Ensuring a steady cash flow is important as it takes a lot of worry off managing costs after retirement, including escalating medical fees.
There are a few ways to do this, from having the right insurance plans to deferring CPF Life payouts and cashing in on stamp duty concessions for property.
The most urgent are the income tax top-ups because they must be made by the end of this calendar year to qualify for the next year of assessment.
Here are a few tips:
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1. Top-up your CPF to enjoy up to $16,000 tax relief
Everyone is entitled to top-up their CPF Special Accounts (SAs) as well as those of their loved ones to the Full Retirement Sum (FRS), which for 2024 is $205,800.
Although this top-up can be done using money in your CPF Ordinary Account, consider using cash instead.
When you do so, tax relief up to $8,000 is possible. If the top-up for a loved one is also done in cash, then an additional $8,000 in tax relief is also available, which means you can potentially enjoy a total of $16,000 in tax relief.
Note the following:
- That total tax reliefs per person per year is capped at $80,000.
- The definition of who qualifies as a loved one – parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings.
Children are not considered loved ones for the purposes of tax relief, and if you’re wondering why, this is the reason given by CPF:
"Your children have more time to accumulate savings in their working years for their own retirement needs. Hence, there is no tax relief for top-ups made to your children or non-immediate family members".
- You can, of course, top-up your children’s SAs with cash up to the FRS with no tax relief but you cannot transfer your CPF to your children’s accounts.
Again, if you’re wondering why, this is the reason:
"… CPF savings are meant to support your retirement needs. Your children would be able to accumulate savings in their working years. Hence, it is more important to prioritise your own retirement savings and ensure that you have sufficient funds to support your retirement needs".
- If you are making cash top-ups to a spouse or sibling, you will only be eligible for the tax relief if the recipient's income in the previous year does not exceed $8,000 or if the recipient is handicapped.
According to CPF:
"income would include income from bank interest, dividend and pension, investment income/rental income/directorship income. An example of a handicapped person is someone with visual-impairment, loss of hearing, loss of limb and dementia".
2. Get ABSD Concession for Single Seniors
During Budget 2024, the Government announced that purchases of a second residential property made on or after 16 Feb 2024, can get an Additional Buyer’s Stamp Duty (ABSD) refund. This is applicable to single Singapore Citizen (SC) seniors aged 55 and above, if conditions are met.
Essentially, each first residential property has to be solely owned by a single SC aged 55 and above, or with single SCs aged 55 and above who are immediate family members (parent, child or sibling).
Also, the owners of each first residential property need to be the owners of the second residential property.
Any additional owners purchasing the second residential property with the owners of each first residential property must also be single SCs aged 55 and above who are immediate family members.
The condition is that the buyers will have to dispose of the first property within six months after the date of purchase of the second property.
The full list of conditions can be found here.
3. Delay CPF LIFE payouts
A Singapore citizen or permanent resident born in 1958 or after has at least $60,000 in their retirement savings. Their monthly payouts are automatically included in CPF LIFE, which is an insurance annuity scheme that protects individuals from outliving their savings by guaranteeing payments for life.
Like most annuity schemes, CPF LIFE relies on risk pooling to spread risk among participants. Here’s how it works:
When a person turns 55, she should set aside at least the FRS for that year in a fourth CPF account known as the Retirement Account or RA.
- Assuming she is able to set aside this year’s FRS of $205,800, this sum will grow to about $308,900 in ten years.
- Assuming she wishes to start her monthly CPF LIFE payments at 65 and goes for the default Standard Plan, the entire RA balance will then be used to pay the CPF LIFE premium and therefore enters the risk pool with the balances of other CPF members.
CPF will then pay a monthly sum of about $1,600 to her for the rest of her life. These payments start with her RA balance (which once it enters the pool is now known as CPF LIFE premium) first, and once this is depleted (it takes about 16 years or $308,900/$1600 x 12) the interest from the pool will continue paying her for the rest of her life.
However, if she decides to delay receipt of payments from CPF Life, the money does not enter the pool yet. Instead, it stays in her RA and continues to earn a base interest of 4% for herself.
This is why CPF suggests that those who are still working and do not need the money yet, could postpone receiving payments as this would then be roughly 7% higher for each year of deferment.
4. Protect yourself with insurance cover for medical expenses
Most seniors would very likely have bought personal insurance when they were younger. If you have, good. Some may even feel that the healthcare schemes provided by the Government are sufficient, namely MediShield Life and CareShield Life.
However, there could be some who may be worried about mounting medical bills in their silver years and could be wondering about the affordability of buying insurance at the age of 50-plus or 60-plus, given that premiums for older folk tend to be relatively high.
If you fall into this category, it might interest you to know that there are private insurance schemes for senior citizens which are quite affordable. Here are a few to consider.
A. Income’s SilverCare
SilverCare is a policy advertised on Income’s website as providing “coverage against accidental death or permanent disability due to accident, from as little as 45 cents a day”.
It is also advertised as requiring no medical check-ups when signing up and for renewals. Interested persons can buy at any age between 50 and 75 whilst those aged above 75 are only eligible for renewals.
If you are aged 50-75 and opt for the Basic Plan, the yearly premium is $163.50 (or the advertised 45 cents per day) whilst that of the Prestige Plan is $316.81.
The Basic Plan provides coverage of $40,000 per year for permanent disability versus $60,000 for the Prestige Plan. Hospitalisation expenses for each accident is $2,000 versus $6,000 for the Basic and Prestige Plans respectively and the annual claim limits are $80,000 and $200,000.
In between these two extremes lies a Superior Plan which may be suitable for those who want more than just the lowest coverage but not the highest.
B. Great Eastern’s GREAT Golden Protector
The GREAT Golden Protector is designed for individuals aged 40 to 75 years old. It offers extensive personal accident coverage of up to $405,000 for “the best possible medical treatment and care you need after an accident”.
Three plans are available, called simply A, B and C. The annual premiums are $303.57, $436 and $517.50 respectively. In the case of major permanent disability, the payments are up to $45,000, $90,000 and $135,000 whilst coverage for hospitalisation is $100, $150 and $200 respectively per day.
C. Liberty Insurance’s SeniorCare
The SeniorCare policies offered by Liberty Insurance are Essential, Economy and Executive and the annual premiums are $136.25, $245.25 and $419.65 respectively. Coverage for one’s spouse is also available as well as for traditional Chinese medicine treatment.
Payment for permanent disablement ranges from $20,000 to $40,000 and although there is no mention of hospitalisation expenses, there is a payment of $1,000 to $3,000 to cover medical expenses per accident.
However, pre-existing conditions are not covered whilst accidental death and the permanent disablement benefit amount will be reduced by 50% when the insured reaches the age of 76.
There are other plans in the market tailored for seniors. It would be best to do your own research but remember to balance affordability and coverage when deciding.
