In ancient times, emperors of all dynasties made alchemy in pursuit of immortality, and today there are advanced medical technologies to assist human beings in pursuit of health and longevity.
According to the data of the United Nations in 2023, the average life expectancy in Hong Kong ranks second in the world, and the average life expectancy of newborn girls exceeds 88 years. It can be seen that population aging will become a new trend in Hong Kong society in the near future. To live a wonderful life in old age, women especially should make good use of the power of compound interest, which Einstein called “the eighth wonder of the world”, to increase the value of wealth and achieve wealth and freedom in old age.
As the life expectancy of Hong Kong people increases, the length of retirement life also increases accordingly. According to the 2023 “Wealth Insights Report” by Endowus Zhi An Investment, more than 40% of Hong Kong respondents believe that they do not have sufficient retirement savings and are worried about it.
In addition, due to factors such as women’s longer life expectancy and salary inequality, women are generally more conservative than men in terms of wealth appreciation. Therefore, their retirement savings are on average 30 to 40 percent lower than those of men, and they face a more severe retirement crisis. Even with the financial support of a partner and the next generation, independent thinking about retirement planning is still key.
Create a retirement planning checklist
To deal with the retirement crisis in a comprehensive manner, women should make arrangements according to their expected monthly income and expenditure after retirement. You may wish to refer to the following list of suggestions to calculate your monthly expenses and income after retirement in advance to plan ahead.
Calculate monthly retirement expenses
Generally speaking, retirement expenses can be divided into 3 categories: (1) necessary; (2) non-essential; (3) unexpected expenses. When calculating your retirement expenses, remember to factor in inflation.
1. Necessary expenses
Regardless of age, the necessary expenses to meet the basic needs of life account for a large part of daily expenses, generally covering areas such as food, transportation, housing and medical care. After retirement, without a fixed income, coping with regular expenses will cause huge financial pressure on retirees and their partners or family members. Therefore, it is very important to reduce the necessary expenses after retirement as much as possible. For example, owning a personal property can avoid monthly rent expenses; developing the habit of regular exercise and regular medical check-ups can also help save medical expenses that increase with age.
2. Non-essential expenses
Most women have struggled for their careers and families for many years. If they want to enjoy life after retirement, they must take into account travel, hobbies and other petty expenses in non-essential expenses. Whether it is to experience the cultural customs around the world or to learn a new hobby, pre-planning the non-essential expenses after retirement can make the old age fully enjoy the fruits of hard work and the wonderful life after retirement.
3. Unexpected expenses
That is, unexpected expenses are used for unexpected expenses, so it is more important to plan related expenses in advance. In addition to setting aside the necessary expenses that can cover 3 to 6 months of life as an emergency fund, women should also plan for their own insurance when they are young, so as to reduce premiums and prevent problems before they happen.
plan monthly retirement income
We found that women are generally more conservative in investment, and in today’s long-term inflationary economic environment, there is a high chance of depreciating wealth. Because a mere 1% annual inflation rate can reduce purchasing power by 26% in 30 years, and the inflation rate in Hong Kong has been higher than the above level for a long time. If you take a longer view and think about your life goals with a goal-based investment method, is it more important to avoid short-term market fluctuations, or to achieve an ideal retirement life in the future?
The answer is obvious. As far as retirement planning is concerned, a simple strategy is to divide wealth into 3 parts, while providing monthly retirement income while investing to grow wealth and fight against inflation.
1. Cash reserves
It is mainly to meet short-term expenses within three years and requires high liquidity. Therefore, it is recommended that you keep it as cash savings or short-term fixed deposits.
2. Invest conservatively
The second part of the wealth can be used to invest in more conservative financial instruments such as bonds, which can provide stable investment returns in a short period of time to provide retirement income and pay for expenses within 3 to 7 years after retirement .
3. Long-term investment
Since the average life expectancy of women in Hong Kong is 88 years old, in terms of retirement age at 60 years old, it is generally necessary to have enough wealth to cope with retirement life of 30 years or more. Therefore, after retirement, it is also necessary to continue to invest in investment tools with long-term growth potential, such as stocks, to help you fight against inflation and increase the value of your wealth.
After using up the cash reserves, women can sell the same amount of conservative investments to convert them into cash reserves to maintain the liquidity of wealth and meet short-term expenses. At the same time, they also need to convert part of the stock investment into conservative investments to maintain Short-term investment returns and overall long-term investment strategies.
To sum up, starting retirement planning early will help you to increase your wealth through the effect of compound interest, and then help you achieve your long-term life goals through the goal-based investment method.
The amount of funds does not affect the long-term investment strategy. What is more important is to develop regular investment habits, which is the key to achieving an ideal retirement life. When encountering any investment and wealth problems, you may wish to seek professional advice.
Author: Yuan Qixin, Managing Director and Head of Hong Kong, Endowus
Editor: Zhong Caiyu
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Author : Yuan Qixin Endowus Managing Director and Head of Hong Kong
column name: Ziben notes
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