Planning your retirement

Planning Your Retirement

Retirement Step-by-step

There are four simple steps in planning for a comfortable retirement lifestyle. Because your retirement assets may represent a substantial proportion of your total wealth it's worth paying close attention to your plan. Follow these steps and it will become easy to begin planning for a happy retirement.

Step 1 - set your investment objective

It is essential to know how much you will need for a comfortable retirement. To work that out, first list the basics such as:

  • Estimated living cost per year after retirement
  • Estimated medical expenses
  • Possible inflation rates
  • The lifestyle you aspire to have

Step 2 - develop your plan

Before you start to develop your retirement plan, it may be better for you to understand your risk and return profiles. Investment involves risks. The better you understand your risk tolerance level, the more effectively you will manage your retirement investments. Generally, if you are younger and can invest longer, you will have a higher tolerance to risk. Therefore younger investors might consider a growth-oriented portfolio that aims to achieve their retirement goals sooner.

Step 3 - understand the basic asset class and portfolio mix

It is important to consider the key features of the various investment funds that are available to you. To what extent are they likely to provide capital growth or income? What are the main factors that drive their performance? How risky are they relative to other types of funds?

Investment Choice

Fund Characteristics

Relative Risks

Equity Funds

  • Can produce capital growth and income
  • The capital gains mainly come from rises in the prices of the shares held in the funds
  • Income comes from dividends paid by the companies that the fund invests in
  • Higher return potential, but higher risk relative to other funds

High

Bond Funds

  • Can produce capital growth and income
  • Capital gains come from rises in the prices of the bond funds
  • Income is usually generated by the interest paid on the bonds
  • Has a medium return potential and generally considered to be a rather stable investment and risk associated is comparably lower than equities

Medium

Cash / Liquidity Funds

  • Invests generally in short-term high quality interest securities or commercial paper
  • Usually has little potential for capital gains
  • Income comes from interest from bank deposits and very high quality short-term bonds
  • Has the lowest potential for returns, but also the lowest risk among investment funds

Low

Identifying a suitable portfolio

Portfolio Mix

Investor Profile

Aggressive

(e.g. 80% - 100% equity)

  • Age: The early years eg. below 40 (20-39 years old)
  • Investment strategy: Aggressive
  • Risk appetite: Willing to take high risks
  • Looking for attractive long-term capital appreciation and maximization of investment returns

Growth

(e.g. 70% equity / 30% bond)

  • Age: below 50 (20-49 years old)
  • Investment strategy: Growth
  • Risk appetite: Willing to accept above average levels of risk
  • Looking for long-term capital growth and income without excessive risk

Balanced

(e.g. 50% equity / 50% bond)

  • Age: Mid-life eg. 50-55 years old
  • Investment strategy: Balanced
  • Risk appetite: Willing to accept medium levels of risk
  • Looking for capital growth with some stability

Conservative

(e.g. 30% equity / 70% bond)

  • Age: Approaching retirement 56-62
  • Investment Strategy: Moderately conservative
  • Risk appetite: Willing to accept a relatively low level of risk
  • Looking for capital preservation with some stable growth of income

Very Conservative

(e.g. 100% cash)

  • Age range: 62 and above or retired
  • Investment Strategy: Very conservative
  • Risk appetite: Unwilling to take risk
  • Looking for capital security and stability with very minimal risk

Step 4 - review and rebalance

Balance is desirable in many things and that includes your portfolio. Building your initial retirement investment portfolio is only the first stage of the retirement planning process because your life will go through different stages and you will experience change between now and when you retire at 65. The next stage of the retirement planning process involves reviewing your retirement portfolio regularly, eg. once a year and rebalance your portfolio from time to time. You might need to reassess your investment objectives and your risk appetite each time before choosing a strategy that meets your needs and changed situation.

Follow us

Contact Us

Level 33, Two Pacific Place, 88 Queensway, Hong Kong

(852) 2521 1633

Online enquiry: Please complete the web form below and we will reply as soon as possible.

Contact us

The investments mentioned in this website may not be suitable to all investors. The information contained in this website is provided for reference only and does not constitute any investment advice. Investors are advised to seek independent advice before making any investment decision.

Investment involves risk. Past performance is not indicative of future performance. You should remember that the value of investments can go down as well as up and is not guaranteed. You may not get back the full amount invested. Please refer to the relevant offering document including the risk factors.

This website is intended for Hong Kong residents only. Non-Hong Kong residents are responsible for observing all applicable laws and regulations of their relevant jurisdictions before proceeding to access the information contained herein. Schroder Investment Management (Hong Kong) Limited is regulated by the SFC. The website (excluding Schroder Provident Plan related pages) has not been reviewed by the SFC.

The website is issued by Schroder Investment Management (Hong Kong) Limited.

© Copyright 2024 Schroder Investment Management (Hong Kong) Limited

Important notice: Schroders does not make unsolicited requests through emails, calls, messages, WhatsApp, WeChat, Facebook, Instagram applications. Any contact other than via Schroders’ official channels for personal or financial information is likely to be false and fraudulent. Please stay vigilant and refer to our Fraud Alert Notice for further details. If you have doubts about the person, platforms, websites or institutions that claim to be associated with Schroders, please contact us via (852) 2521 1633 and inform the local police.