retirement, all of a sudden you change your mind and you actually need this money sooner. If so, then that may mean you need to change the strategy that you have for that money.

2. Did your risk appetite change?
Perhaps you started investing with a gung-ho attitude, believing you can take all the risks to get potentially higher returns. Then that changes and you don’t want to take on that level of risk anymore. This may be a reason for you to review your investment strategy and make some changes.

3. Is your money allocated in a diversified portfolio?
If you could honestly answer ‘yes’ to this question, that you know your money follows an allocation model and you are rebalancing the allocation on a regular basis, then you might not need to make any changes.

Again, everybody’s situation is different – you have different risk tolerance, different goals and different timeframe to hold on to their investments. You need to be aware of what your specific needs are when it comes to investing, do your homework and make sure you’re investing properly.

Simple Financial Tips That Can Make A Difference

tips2018 has certainly flew by and wow.. we’re going into March already? Perhaps now is a good time for us to do a stock-take on our money. Here is a couple of tips on how to keep more money in your wallet this year.

1. Don’t Do Mental Accounting When Building Your Budget
Mental accounting means the behavioural thinking of having different piles of money for different reasons. You might have a “jar” that says this is for emergencies or a vacation, and you’re putting money in there every month – at close to zero interest rate.

Then you also have a credit card debt. You mentally classify it as a different thing and pay your debt with income each month.

Financially, this doesn’t make much sense. Money is fungible, it really is all the same. You shouldn’t have a jar with money sitting in it that’s getting no interest or growth while you still have credit card debt.

The solution is to think about all your money as the same. People like to put cash in different buckets for different reasons, but that’s mental accounting and we need to overcome that hurdle.

2. Prepaying your mortgage
Some people add a little extra to their monthly payments to pay the loan off faster. This brings up a common question – is this a good use of the extra cash?

With current mortgage rates at under 4%, you should not be prepaying your mortgage. In fact, mortgages have really low interest rates and are designed for long periods of payments, and you should stick to that payment.

Prepaying it means you are giving up opportunity to use that money elsewhere – whether it’s paying off credit card debt or just investing it, putting it aside for retirement. If you’d be getting 8% returns on your long-term investments, why put your money in something that’s only 4%?

So from a financial planning standpoint, it’s not a good strategy. Nonetheless, people feel comfortable doing that. I know you want to feel like you’re paying off the house faster, but resist if you can.

3 things about your employer-provided insurance you may not know

benefitsIt is great if you are working in a company that provides you with benefits such as insurance. However, there are some limitations to employer-provided insurance that you should know. Here are 3 of them:

1. It’s a benefit, not a guarantee.

Fact is, companies are not obligated to offer life or health insurance. Just because your employer is offering it now, doesn’t mean they will in the future. A lot of companies are in cost-cutting mode, and benefits like life insurance can disappear without notice.

2. If you have it, it’s most likely not enough.

Most employer-provided life insurance coverage is one to three times your salary. So if you make $50,000, having up to $150,000 of life insurance sounds like a lot, right? But if you try to put that money to work in today’s interest rate environment, you’ll soon find out it doesn’t go very far. And if your family needs to spend $50,000 each year, what are they going to do after the third year?

3. It doesn’t protect your insurability.

Think about what would happen if your health changes while you only have employer-provided health insurance, but then they drop the coverage and you’re no longer able to get covered? Or what if you lose your job, or change jobs and the new employer doesn’t offer life or health insurance as a benefit?

Typically, employer-offered group insurance is not portable, meaning you can’t take that coverage with you when you leave a job. Buying an individual policy prevents this because it’s something you own.

The bottom line, is that it’s good to have employer-provided life insurance, but don’t ignore the greater need you may have for individual life insurance coverage too.