Manage the financial needs of elderly parents

The Sunday Times have a good article on how you can manage the financial needs of your elderly parents.

I wish to focus on the option called "do it yourself". First, you can ask your parent to generate a financial plan using the available savings. This free service can be found in Prepare Your Financial Plan in this website. This financial plan will show you the retirement income (based on 20 years draw-down) after age 65, at various yields. You can compare the income against what is offered by other investment choices, such as a life annuity.

Your comparison should be based on the income "before adjusting for inflation" as the other options are also unadjusted. Pay special attention to the fact that the retirement income depends on the yield that can be obtained from the investment.

You are likely to get a yield of at least 4% by investing in an indexed fund over the next 20 years. This is explained in my book on financial planning. Your parent should also attend the educational talks organised by FISCA.  Even if your parent wish to invest in a life annuity, it is a good idea to get the benchmark to compare if the life annuity offers an attractive yield.

Tan Kin Lian