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[Meet life goals] Retirement Reinvented: Unlocking Success in Act Two

18 Sep 2023

Key takeaways

  • Plan for a secure future: Consider financial security, protecting your health, and paying off mortgages. Align your financial portfolio with your purpose. 
  • Address healthcare and inflation concerns: Be mindful of declining physical health and increasing healthcare expenses. Mitigate the impact of inflation on your savings and plan for the future cost of living. 
  • Embrace active retirement: Pursue fulfilling activities and find purpose to reduce cognitive decline and spend your time meaningfully.

Planning for retirement has always been a crucial financial goal for individuals, and it remains important across generations. It ranks as the second most important priority for Boomers[@boomers] and Gen X, following immediate financial security[@financial-security]. Even Millennials, for whom retirement is still some time away, consider it an important financial objective, after achieving financial security, providing for the family, and generating additional income.

The amount of savings perceived to be required for retirement varies significantly across markets, ranging from USD302,000 in India to USD1.2 million in US, with Hong Kong, Singapore, and mainland China not far behind.

These anticipated savings needed align with the differing costs of living between Emerging and Developed markets. Markets like Hong Kong and Singapore rank as the most expensive in Mercer’s “Cost of Living City Ranking 2023”,[@cost-of-living-city-ranking-2023] while in Emerging markets like Mexico and India are more affordable. Hence, when planning for retirement, it’s essential to consider the desired retirement location.

Average savings needed for retirement by market (USD)

*The result is based on survey respondents’ view on how much savings they needed. The values are for reference only. How much is needed will be di fferent for every individual. It’s advised to use professional tools such as a retirement calculator or seek financial planning advice for better assessment of individual retirement plans.

Addressing health and inflation concerns for a financially resilient future

The savings needed for retirement go beyond day-to-day costs and are influenced by concerns about declining physical and cognitive health, increasing healthcare expenses, and longer life expectancy.

Hong Kong, which now boasts the longest life expectancy in the world at 85.3 years, and Singapore, which ranks fifth at 84.1 years, show greater anxiety about health in retirement[@health-in-retirement].

Increasing healthcare costs are a significant concern in Hong Kong, Singapore, and Malaysia, while people in locations with universal healthcare, like UK, mainland China, and UAE, show less worry. Planning for retirement should also consider protection against healthcare expenses, especially coverage during retirement, and access to care services.

Harnessing purpose and engagement in retirement

At a spontaneous level, retirement still evokes traditional dreams of spending time with family and friends, travelling the world, and a carefree life where one doesn’t have to worry too much about finances. Increasingly retirement no longer marks the end of one’s productive life, but the beginning of another chapter in the book of life. Just over half of working individuals intend to work beyond official retirement, motivated by a commitment to remain healthy, engaged, and financially secure.

The top reason mentioned for planning to work beyond retirement is to stay engaged and active. Staying active can take many forms, including traditional retirement pursuits like spending time with family and friends, travelling or indulging in hobbies. However, people in retirement are looking for a sense of purpose and meaning in life. It’s not about just passing the time, but about maximising the quality of that time. Research suggests that having a sense of purpose reduces the risk of cognitive decline in older individuals and can even delay the onset of Alzheimer’s disease[@alzheimers-disease].

While volunteer work and skill-building courses are good options, many look to utilise their years of experience and expertise by continuing to work in their field. It’s important to consider retirement planning beyond finances and also focus on how your time will be spent

Ensure financial security in retirement with secure income streams

Some of the reasons quoted for working beyond retirement included general financial security, as well as having access to health insurance coverage and paying off mortgages. Access to healthcare is mentioned most in mainland China, Hong Kong, Malaysia, Singapore and US, while paying off mortgages is mentioned most in UK, followed by Malaysia, US, Singapore and India.

Financial security in retirement requires an objective assessment of how much savings you require, along with consistent monitoring and periodic reassessment of strategies to adapt to evolving circumstances. It’s crucial to not solely rely on dividends and interest, but also explore avenues for generating a steady income that can withstand the impact of inflation. Explore creating additional income streams from rental income, establishing a small business, or investing, so that you can choose to work rather than being compelled to work

5 steps to a successful Act Two

As you plan for your retirement, it's crucial to have the right guidance and support. Here are some important points to consider:

Hear from our experts

When we plan for our retirement, we face three big uncertainties. There’s the future state of our health, the unknown investment returns on our savings, and the cost of living during our retirement.

Willem Sels, Global Chief Investment Officer, HSBC Global Private Banking and Wealth

So, what can we do?

  • Think about contributing to pension savings as early as possible: if markets go down for a while, there’s a very good chance they might rebound if you have a long-term investment horizon.
  • Systematically contributing every month or quarter could help you grow your pot through the ups and downs in the market. And the tried and tested approach of investing in diversified portfolios (with stocks and bonds) continues to have the best track record if you want to beat inflation.
  • It’s a good idea to ensure that you have adequate healthcare protection.

Remember, with the right guidance and a comprehensive retirement plan, you can confidently step into your 'Act Two'. In the context of finances, time really is money, so the earlier your start, the better. Talk to your HSBC adviser to see how we can help.

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