Retirement 101: Ways to Save for Retirement in Hong Kong
Retirement savings will always be an important subject regardless of your age. According to an article published on AsiaAsset.com, Hongkongers might be in trouble of outliving their retirement money by 6 years. Apparently, people in Hong Kong are living longer and their savings plans are not enough to pay for their needs until the very end. According to the data provided in the article, a comfortable retirement in Hong Kong is expected to cost around HK$436,000 each year. If based on the data, the average retirement age will last 17 years, that means you need at least HK$7.4 million to retire comfortably and without running the risk of losing money before you expire.
We all know that this is a problem because the elderly are in no condition to work to support their lifestyles. If you add to that health care costs, you will see the value of having adequate retirement savings.
Obviously, not saving for retirement is probably one of the biggest mistakes that you will make. In that regard, Hongkongers are smart about their choices because it is revealed that 6 out of 10 will save for retirement rather than go on a holiday.
And the government is also aware of the needs of the elderly. In fact, in a publication in Gov.hk, Chief Secretary Carrie Lam discussed the pillars supporting the retirement funds of the seniors in Hong Kong. You have the social security benefits that help 7 out of 10 of the elderly in Hong Kong. Among the programs involved are the CSSA (Comprehensive Social Security Assistance), OALA (Old Age Living Allowance), and Old Age Allowance and Disability Allowance.
The other pillar that supports the lifestyle of retired individuals is the retirement contribution scheme that is usually privately funded – in other words, the MPF (Mandatory Provident Fund) system. The third pillar involves the voluntary contributions to add to the mandatory MPF contributions. The fourth are the subsidised services that cover the health care and housing needs of the elderly.
As you can see, retirement in Hong Kong is well covered by the government. But that does not mean you should feel complacent. You need to understand what it takes to really secure your retirement lifestyle. After all, retiring in Hong Kong can be costly and living here will make you live longer – at least if you live a healthy lifestyle.
Two ways you can save for retirement
There are two options for retirement savings plans in Hong Kong:
Mandatory Provident Fund (MPF)
If you are employed, this is usually an automatic retirement plan that you will opt into. While that is true, you still have the option to manage your MPF portfolio. The ECA (Employee Choice Arrangement) will allow you to move your benefits to the different MPF schemes one a year. This will help you maximize the growth of your retirement savings. Just make sure that you will consider certain factors like your age and your risk tolerance. It is okay to be risky when you are still young. However, when you are nearing your retirement age, you need to make sure that your funds will not be compromised. You do not want to suffer losses just when you are about to retire. .
If your current MPF fund is performing well, try not to move it – unless you see a better option that will make your investment grow faster. Remember, making the switch takes time and can cost you too. Do not make the switch unless you know that it is really worth it.
Another option for retirement savings plans is personal investments. You can look into private companies and investment agencies for plans that you can use to grow your retirement fund. Here are three that you can consider.
- AIA offers different retirement planning options – according to your requirements. If you want a convenient way to manage your investment, you can choose the Simply Love Encore. If you want a lifetime protection combined with investment return opportunities, the Admire Life 2 is a great option. The Golden Years Income Plan will help provide a specific income for retirees. Choose the option that will serve your retirement needs.
- AXA is another company that you can look into. The company offers a Wealth Advance Savings Plan that combines a life insurance policy with an opportunity to grow your savings on either a mid to long-term phase. AXA even provides a bonus for every goal that you can meet – which will help accelerate the accumulation of your retirement savings.
- HSBC is the third company that you can look into. The company offers the Income Goal Insurance Plan that builds up your savings plans while meeting your personal requirements (e.g. accumulation of wealth, investment opportunities, etc). You have the option to choose a 10-year or 15-year plan. The longer the term, the more returns you can get. This can be turned into a more comprehensive plan that will provide benefits in the event of an early death, terminal illness or unemployment. They have other plans like the Early Income Annuity Plan and Uni Trust Monthly Investment Plan that might fit specific investment requirements.
How to be wise when saving for retirement
When you are saving for retirement, it is very important that you consider the type of lifestyle that you currently have and what you want to have in the future. Here are some tips that will help you make the right decisions for your retirement savings plans.
Understand your needs.
Do you have medical costs to expect because of a hereditary illness? Are you currently the breadwinner for the family? These are important considerations when you are choosing a retirement plan to invest it. Make sure you also consider the inflation in Hong Kong. As mentioned, this is one of the most expensive cities to live in. You have to be prepared financially.
Decide how you want to receive your retirement income.
Do you want to receive it like a monthly income or do you want to get it as a lump sum money that you will manage on your own? If you are good at managing your finances, the latter would make sense. But make sure you try to invest it in something that will help it grow further. You have to remember that the longer you withdraw your retirement savings, the more potential for it to grow.
Do not delay.
Finally, you have to make a commitment to save for retirement as early as possible Do not postpone it because the longer you wait, the bigger the premiums will be. When it comes to retirement savings, compound interest is your best friend. You want to ensure that this is something that you can maximize.
She is a Singapore Management University 2nd year undergraduate specialising in Strategic Management. From Tampa, Florida, she possesses an International Baccalaureate diploma from C. Leon King High School, and previously held the position of Treasurer of the King High School Division of the French National Honour Society and the Science National Honour Society. Abigail is currently acting as President of the French Cultural Club for SMU International Connections, and as a Resident Advisor and Fire Warden for the SMU Residences at Prinsep.
Abigail is a Former Florida Science Olympiad Champion in chemical forensics and protein modelling, and former Health Occupation Student’s Association District Champion in clinical nursing.
In her free time, Abigail enjoys interacting and caring for animals. She has previously volunteered for the Humane Society of Tampa Bay as an Adoption Assistant.
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