At one of our recent website content meetings, we thought of doing an article on the topic aging/ retiring financially secure in Hong Kong.
We knew the topic was tricky!! The cost of living in Hong Kong makes it very challenging to be financially secure when retired. Anyone who is fortunate enough to own property will probably be OK as their accommodation costs at least will be taken care of. For those without property it is much more difficult. The income from a typical MPF is not enough to live on. Many Hong Kongers scrape by with help from younger relatives, many working age people in Hong Kong give home to their parents to help them get by. The people in the expat community are in a different situation, many of them move back to their native country or to a place that's cheaper to live when they retire.
What about those within our community who have lived and built a good part of their lives in HK and wish to stay put during their “silver years”? Be they pure locals, 'locals at heart' (but foreign passport holders) or expats. It is super easy to google to list of support measures the HK government gives to HK passport holders and PRs who are 65 years and over. Even if eligible to those social measure, we surely can't rely solely on them to have our financial security! So, What factors should they be taking into consideration if they wish to retire "comfortably" in Home Kong.
The term "Comfortably" is obviously subjective with each one of us having a different definition. So it everyone’s road to retirement, with twists and turns that are unique to their situation.
An initial question anyone thinking of retiring should be asking is: “How much do I need to retire?” There is no obvious correct or precise ‘magic number’ to this question. But the question remains critical as you need to know where you stand to take decisions along the way that will help you have choices as retirement nears.
So, we asked a couple of financial savvy persons in the community and came up with a list of sub-questions/points that you will need to ask yourself if you are considering retiring in Hong Kong (or elsewhere).
Where in HK (or elsewhere) would you retire? Depending on the exact location where you want to live your retired years, your post retirement expenses and thus your financial needs will vary considerably. In Hong Kong only, if you wish to settle down on HK Island or New territories, you can expect very different lives and very different cost of living.
What do you expect to be doing during your “silver years”? It is well known that the more active you will be during your retired years, the longer and the better you will age. Take this into account when setting your target needs for your retired years.
Answering these 2 questions, you will know more or less what you need for your retired years. Next step is to check your options to finance these needs. These can be done using the three pillars of retirement planning:
1) Saving during active period OR the wealth accumulation
2) Putting the saving in the right channels to fructify
3) Making sure you have access to your basic needs (housing, health protection)
In how many years do you wish to retire? Knowing the number of years, you have left to retirement is important as you will be consciously saving towards your retirement.
How much can you save monthly or yearly? According to Fidelity asset manager, for a high level of confidence that you can maintain your lifestyle in retirement, you should be aiming to save at least 20% of your pre-tax income a year over the course of your working life. Of course, you may not be able to do this every year, but there are always way to catch up along the way.
Revenues in a foreign country? The closer you get to retirement age, the more conservative you should be. Make sure to keep some funds easily accessible in foreign currencies you may need in your retired life (e.g.: currency from your native country where you may go back from time to time) or from some other major international currencies (USD, EUR, Yen, CHF…). They will allow you to pay for your overseas expenses or could also become a potential source of revenues (in case of an appreciation of these currencies vs. HKD, via a conversion of these foreign currencies into HKD when they reach a high point). But always keep in mind that your home is Hong Kong, your expenses will be mostly in HKD and your liquidity needs to be in priority in this currency.
Where should I invest my savings? The nature of your savings needs to evolve with time. During your early “active years” (under 50s), you may want to favor long term investments weathering market volatility. While getting older, the priority should be to look after your self and enjoy the fruits of your work while supporting the younger generations who are building their own lives. In this phase, you may prioritize more liquid investments and clear your debts as much as you can.
Secure a home. If you can afford, try to invest into your own residence. Somewhere, anywhere. The knowledge that you have a place you call your own will take off a lot of stress and provide you with some stability. The value of your place may vary but you will always have access to the most basic need: a place where to live.
Secure a good health protection. If you are retired, we assume that you will be a PR or a HK citizen. In these cases, you will get almost free access to a good quality health protection provided by the Govt. Even though you will need to be ready for long queues at the hospital! But you will then be retired, so you will have plenty of time! :)
Lastly, you may need to reconsider your betting strategy every week-end at the race course. There is a lot of excitement there granted...but do we absolutely need to become millionaire when we are retired? :)
Disclaimer: This article is not tailored to the investment needs of any specific person or investor. This information does not constitute investment advice or financial advisory. This article is made through the research and discussions and cover a non-exhaustive list of points that seem logical and of common sense to us.