Understanding CPF
5 Ways On How Your CPF Monies Can Help Your Loved Ones
When we talk about CPF, most of us might be thinking about housing and retirement. Which is totally right and absolutely normal.
By using our CPF monies, we can put a roof on top of our family’s head. And with our CPF monies, we can be dependent (not fully) on financing our own expenses when we retire. But this article will share other ways on how you can use your CPF to help your loved ones.
READ ALSO: Breaking Down CPF LIFE And How It Can Be Included In Your Retirement Plan
Pay for their health insurance
We will be worried when one of our loved ones has to be hospitalized. Or when they are involved in an accident. Apart from the emotional aspect of things, you might also be worried about the financial aspect as well.
Hospital bills can rack up faster than waiting for a taxi. And if you do not have sufficient excess savings, you will find it hard to pay for their bills.
Therefore, by using the money from your MediSave account to buy your loved ones health insurance, you can very much lessen the financial burden.
READ ALSO: Get To Know More About MediShield Life
Nominating your CPF monies
Month by month you are contributing to your CPF account. That also means that it is just another bank account. And after decades, you do have a good amount of money in your CPF account even after using it up for your housing.
But what happens if passed away? What will happen to your CPF monies?
Not to worry, your CPF monies will be distributed. But if you want a specific person or a few number of people to be the one receiving the money, you would need to nominate your CPF monies.
Your CPF monies can be nominated to whomever you want during your lifetime. And there are 3 types of nomination that you can choose from.
- Cash Nomination
CPF distributed in cash via Cheque or GIRO.
- Enhanced Nomination Scheme Nomination
CPF distributed to your nominee’s CPF Account.
- Special Needs Nomination Scheme Nomination
CPF distributed to your special needs children where they will receive money monthly.
You can nominate your wife to be the sole nominee. Or you can perhaps nominate all three of your children.
With that money, your spouse can pay off the mortgage. Your children can get their tertiary education. Your CPF monies can help your loved ones even after you passed on.
Buy insurance (DPS)
The fear of passing on and leaving your spouse with a debt to pay is sometimes unavoidable. Buying an insurance policy that has a payout upon your demise can help you solve this particular issue.
But sometimes with a limited budget and really a lot of expenses, you are not able to buy an insurance policy.
Well, it is not the end; you still are able to buy an insurance policy with your CPF monies. That insurance policy is called the Dependants’ Protection Scheme (DPS)
DPS is a term-life insurance scheme that provides insured members and their families with a lump sum of money. The payout will be given upon the insured members pass away, suffer from Terminal Illness or Total Permanent Disability.
The maximum sum assured for DPS is $46,000. You should also nominate your DPS payout so that there will be clarity on who will be able to claim that sum assured.
The sum assured of the DPS is not included in the CPF proceeds. Which means even if you have indeed made a CPF nomination, the DPS payout is not included in the estate that will be distributed.
READ ALSO: DPS? What Is The Dependants’ Protection Scheme?
Having Long-term Care
Long-term care is often associated with the term ElderShield. And soon, in the near future, CareShield Life will also be introduced.
Both are a severe disability insurance scheme, which provides basic financial protection to those who need long-term care, especially in their old age.
The insured will get the payouts upon severe disability.
Severe disability means the inability to do three out of six activities of daily living (ADLs). They are:
- Transferring
- Walking
- Washing
- Toileting
- Clothing
- Feeding
Being unable to do some of the activities would mean that you would need assistance in most things. If you do have an ElderShield or even CareShieldLife (in the future), that will enable you to maybe hire a maid or get yourself a device that will assist you in your daily activities.
Your loved ones need not quit their job to help you with such matters. Or they do not have to sacrifice part of their own savings to pay for the maids’ salary.
You can pay the long-term care insurance with your MediSave account monies. By getting yourself sufficient long-term care coverage, you can help your loved ones in the future.
READ ALSO: Here Is How CareShield Life Can Help You Take Care Of Your Aging Parents
Pay for their college tuition fees
The CPF Education Scheme is a loan scheme where you are able to use your Ordinary account monies to pay for your own, spouse’s or children’s subsidized tuition fees.
You are only able to use only on Full-time subsidized diploma/degree courses at Approved Educational Institutions (AEI). Which means, only local educational institutions. Therefore, you are not able to pay it for courses in private institutions.
The amount you can use is 40% of your remaining Ordinary account balance or your remaining balance after setting aside money for housing or any other schemes (whichever is lower).
The student has to pay back the loan after graduation or termination of studies (whichever is earlier). Can be paid in a lump sum or via monthly installment over a maximum of 12 years.
With this, you are able to help loved ones achieve their tertiary education without using your own savings. You do have to take note, by taking this loan scheme, you will have a lesser amount to pay for your housing.
Think beyond housing and retirement
There are other different uses to your CPF account and those mentioned may help you in many other ways.
Nonetheless, with a limited budget, you cannot simply use it for all of them. You do need to know which is a priority. And if all of them are indeed priorities, make a timeline and determine which is the closest one to come.
That comes to the end of this article. Hope that this is beneficial for you and do share it with your family friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
