MANILA, Philippines - Asians do not have enough savings to cover their day-to-day needs when they retire.
Retirement savings of Asians can only support them for another 10 years, Hong Kong and Shanghai Banking Corp (HSBC) Senior Vice President and Head of Retail Banking and Wealth Management Gigi Pio De Roda said in a report released Monday, February 25.
In The Future of Retirement: A New Reality, the wealth managers showed that while Asians expect to live 15 to 21 years more after retirement, many expect their savings to last only 9 to 12 years.
"Increased longevity is one of the most important issues challenging societies today," Pio De Roda said. "Financial planning is vital to achieve retirement goals and is especially relevant as increased longevity challenges people’s financial security in later life."
HSBC said Asians believe they need around $40,000 per year to retire comfortably. This is higher than the global average of $35,000 per year.
The most expensive country to retire in Asia and the Pacific region is Australia where retirees need around $60,471 per year. Those from Hong Kong will need $56,217, and from Singapore, $48,773.
Obstacles to saving
HSBC said that while people across Asia started to save at 27 years old and started to plan for retirement at 29, many have never saved for retirement.
For the 37% who never saved for retirement, the biggest obstacle to saving is day-to-day cost of living. Some cite life events like the cost of property or mortgages as major reasons for not saving.
For those who do save for their retirement, they mostly rely on cash savings to supply their retirement needs.
"Cash remains a big part of Asians’ wealth portfolio. Building up savings for retirement can provide the benefit of diversification and the flexibility to capture growth opportunities in the market as well as to adjust their investment strategy to evolving personal circumstances," Pio de Rado said.
"However, an over-reliance on cash savings may increase the risk of a retirement income shortfall amidst today’s extremely low interest environment. Moreover, inflation in emerging markets also remains a real threat to bridge retirement income gap," she said.
HSBC said that 74% of Asians plan and compute for their retirement on their own. While this a good move, HSBC said seeking professional help in planning one's retirement could result in more savings.
"Living expenses and major life events push retirement savings down people’s priority list while ageing; weak social safety nets and changing pension schemes will continue to add pressure to retirement planning. Shifting economic and social trends require people to think differently about retirement and prepare for the unexpected," Pio de Roda said.
Pio De Roda said aging is one of the biggest challenges in Asia. She said that by 2050, there will be atleast 1 in 6 Asians who will be aged 15 to 64.
This means, Pio De Roda said, the median age in the region will rise to over 30 years old in 2050, from around 20 in 2010. Filipino's average age is currently around 23 years old.
"Spending more time with friends and family and frequent holidays are generally cited as the most popular retirement aspirations, whereas poor health and financial hardship are regarded as the biggest fears by Asian respondents," HSBC said. - Rappler.com