Silver Tsunami hitting Singapore: can we survive?

Sil­ver Tsunami is a term used to describe the enorm­ous fin­an­cial resources required to sup­port the high pro­por­tion of seni­or cit­izens age 65 years old and above in a coun­try. It will attack most developed coun­tries like Singa­pore in near future. The daunt­ing truth is, by 2030, about 23% of Singa­pore pop­u­la­tion will be aged 65 and above, lag­ging behind Japan only. The medi­an age will be 41 then and will rise to 54 by 2050, trail­ing behind only Japan, South Korea and Macau (see Singa­pore faces ‘sil­ver tsunami’ in Asi­aTime Online). What can we do to weath­er the Tsunami in time to come…?

With lower birth rate and med­ic­al advance­ment in drugs and implants that leads to longer life expect­ancy, Singa­pore will face a huge chal­lenge in 20 years times with few­er young people sup­port­ing the eld­erly. To weath­er the sil­ver tsunami, the easi­est and most fun­da­ment­al things we can do is to keep ourselves phys­ic­ally healthy and men­tally act­ive. Inev­it­ably, we also need to be pre­pared fin­an­cially so as to cope with the increas­ing med­ic­al, retire­ment expenses and even nurs­ing care in time to come.

Face-off with the Silver Tsunami

Old age is not the only chal­lenge we will face. What we need to deal with is the fact that though we are liv­ing longer, we have more people suf­fer­ing from chron­ic ill­nesses such as high blood pres­sure, high cho­les­ter­ol and diabetes…etc., no thanks to the afflu­ence and our sedent­ary life­style. The cur­rent aver­age hos­pit­al­iz­a­tion cost and treat­ment for some of the ail­ments are as shown in Table 1: Aver­age Hos­pit­al­iz­a­tion Cost.

Table 1: Average Hospitalization Cost for Common Diseases

 

 

 

 

 

 

The hos­pit­al­iz­a­tion cost is only for the ini­tial treat­ment. If we do not have a com­pre­hens­ive hos­pit­al and sur­gic­al plan that insured against such hos­pit­al­iz­a­tion cost, we may be saddled with a huge med­ic­al bill that can eas­ily wipe out most if not all our Medis­ave sav­ings and cash sav­ings meant for retire­ment.

These long term ill­nesses need long term med­ic­a­tions and care too. When these ill­nesses lead to com­plic­a­tion that requires long-term care from the fam­ily or pro­fes­sion­al, more cost will be incurred. This may include expenses for home med­ic­al, home nurs­ing, home rehab­il­it­a­tion, demen­tia day care ser­vice, ren­al dia­lys­is and cost for hir­ing a maid or enga­ging med­ic­al ser­vices. As a mat­ter of fact, “The cost of care in nurs­ing homes and assisted liv­ing has been and con­tin­ues to be high and in the past year, the increases have even out­paced med­ic­al care infla­tion of about 3 per­cent,” said Sandra Tim­mer­mann, dir­ect­or of the Mature Mar­ket Insti­tute, in a pre­pared state­ment in Nurs­ing Home Costs Con­tin­ue to Raise in 2010.

Even if we can live to ripe old age without chron­ic ill­ness or being severely dis­abled, we will still need money to sup­port ourselves through our old age. Hence, it is cru­cial to start early so as to accu­mu­late enough sav­ings for retire­ment.

Surviving the Silver Tsunami

Back in 2009, in his speech on Singa­pore’s needs to be pre­pared for the Sil­ver Tsunami , Mr Khaw Boon Wan, our former Health Min­is­ter, had high­lighted that ‘hav­ing more money, more capa­city for nurs­ing homes and com­munity hos­pit­al, improve cap­ab­il­it­ies of the long-term care sec­tor and have bet­ter integ­ra­tion of the health­care pro­viders’ (are vital to pre­pare Singa­pore to cope with the Sil­ver Tsunami).

In this regard, the gov­ern­ment has been act­ively encour­aging Singa­por­ean to keep healthy life­style and to go for health screen­ing early to detect any ail­ment early. In Octo­ber 2011, Health Pro­mo­tion Board launched a com­munity screen­ing pro­gramme to detect dia­betes, high blood pres­sure, high blood cho­les­ter­ol and obesity at only $2! Test for cer­vical can­cer is merely $10, $30 for breast can­cer and free for colorectal can­cer screen­ing! The recent par­lia­ment­ary debates and changes in health­care policies also show that the gov­ern­ment is spar­ing no effort in get­ting us ready for the tsunami.

On our part, we also have to start plan­ning for the expenses needed in the fol­low­ing areas:

  • Med­ic­a­tion
  • Hos­pit­al­iz­a­tion
  • Home Nurs­ing or Nurs­ing Home
  • Retire­ment

The estim­ated expenses in each of the area and pos­sible sources of income or sav­ings to cov­er the expenses are sum­mar­ized in Table 2: Estim­ated Expenses and Sources of Sav­ings.

Table 2: Estimated Expenses and Sources of Savings

 

 

 

 

 

 

 

 

 

 

 

Med­ic­a­tion Expenses are mainly for chron­ic ill­nesses. These expenses can be partly paid from Medis­ave and partly from cash. The list of chron­ic ill­nesses that can be paid via Medis­ave annu­ally are provided in my art­icle What can Medis­ave use for Chron­ic Ill­ness Man­age­ment and for Health Screen­ing? at aboutfinancialplanning.net (aFp.net) web­site. Obvi­ously, hav­ing suf­fi­cient Medis­ave sav­ing is the first thing that we should take care of. Since Medis­ave is part of CPF con­tri­bu­tion, retir­ing at a later age is the easi­est way to accu­mu­late more Medis­ave sav­ings. Top­ping up our depend­ants’ Medis­ave account is also a good altern­at­ive to increase their Medis­ave sav­ings.

Hos­pit­al­iz­a­tion Expenses include the expenses for sur­gery and med­ic­al expenses incurred when one is hos­pit­al­ized. These expenses are best addressed by enrolling in the Private Med­ic­al Integ­rated Shield Plan with As-Charged fea­tures with premi­um pay­able from Medis­ave, capped at $800 per insured. These As-Charged fea­tures are crit­ic­al in address­ing the med­ic­al cost infla­tion in future, which is cur­rently pro­jec­ted at 5% per annum. If pos­sible, do include the rider to cov­er the deduct­ible and co-insur­ance imposed by the main plan as this can effect­ively reduce the med­ic­al expenses to $0, as illus­trated in the aFp.net’s Fea­tured Art­icle $0 Med­ic­al Expenses, is it pos­sible?.

Home Nurs­ing or Nurs­ing Home Expenses are required when one is not able to take care of him­self due to old age or ill­ness. These expenses can be partly addressed by the gov­ern­ment Eld­erShield Scheme which every­one of us are auto­mat­ic­ally enrolled in when we reach 40 years old. How­ever, it is import­ant to note that Eld­erShield is only claim­able if the insured is not able to per­form 3 of the 6 daily activ­it­ies, i.e. bathing , dress­ing, feed­ing, mobil­ity, trans­fer­ring and toi­let­ing. Even so, the cur­rent basic allow­ance dis­bursed — $400 per month for 72 months, is far from enough for the nurs­ing expenses. The aver­age nurs­ing cost is about $2000 per month cur­rently, and will work out to $5037 in 20 years’ time based on 5% infla­tion rate. There­fore, we need to sup­ple­ment the short­fall by pur­chas­ing Eld­erShield Sup­ple­ment plan from private insurers like Aviva, Great East­ern or NTUC Income as such plan pays up to $2500 per month whole-life. For this, up to $600 Medi­as­ve can be used to pay for the premi­um for Eld­erShield Plan and anoth­er $600 for Eld­erShield Sup­ple­ment..

Retire­ment Expenses and plan­ning have been dis­cussed extens­ively in the aFp.net’s Fea­tured Art­icle Retire­ment Plan­ning – Start right now the right way. In brief, the earli­er we start plan­ning and sav­ings now, the less money we will need to set aside monthly for future liv­ing expenses.

How much monthly allow­ance should we save depends on the life­style we wish to main­tain after retire­ment. For example, if your cur­rent monthly expenses is $2000, it will soar to $3,612 in 20 years and $4,854 in 30 years based on 3% infla­tion rate. Cur­rently, there are two retire­ment gov­ern­ment schemes — CPF LIFE and Sup­ple­ment­ary Retire­ment Scheme (SRS), we can use to save for retire­ment.

CPF LIFE is the nation­al longev­ity scheme which all Singa­por­ean in the 40s now will be auto­mat­ic­ally enrolled into when we reach 55 years old. It is an annu­ity scheme that can be pur­chased using our money in CPF Retire­ment Account to provide us with monthly income, for as long as we live.

The Sup­ple­ment­ary Retire­ment Scheme (SRS), on the oth­er hand, is a vol­un­tary retire­ment sav­ing scheme intro­duced by the gov­ern­ment to encour­age Singa­por­eans to save more for our old age. Par­ti­cipants can con­trib­ute up to $12,750 to SRS yearly and also claim tax relief for the con­tri­bu­tions made. The sav­ing in SRS can be with­drawn from age 62 or the stip­u­lated offi­cial retire­ment age when we open the SRS account. This will be part of our retire­ment monthly allow­ance for med­ic­al expenses or daily liv­ing activ­it­ies. As 50% of the amount with­drawn is sub­jec­ted to income tax, we should spread out the with­draw­al amount for the next 10 years to min­im­ize the chargeable income tax.

In addi­tion to CPF LIFE and SRS, we can also con­sider sav­ing in retire­ment or annu­ity plans such as the Save As You Like (SAIL) from NTUC Income to sup­ple­ment any short­fall for the monthly expenses. For a com­par­is­on in the types of annu­ity plans, please refer to the aFp.net Fea­tured Art­icle Reduce Income Tax with SRS.

 

Conclusion

The needs to pre­pare ourselves phys­ic­ally, psy­cho­lo­gic­ally and fin­an­cially for the social eco­nom­ic issues arising from aging pop­u­la­tion are not some­thing new. Singa­pore gov­ern­ment has been pro­act­ive in help­ing the cit­izens to pre­pare for and com­bat these issues in time to come. Besides the effort by the gov­ern­ment, we have to fend for ourselves for the poten­tially huge med­ic­al cost, daily liv­ing expense for the healthy or nurs­ing care expenses for the “unlucky” ones. Take care of ourselves and every­one will be taken care of.

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