When Should Retirement Financial Planning Begin?

With high living costs in Hong Kong, relying only on MPF and corporate pensions for expenditure after retirement may not be able to let you enjoy your life. To ensure sufficient livelihood protection after retirement, we must first calculate the required amount of fund. You should consider your retirement age, monthly retirement expenses, inflation rate, expected returns on investments and risk tolerance. What is more, you need to understand the risks and returns of various investment products. Investments should be adjusted if the target returns are difficult to achieve or the risks level is too high.

Medical Expenses in Old Age should not be Overlooked
According to a survey conducted by the Hong Kong Academy of Medicine in recent years, out of nearly 90% of elderlies are with chronic diseases, about two-thirds needed to self-finance for their medical costs. Some elderlies admitted that medical expenses, which took up a significant portion of their daily expenses, were the main financial burden that even affected their living. The survey also found that more than 60% of elderlies suffered from at least one chronic disease, including diabetes, heart disease and high blood pressure. Therefore, we must reserve a budget for medical expenses in later years.

Budget for Home Repair in Retirement
Your owner-occupied property, even if it is now a new building, will reach a certain age when you retire. Major repairs, such as water pipes replacement, exterior wall refurbishment, lobby renovation, lift replacement and others, will follow, increasing your retirement expenses. The owners of properties of certain ages should make plans even earlier. After the implementation of the Mandatory Building Inspection Scheme, many old large-scale housing estates need to be repaired. Therefore, do not overlook building maintenance costs while planning for retirement financing.

Is Reverse Mortgage Worth Considering?
Reverse mortgage scheme has been emerging in recent years, encouraging elderlies to mortgage their owner-occupied properties to banks. The banks will distribute the elderly a one-off or monthly living allowance based on the property value. The advantage is that the elderly can obtain a monthly living allowance without selling the property. However, participating in the scheme means fewer assets to be passed to descendants. Therefore, the scheme is more suitable for those who have no children or no intention to pass the properties to their children.

Retirement Protection Tips
To maintain stable living quality for retirement, we should consider financial plans with the following features:

• Provide guaranteed cash value as well as non-guaranteed anniversary and maturity dividends
• Flexible income period to match with your future retirement plan
• In the event of the insured’s death, the spouse or other family members can continue receiving regular dividends or come into one-off asset inheritance without time-consuming application procedures

Retirement financial plans should be reviewed once a year. In addition to active management, professional financial advisors can also help you select appropriate financial products and services. Regular review of asset allocation can help improve efficiency and reduce risks, ensuring that ideal retirement life can be achieved.