Here's the golden rule of retirement: the more prepared you are, the better the outcome.
However, the reality of personal finance is that ideals and real-life circumstances seldom match. Throughout your life, you may have responsibilities that others don't - whether it's a parent who requires more expensive healthcare because of a medical condition or school fees for your children.
To build a substantial nest egg, some of us may invest in stocks or a retirement plan offered by a bank or insurer. Then, there are some who depend on their children for financial help, buffered by monthly payouts from their Central Provident Fund (CPF) Retirement Sum Scheme or CPF Life. But what if you would like to augment your lifestyle with more income in your golden years?
That's where a property can come in handy. If you're living in a Housing and Development Board (HDB) flat, there are a few options to help you unlock the value of your flat to supplement your retirement needs. Read on to find out more.
Monetising your flat
Elderly owners of HDB flats have always had the option of renting out their flats or rooms for additional income, or right-sizing to a smaller flat if they do not intend to stay in their current one. In recent years, HDB has introduced two other schemes - the Lease Buyback Scheme in 2009 and the Silver Housing Bonus in 2013 - for elderly flat owners to tap into.
Here's a breakdown of the various options available to elderly who wish to unlock the value of their flat for retirement.
Right-sizing with Silver Housing Bonus
Over time, elderly couples may find that their flat is too big to maintain, especially if they have children who have moved out to start families of their own. In this case, some may choose to sell their flat and right-size to a smaller one.
There are a few options for the elderly when it comes to right-sizing:
You can choose to right-size to a resale flat, and enjoy a Proximity Housing Grant of up to $20,000 if you move near your children. You may also choose to buy a new two-room Flexi unit from HDB, with those aged 55 and above having the flexibility to choose a lease length and flat size that best suit their budget and needs.
There is an additional Silver Housing Bonus of up to $20,000 for seniors who purchase a three-room or smaller flat from HDB or the open market. The amount of cash bonus you receive will depend on the sales proceeds that you top up to your CPF Retirement Account.
By topping up your CPF Retirement Account, you will also increase the lifelong monthly income that you receive under CPF Life. CPF Life is an annuity scheme that provides Singaporeans and Permanent Residents with a monthly payout for as long as they live.
Find out more about right-sizing with the Silver Housing Bonus here.
Renting out your whole flat or spare bedrooms
Seniors who prefer to stay put in their flat can still earn a steady stream of income by renting out their spare bedrooms. Corporate services firm Hawksford Singapore estimates that monthly room rental in a flat can fetch anywhere between $500 to $800, depending on the location and size of the room.
Meanwhile, couples who plan to move in with their children also have the option of renting out their entire flat. According to data from HDB, a four-room flat could bring in around $1,700 to $2,600 monthly depending on where your flat is located.
Read more about renting out your entire HDB flat or spare rooms here.
Lease Buyback Scheme
If you are aged 65 and above, taking up the Lease Buyback Scheme is another way of monetising your flat. Plus, you get to continue living in a familiar environment in your flat.
The scheme allows you to retain up to 35 years of lease, as long as you cover the youngest owner until he or she is at least 95 years old. Similar to the Silver Housing Bonus scheme, you will need to top up your CPF Retirement Account with part of your net sales proceeds. The top-up will increase the lifelong monthly income you receive from CPF Life. By selling the tail end of your flat's lease to HDB, you will also get to receive a cash bonus of up to $20,000.
Read more about the Lease Buyback Scheme here.
How to get started
To help seniors better understand their options, HDB offers one-to-one personalised financial counselling sessions at HDB branches. Want to attend these financial counselling sessions? Here's how:
Step 1: Make an e-appointment with an HDB branch and choose your appointment date and time. You will receive a message on your mobile phone, confirming the time, date and location of your appointment.
Step 2: Meet with an HDB officer who will guide you through the various monetisation options. The HDB officer will advise you on your right-sizing options and share estimated rent figures based on the location of your current home. They will also share the estimated figures for seniors interested in the Lease Buyback Scheme.
Step 3: For seniors keen on taking up the Lease Buyback Scheme, HDB will appoint valuers to conduct a market valuation of the flat. They will determine the value of the lease retained by the owner and the value of the tail-end lease sold to HDB.
HDB will then arrange another financial counselling session to share the actual total payout and monthly income that you can expect from taking up the scheme. Seniors will need to attend this session with a witness, who can be a family member or close friend. Their involvement can help ensure that seniors have fully considered their options before taking up the Lease Buyback Scheme.