With Hong Kong’s population having one of the world’s longest life expectancies, almost half (46%) of Hong Kong investors are concerned that they do not have sufficient funds to support their retirement living in one of the most expensive cities, according to a recent study.

While Hong Kong investors aim to retire early at age 63 and anticipate to support themselves for 17 years from their pension and saving, it is expected they will face five years of retirement income shortfall given the average life expectancy of 85 years (men 83; women 88), finds Fidelity International’s Asia-Pacific Investor Study, which aims to understand the retirement readiness of investors in Hong Kong, mainland China, Taiwan, Singapore, Japan and Australia.

When it comes to planning for retirement, just 38% of Hong Kong investors surveyed have started planning, rising only to 52% for the 45 to 69 age group. Interestingly, younger investors appear to be paying attention to the importance of early retirement planning, the study notes, with 19% of under 30s having started already and 27% having seriously considered it even if they have not yet begun.

Hong Kong investors expect to be able to spend an average of HK$24,000 (US$3,079) monthly in retirement, which accounts for 60% of their current monthly income. The majority (82%) consider that covering their daily costs will be the most important financial need in retirement, followed by having an emergency fund for medical treatment (68%) and affording leisure and travel (63%).

Young investors under age 30 indicate a high preference for being able to afford leisure, travel and personal growth.

However, a high proportion of Hong Kong investors express major concerns related to being able to afford medical expenses, longevity risk and inflation risk, the study details, showcasing that for many, a dream retirement remains out of grasp.

Retirement planning

Investing is a significant part of retirement planning, where individuals are likely to benefit from taking a long-term approach and investing consistently throughout their working life, also known as the accumulation phase.

This generally allows individuals, the study points out, a greater probability of achieving their goals. However, Hong Kong investors express concerns about not having enough for retirement because of losses from investment (55%), not being confident with investing (43%), and not making additional contributions (34%).

Off the back of these concerns, investors indicate that they will look to plug the gap by reducing their outgoings (45%) or even working part time in retirement (40%).

When asked for their top priority in choosing investment products post-retirement, generating stable monthly income was the number one choice (62%), followed by capital appreciation (24%). Just 14% indicated that their top priority was to guarantee no capital loss.

The expected investment return for those surveyed was 7.9%, which is likely unrealistic given that the most popular financial product post-retirement is the term deposit (considered by 56%), followed by stocks (53%) and bonds (40%).

“Many of us in Hong Kong find it daunting to think about retirement and are unsure how to start planning,” says Charlotte Chan, Fidelity’s head of Hong Kong global platform solutions and head of Hong Kong. “Of course, the earlier people start preparing, the longer they have to build their nest egg, but the next best time to start is today. Understanding your replacement ratio is a good starting point.

“According to the Fidelity retirement savings guidelines, the income replacement ratio to maintain the lifestyle is 48% of pre-retirement income assuming a retirement age of 65. To achieve this, investors are suggested to save at least 20% of pre-tax income per year on top of MPF [Mandatory Provident Fund] contribution over the course of working life. Planning ahead allows investors to consider the options they have to achieve a comfortable retirement.”