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27 Oct 2023

SOURCE: The Simple Sum

Senior couple blowing bubbles, enjoying retirement

This article is brought to you by the The Simple Sum


There’s a new identity that most of us will assume later in life – being part of the sandwich generation. Entering this phase means supporting both children and elderly parents, both emotionally and financially, especially if the latter did not prepare financially for their retirement.


You’ll also have to manage and plan for your own retirement, whilst juggling every day financial expenses and commitments at the same time. 


It’s not an enviable situation to be in, but the good news is that there are things that you can do now that can go a long way toward being better prepared and less stressed when you have to care for older and younger family members.

That includes thinking and planning for your retirement now, even if it may seem like a long way off. 


If you wait till it happens to take action, you may feel more stressed due to the lack of time. So why not take the first steps to prepare and score small financial wins now for future financial success?

1. Know your CPF

For many of us who just started working, contributing to Central Provident Fund (CPF) savings is compulsory for retirement and you may not fully understand how CPF works. But understanding their use is beneficial – for example, both yourself and your employer contribute a portion of your salary to your CPF each month. The money in these accounts earns interest, so it compounds and grows over time. 


Your CPF is made up of the following accounts:

  • OA (Ordinary Account): For retirement, housing, insurance, and investments.

  • SA (Special Account): For old age and investment in long-term financial products.

  • MA (MediSave Account): For healthcare expenses, including hospitalisation and medical insurance.

  • RA (Retirement Account): Created when you reach age 55, meant for your monthly retirement payouts.

Knowing their use will allow you to save for various life goals, ensure financial security in retirement, manage housing costs, and cover healthcare expenses. You can easily tabulate how much retirement income you would need by using the CPF Planner.

2. Budget well

The first step towards any good planning for your finances comes with smart spending and budgeting, whether it’s using the 50-30-20 method or the zero-based budgeting. When you know how to differentiate between your needs and wants, as well as control impulse spending, you can better build your savings. These good habits will prove useful later in life when your expenses increase such as when you get married and start a family.

If you’re intending to start a family, it would help to get familiar with the costs related to pregnancy and raising a child in the early years. This would include prenatal and maternity care, childbirth expenses, and essential baby gear and supplies as well as childcare expenses. Budgeting for these expenses will mean you are financially prepared and will be less stressed when your child comes.

3. Take advantage of compounding interest and start saving towards your retirement

Make the money that you save work harder by taking advantage of time and compounding – when it comes to growing your money, time is your best asset.

Compounding interest is how your CPF savings grows. Using CPF, you can earn up to 6% p.a. (if you are above age 55) or 5% p.a. (if you are below age 55)*, and over time, your CPF savings will multiply over time, giving you a strong foundation for retirement.  

Achieve another small win by making cash top-ups or CPF transfers to your SA. While there may be other options that offer a higher interest rate, the 4% that your CPF SA account offers you is risk-free. By choosing to make a cash top-up, you also enjoy up to $8,000^ in tax relief every calendar year.

Family celebrating a birthday

4. Speak to your parents about their plans for retirement

It’s not easy, especially in Asian families, but it’s important to make time to talk to your parents about their retirement plans. 


These open and honest conversations are small wins that let you discover what preparations they have (or haven’t) made, and the lifestyle that they intend to have, as well as the expenses that come with it. This lets you work together with them to plan and ensure that they have the funds to support them and their retirement lifestyle.

If you are looking to give your parent’s retirement fund a boost, consider making cash top-ups to your parent’s CPF. This can help alleviate the financial burden on you to take care of them when they retire and they’ll get up to 6% per annum in interest. You’ll also enjoy tax relief of up to $8,000^ for cash top-ups made to your loved ones each calendar year.

5. Prioritise your and your loved one’s health

The biggest costs that come up later in life are health-related, so one of the best investments you can make to reduce the likelihood of being struck by chronic conditions such as diabetes and stroke is to engage in regular physical activity. This can help improve overall health, fitness and quality of life.

However, even if you exercise regularly and lead a healthy lifestyle, it still doesn’t guarantee that you would be free from illness. This is why it’s important to familiarise yourself with MediSave, MediShield Life, and CareShield Life, and how they can help cover your medical costs. This will help you manage better if you or your parents face medical issues in the future.

6. Review your finances regularly

Knowing the state of your finances and the progress you are making towards your financial goals is key in managing the challenges faced by the sandwich generation. This lets you make adjustments to ensure that you are on track to being able to support your children and elderly parents in the future, as well as your own retirement.  


For your funds in CPF, a personalised year-in-review statement is prepared on your birthday every year. It includes an overview of your CPF account balances, inflows and outflows or cash as well as the key milestones you achieved in the last 12 months. It also provides insights into what to look out for in the next 12 months in your CPF account, as well as resources for your retirement planning. 


While we don’t know exactly what will happen in the future, what we can do is to best safeguard against all potential outcomes by being financially prepared and remaining agile.

And don’t get overwhelmed if you feel that it’s a lot to take on, take it step by step and celebrate each small win along the way. Over time, these small wins accumulate and will help you break free from the common financial pitfalls faced by the sandwich generation. 

After all, you have already achieved your very first small win: by arming yourself with the knowledge you need. 

*Up to 5%/6% is based on the floor rate of 4%.

^ Terms and Conditions apply.

This article was first published on The Simple Sum.


The information provided in this article is accurate as of the date of publication.