Four Strategies to Plan Your Retirement Money Well

Hong Kong residents tend to have long lifespans, with an average life expectancy exceeding 80 years¹. To achieve personal retirement goals, more people are focusing on saving for retirement. As everyone has different ideas about retirement, it is essential to tailor your retirement savings and investment strategies based on personal needs and financial circumstances. I have outlined four key steps to help readers review their existing plans, establish, and refine their own retirement goals and strategies.

Step 1: Understand Retirement Savings Tools

Before you start saving, it's important to know about the available retirement savings tools. In Hong Kong, the most common ones are the Mandatory Provident Fund (MPF) and voluntary contributions. Some people also choose to purchase qualifying deferred annuities. While accounts like 401(k) and IRA are common overseas, they are not applicable in Hong Kong, but the concept is similar—using tax incentives and reasonable investments to grow assets within the account.

It is worth noting that different savings accounts and products have various rules on contribution limits, withdrawal ages, and tax benefits. Young investors, if conditions allow, can choose long-term, growth-oriented products to enjoy the advantages of compounding and tax-free growth.

Step 2: Start Saving Early and Increase Savings Gradually

A recent survey² of Hong Kong's middle class showed that out of 1,057 respondents aged 24 and above with at least HKD 1 million in liquid assets, only 38% of non-retirees were confident about reaching their ideal retirement asset goals. In the current increasingly volatile market environment, starting retirement planning early is even more critical.

Indeed, the most important principle of retirement savings is "the earlier, the better." Even if the starting amount is limited, one should seize the opportunity to start planning and gradually increase the savings proportion as income grows. We believe that 15% of annual income should be allocated to retirement savings.

For those who cannot meet the target immediately, a gradual approach can be adopted, starting with a lower proportion and then regularly reviewing the savings situation and adjusting the proportion as income grows.

Step 3: Choose a Suitable Investment Portfolio for Retirement

Retirement savings are one of the long-term financial goals, but to achieve different life plans and retirement visions, it is crucial to fully utilize funds for asset allocation. Generally, an investment portfolio aimed at retirement should balance stocks (growth potential) and bonds (steady returns). As age increases, it is advisable to gradually reduce the proportion of stocks and increase bonds and cash-like assets to reduce the risk of the investment portfolio. In the current market conditions, it is also important to pay attention to bond yield trends and adjust investment strategies timely.

Step 4: Maintain a Long-Term View and Counter Market Volatility

Regardless of how the market fluctuates, maintaining discipline and patience is the key to successfully saving enough for retirement. Retirement planning is not achieved overnight but requires continuous review and adjustment. Proceeding step by step, doing what you can, and regularly reviewing progress will help you gradually move towards an ideal retirement life.