The HSBC Quality of Life Report explored views across nine different markets, revealing that many people want to retire earlier than their predecessors, but financial realities mean that it is unlikely.
Faced with increased longevity and greater economic
pressures, more than half of 2,250 affluent and high net worth
people around the world expect to work after retirement
age in order to preserve their wealth, according to a new
HSBC Quality of Life
Report.
The study of people in nine different markets found that
younger generations hope to retire earlier than their
predecessors. But the financial implications of living longer and
other headwinds led to 85 per cent of those surveyed citing
financial concerns as the main reason to continue working –
in whatever capacity – beyond retirement, the firm said.
Financial reasons included ensuring financial security, affording
a comfortable lifestyle, and meeting financial obligations. Many
also alluded to more holistic reasons such as staying engaged and
active (70 per cent) or building skills and knowledge (51 per
cent).
Despite most people having already saved for retirement, over
half of respondents felt financially unprepared for this
stage in their life, the firm continued. On average, there was a
gap of 71 per cent between actual retirement savings and the
amount needed. In Hong Kong, people anticipated needing $1.1
million to lead a comfortable lifestyle during retirement,
followed closely by Singapore’s $936,000, mainland China’s
$929,000 and Malaysia’s $829,000, the firm said. With the
rising cost of living, this gap is growing. Inflation is a major
concern for developed markets such as the US, Singapore and
Hong Kong. Notably, respondents in Singapore and Hong Kong were
more concerned about healthcare costs than any other market
surveyed.
This study, while not unprecedented, adds fuel to the idea that
people, including high net worth individuals, may have to
re-think their expectations of when they could end working
and when they could start to drawdown on long-term savings
pots. Changing demographics, falling birthrates and moderating
investment returns in recent years have sharpened people’s focus
on when it makes sense to stop working. This is a politically
sensitive issue in countries such as France where a move by the
government to increase the retirement age prompted public
protests. In the US, the social security system of tax-funded
retirement has been seen as the “third rail” of politics for a
long time.
“The challenges and priorities shared by survey respondents on
their retirement underscore the need to build awareness of
financial planning solutions that address the key issues head
on,” Lavanya Chari, HSBC’s global head of Investments and
Wealth Solutions, Global Private Banking and Wealth, said.
“Contributing early to a pension plan is a good place to start,
as is investing in a diversified portfolio including stocks and
bonds to help counteract inflation. It is important to consult an
expert who can help identify needs and tailor a personal plan,”
Chari added.
Quality of Life Index findings
The Quality of Live Index is based on assessment against three
key dimensions: physical wellness, mental wellness and financial
fitness, all three of which are inextricably linked. Those who
rated themselves as physically or financially fit were
significantly more likely to score above average for mental
wellness.
“In particular, the link between financial, physical and mental
health is insightful, and reinforces the importance of
systematically addressing all three aspects to improve overall
personal wellbeing,” Chari continued.
The survey explored the financial goals, life decisions and
expectations of individuals who want to future-proof their
quality of life. Other key findings from the HSBC Quality of
Life Report include the fact that, on average, Millennials
aspire to retire seven years earlier than Boomers.
The impact of current economic uncertainty is also apparent, with
58 per cent of global respondents wanting to gain wealth for
financial security in the present and near-term future as a top
financial goal. At some point, one-in-four individuals plan to
relocate in order to achieve a better quality of life,
principally, Millennials and those from emerging markets.
Less than half of respondents have written a will and 20 per cent
say that they are unsure how to start with legacy planning, the
firm said.
The survey covered countries including mainland China, Hong Kong,
India, Malaysia, Mexico, Singapore, the United Arab Emirates, the
UK and the US. Out of those, 79 per cent are classified as
“mass affluent” (investable assets of $100,000 to $2 million), 20
per cent are classified as emerging affluent (investable assets
of $25,000 to $100,000) and 1 per cent are classified as high net
worth and above (investable assets of $2 million and above).
Other banks and wealth managers have tracked attitudes about
retirement and saving, often finding uncomfortable results. For
example, last year, a study launched by St James’s
Place Asia found that 58 per cent of Singaporeans and
Hongkongers aged between 45 and 64 have not planned for their
retirement, and 64 per cent have not accounted for inflation in
their financial planning. The report coincided with the
retirement age in Singapore being raised from 62 to 63, as of
July 2022, with plans to gradually raise it to 65 by 2030. Hong
Kong, on the other hand, has an official retirement age of 65
years. See here.
