Today, many Hongkongers are taking different measures to financially prepare for retirement, through the Mandatory Provident Fund (MPF) scheme, savings, and separate investments, with the aim of creating a sustainable income stream for their retirement. Research from Manulife Investment Management revealed that working Hongkongers on average will get a recurring retirement income of less than one-third of their current income when they retire. This is according to the newly launched Manulife Investment Management Retirement Income Forecaster , a proprietary tool that helps people project their anticipated monthly retirement income based on current age, salary, and investable assets, including their MPF contributions.
The Retirement Income Forecaster integrates Manulife Investment Management’s proprietary capital market assumptions and leading investment portfolio data with our state-of-the-art mathematical modeling and Monte Carlo simulations, which then produces the expected monthly retirement income that people could achieve with a good level of confidence. Using the Retirement Income Forecaster, four scenarios of working people in Hong Kong are examined. Results show that their projected retirement income will be far less than what they are currently earning.
Scenario 1: Early career starter
Age: 32 Monthly income: HK$29,200 Investible assets: HK$750,000
Expected monthly retirement income: HK$9,200
Scenario 2: Double income couple with young kids
Age of Partner A: 42 Monthly income: HK$62,500 Investible assets: HK$1.5 million
Age of Partner B: 37 Monthly income: HK$41,700 Investible assets: HK$1 million
Expected combined monthly retirement income: HK$22,800
Scenario 3: Single individual with successful career
Age: 52 with Monthly income: HK$166,700 Investible assets: HK$4 million.
Expected monthly retirement income: HK$22,800
Scenario 4: Double income couple, about to retire
Age of Partner A: 64 Monthly income: HK$83,300 Investible assets: HK$2 million
Age of Partner B: 62 Monthly income: HK$20,800 Investible assets: HK$2 million
Expected combined monthly retirement income: HK$14,300
A separate survey commissioned by Manulife Investment Management found that people in Hong Kong expect they need an average of HK$21,287 per month, including housing expenses, to maintain a comfortable lifestyle in retirement. This sum is approximately 73% of their current household income.
There is clearly a huge gap between Hongkongers’ expected retirement expenses and the amount of retirement income they could confidently achieve per their current financial status. People in Hong Kong, and in fact across Asia, are facing a challenging situation in bridging this gap. This comes to show there is an imminent need for people to better plan for their financial well-being and an effective way to produce recurring income when they retire.
Inflation has always been the key issue in retirement, and recently markets around the world has seen the detrimental impact it could have on people’s livelihood.
One of the challenges with high inflation is it could heavily discount the purchasing power of an investment portfolio over a longer period. Inflation, coupled with deglobalization, demographic reversals, higher real interest rates and increased macroeconomic volatility, will create a challenging environment for generating sustainable returns and yields through traditional means.
One way to counter these issues is to consider long-term income-oriented and diversified multi-asset strategies when planning for retirement. This allows people to seek and capture sustainable income from higher yielding assets, as well as benefit from capital appreciation opportunities that may arise across geographies and sectors which can produce real returns on top of inflation.
Find out more about the Retirement Income Forecaster and the macro-economic outlook here.
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