Money and Me: CPF and the sandwich generation - How do you support your parents without putting your own retirement at risk?

SPEAKER_1 (0:01)

Best of Live Well, featuring Lance Alexander.

It's not just about money, it's about you, Money And Me, where wealth meets self-awareness. Only on Money FM 89.3.

Lance Alexander (0:19)

Well, you may be paying for a home, raising children, and possibly helping your parents with their bills. When money is tight, what should come first? And can CPF help with more than one generation's needs? On Money And Me, we look at the choices families can make now, and the decisions that will matter years from now.

What should someone do if someone's caught in the middle, and what are their options? With us is Gabriel Chen, who is the Senior Deputy Director, Retirement Savings Department at CPF Board. Gabriel, welcome to the show.

Gabriel Chen (0:55)

Good morning, Lance. Thank you for the welcome.

Lance Alexander (0:58)

Oh, my pleasure.

Gabriel Chen (0:59)

Thanks for having me here.

Lance Alexander (1:00)

Of course. It's sort of a gloomy Thursday morning. We've had some rain, which is also good. It's sort of getting rid of the haze. We like that. But still, it's looking kind of hazy from where we are. Let's start with why we're talking about this, because we know a lot of Singaporeans are caught up in the sandwich generation. And with our parents living longer, would you say that financial planning for the sandwich generation is becoming more and more challenging?

Gabriel Chen (1:28)

Thanks for the question.

Firstly, let's talk about who actually is part of this sandwich generation. This generation refers to the individuals who are balancing several responsibilities at a go. Supporting their aged parents, like you mentioned, managing their children's expenses, still having to plan for their own expenses, their homes and plan for their retirement. So this financial planning can be indeed challenging for this group, as their responsibilities pull in different directions. Immediate needs, such as parents' health care, children's education, current housing repayments, and all these need to be managed alongside future needs, such as building sufficient funds for your retirement. So I don't think there's a one-size-fits-all plan that works for everyone. And a sustainable balance across the responsibilities really depends on one's income, family circumstance, commitment and their desired retirement lifestyle.

Lance Alexander (2:23)

Right. You know, we've got this issue or thing that in the past couple of decades, we've discovered that people are living a whole lot longer, and Singapore is already a super-aged society. So when it comes to the sandwich generation, how does CPF support long-term financial planning for them?

Gabriel Chen (2:40)

CPF provides a foundation across the three pillars, retirement, housing and healthcare, helping members to meet these needs throughout their working lives. So for example, CPF contributions help members to build their retirement savings, support their housing needs, and cover healthcare expenses for themselves and their loved ones.

So this gives members, and this is this generation, this sandwich generation, a foundation to build on, so that they're not starting from scratch when they're working on their financial plans.

Lance Alexander (3:11)

Yeah, so the worrying thing is, if I'm also supporting my parents, would I be hurting my own retirement?

Gabriel Chen (3:19)

I guess that's actually what we would say we want to advise members to be very careful of, that it is actually important for this sandwich generation to keep both present as well as their future needs in view. So supporting loved ones today really should not come at the expense of your own retirement needs. Otherwise, it could shift the financial burden potentially to the next generation.

Lance Alexander (3:43)

Yeah, yeah, yeah, I was just thinking that as well, because we don't want a situation where we underfund our retirement and then we leave our children to carry that burden again, because then it never ends, yeah?

Gabriel Chen (3:53)

That's right. So one actually on this topic of retirement savings and one practical way to grow your retirement savings is actually by making cash top ups or CPF transfers to your own or your parents' special or retirement accounts. So saving in the special or retirement accounts actually earn 4% interest per annum.

And with compounding interest, these top ups would provide higher money payouts in retirement and they can also earn tax relief for the individual of up to $16,000 per year for top ups in cash.

Lance Alexander (4:28)

We're speaking to Gabriel Chen, who is the Senior Deputy Director, Retirement Savings Department at CPF Board. Should we also be looking at maybe money in our OA to invest? Is that what some people are doing or most people are doing today to obviously grow that wealth?

Gabriel Chen (4:44)

Thanks for the question. Based on what I recall, we have about, I think, not that many people actually invest their OA amounts in CPF. I think that's about 20% of our members who actually do that, 20% to 25%.