Grow Your Family's Nest Egg

BY JUNE NYU | Citibank's head of wealth management and segments Chan San-San offers advice on setting financial goals for a better and more secure future for your loved ones in the second of a three-part series

Financial safety for your family can be achieved through a structured financial plan.

In a survey commissioned by Citibank Singapore on financial planning and money management, respondents cite ensuring financial independence post retirement as their top key financial aspiration.

Meeting their long-term healthcare needs and expenses is next.

The survey, which was commissioned in August 2016, was conducted among 100 affluent individuals aged between 30 and 60.

"First, ensure we have sufficient savings so that we don't burden our children as we grow older," says Ms. Chan San-San (right), Citibank Singapore's head of wealth management and segments.

She adds that most people want to remain active after retirement, with aspirations to travel the world, spend more time with family and friends, pursue hobbies, learn new skills, start businesses and stay relevant in the modern economy.

Financial planning is thus essential in ensuring and protecting the financial well-being of individuals and families.

Ms. Chan highlights that retirement, healthcare and education are the key financial challenges of the modern family in Singapore.

Meanwhile, the survey found that the key sources of retirement income are the Central Provident Fund, fixed deposit or savings, and property rentals.

In her view, these may fall short as fixed deposits and savings account rates have been depressed by low interest rates around the world.

In addition, rental incomes may be impacted if the property market remains weak.

She says: "Families need to think through how they would tackle such situations. Only about half of affluent families have worked out a game plan, whether by themselves or with a financial planner.

"A strategic financial plan helps families to better understand each other, communicate their aspirations and money worries, and work towards their common goals.

"This includes decisions on how much to save and invest, and whether any adjustments to the lifestyle or goal are needed."

01. Retirement Plans

With rising costs and longer life spans, people may need more retirement funds than expected when they retire.

The findings showed that 60 per cent of respondents expect their investments or savings to cover their long-term care and medical expenses during their retirement years.

However, a quarter would need professional help on planning for retirement and ensure sufficient coverage for other needs.

Most people have started preparing for their retirement by investing in property and financial products such as stocks and shares, unit trusts and bonds.

Seventy-four per cent of respondents have also set aside money in savings, fixed deposit or retirement savings accounts.

Tips to prepare for retirement

Think about how you want to retire and start saving towards that. Estimate how much money you will need for the items on your "bucket list".

Minimise your "protection gap" — the difference between the resources you need and what you have — in case of an unexpected loss of life or income.

A financial adviser can help to sharpen your investment plan by using a combination of investment, cash and insurance instruments.

Schedule a review each year to track the progress of your plan and fine-tune what you need as your life stage shifts, such as when your children go off to university.

Citi's proprietary digital advisory tools, for instance, the Total Wealth Advisor, make it easier to track your financial goals.

Start a savings plan early to prepare for rising medical costs associated with old age. It may seem premature to think about retirement when you are in your 30s and 40s, but a longer time horizon means more time to materialise your plan.

Set up different sources of future income, using a combination of income or dividend yielding investments, and retirement savings plans that provide the flexibility of withdrawing monthly sums in your retirement years.

If you do not have immediate need for your insurance cash payouts, keep them with the insurer to earn extra crediting interest at an estimated market benchmark of 3 per cent per annum.

A comprehensive health insurance (such as medical and critical illness) is a good way to curb the rising costs. More importantly, stay in the pink of health so you can enjoy your retirement to the fullest.

02. Health Is Wealth

According to the study, nearly 80 per cent of affluent Singapore families have life insurance policies, 75 per cent have something for hospital stays, and 68 per cent have bought critical illness and disability riders.

However, most people in Singapore are underinsured, by about US$60,000 (S$81,800) each.

In view of this, Citibank has developed an online Protection Calculator to work out how much your own "protection gap" is.

Tips for healthcare plans

Analyse all your insurance policies to ascertain if they are adequate to see to your family's healthcare expenses.

With rising medical costs, it is imperative to look for comprehensive medical coverage that takes care of pre- and postmedical treatments, deductibles and "as charged" surcharges.

This will help to trim hefty healthcare costs, especially for conditions that require post-medical treatments.

Know what your critical illness plan covers, as not all such plans provide coverage for critical illnesses in the early stages.

A popular feature recently introduced in the market allows coverage to be restored after 12 months from the last claim, so the insured can enjoy continuous coverage.

Familiarise yourself with your company's healthcare benefits. Some companies extend insurance coverage to your spouse or children, and even offer discounted medical checkup rates.

03. Learning Journeys

Tuition fees at Singapore universities have risen since 2010. While most local undergraduate fees have grown by about 1 to 1.5 per cent per annum, fees for a handful, such as music, law and medicine, grew by 5 to 8 per cent per annum.

According to the survey, most respondents (62 per cent) would save to provide for their children's tertiary education in the future.

One-third has also invested in endowment insurance or education plan for their children.

Tips on education plans

Set up a regular savings plan, or invest in an endowment or a portfolio of safe assets when your children are young.

Most education savings plans allow the insured to withdraw cash payouts when the child enters tertiary school.

This will be handy to pay off school fees. Such plans also provide peace of mind to the child by waiving payments, in the event of death or total permanent disability of the premium payer.

Be mindful of when your children are going to university, and adjust the risk profile of the investment portfolio accordingly.

A portfolio for a child starting university in eight years would most likely start with a more aggressive profile, as time is on your side. But if the child has just three years to go, consider holding a larger portion of more conservative assets.

Scholarships can be a great help with tuition and living costs. Besides the typical government scholarships, some companies offer scholarships with no strings attached, except an internship stint with them.

Most universities also offer grants to international students falling under a certain demographic.

Financial advice at your fingertips

Citibank has developed the Total Wealth Advisor, a proprietary digital advisory tool to help its customers keep track of their progress in reaching their financial goals.

It allows customers to map different goals with customised risk profiles to various investment portfolios, such as moderate profile for educational goals, and conservative profile for retirement planning.

When combined with the bank's Gold Standard Portfolio Review, customers can be assured of staying ahead of the curve in their financial planning efforts with regular and in-depth portfolio reviews.

Tips on financial planning

SET FINANCIAL GOALS FOR MANAGING MONEY — Families should first identify their attitudes towards money, then decide what is the "right" amount to save and spend.

INSURANCE PLANS — Make sure your family has sufficient protection if anything untoward should happen to you.

INVEST WISELY — Consider investing across a range of equities, bonds and alternatives, while staying within a comfortable level of risk.

The opinions expressed in this 3-part advertorial should be regarded solely as general information, and does not constitute investment advice or a guarantee of returns. Neither the information nor any opinions expressed herein constitute or are intended to constitute an offer or invitation to any person (nor are they calculated to induce any offer or invitation from any person) to acquire, subscribe for or purchase any investment product. The views expressed herein do not necessarily reflect the views of Citibank Singapore Limited, Citibank N.A. nor any of its affiliates.

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