Schroders Global Investor Study 2019: Hong Kong investors expect to draw 8.9% from their retirement savings each year and not run out of money

11/12/2019
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Hong Kong investors on average expected to draw 8.9% out of their retirement savings each year and not run out of money, Schroders’ Global Investor Study 2019 has found. Top areas of spending include healthcare costs of their own (55%) and of a loved one (36%), non-essential purchases like holiday (35%), and financial support for relatives such as education costs (25%).

Kelvin Lee, Head of Institutional Business, Hong Kong, commented: “It is alarming to see such a high average figure for withdrawals in this market environment. Our calculations show that an 8.9% withdrawal rate could deplete a retiree’s savings in a decade. As such, investors should plan to continue investing even in retirement so as to ensure a steady income stream to supplement their retirement savings.”

The study – which measured the views of over 25,000 investors, including 500 investors from Hong Kong – found that a third (34%) of Hong Kong investors take more risk with their retirement savings than with their personal savings, whilst a quarter (24%) take the opposite stance. Furthermore, younger generations took on more risk generally, assuming a longer-term view ahead of their retirement.

The willingness to take higher risks with retirement savings may be due to their concerns of not saving enough for retirement. Forty per cent (40%) of Hong Kong investors are concerned they are not saving enough ahead of retirement, compared with 26% in Asia and 24% globally.

The study indicated that Hong Kong investors are saving an average of 12.2% (including the employer contribution) of their current income specifically for retirement. In comparison, global investors’ average savings is 15.3% whilst those in Asia on average save 15.9% of current income.

In regard to generations, it was non-retired baby boomers1 who were saving the highest proportion of their annual income (15.7%) for retirement, compared with millennials and Generation X2 (11.8% and 11.9%, respectively).

Encouragingly, almost all non-retired investors in Hong Kong (97%) think there are factors that would convince them to save more for retirement. More than a third (35%) said that more information about likely living costs in retirement would convince them to save more for retirement.

Lee added:It is encouraging to see many Hong Kong investors being proactive and recognising the need to save more for retirement. By saving more and starting earlier, investors will be able to smoothen their journey to retirement throughout different personal circumstances and market conditions.”

“As we are in an environment where it has become increasingly difficult to generate yields and returns compared to the previous market cycles, it is not surprising to see investors taking greater risks with their retirement savings in order to generate a sustainable income throughout their well-earned retirement years. We believe that the best strategy is to take on an appropriate level of risk, and more importantly, continue to invest when in retirement to help ensure a continued source of steady income. Investors could consider investing in assets that can generate regular and sustainable income via a diversified multi-asset approach,” Lee concluded.

For more on the Schroders Global Investor Study 2019, please visit www.schroders.com.hk/gis.

1 Aged 51-70
2 Aged 38-50

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