There is a joke “the most regret is that you don’t spend all your money before you die; the saddest situation is that you are still alive but you have spent all your money.” If it’s possible, most people prefer to not spend all their money before life ends. No one wants to live without money. Therefore, we had a better plan for retirement pay as soon as we can. However, how much is enough for retirement?
How much should we prepare for retired life?
With late marriage, late maternity, fertility decline, and an aging society, the next generation will take more and more pressure than us. It means the concept of “to bring up children for the purpose of being looked after in old age” is not applicable anymore. Everyone had better arrange retirement by himself instead of relying on his children.
However, how much is enough for retirement? Actually, there is no standard answer to this question. It depends on the different needs of each person. There are many different amounts of retirement pay. Thus, there is no standard definition for “Enough Money”. Averagely, if you would like to keep the living quality of retired life, as usual, you have to keep 75% of your income at least after retirement.
In other words, if the monthly income is HKD 10,000 before you retire, the monthly income should be at least HKD7, 500 after retirement. Of course, it’s just a rough calculation without considering other realistic factors.
There are some considerations that should be put into while planning retirement:
How many years you’ll live after retirement
First of all, please make sure when you will be retired. According to research in Q4/2019 from Hong Kong Investment Funds Association, it reveals that the average ideal retired age of Hong Kong residents is age 62, and the ideal amount of retirement pay is HKD5 million. However, along with the extension of Life Expectancy and the rising Inflation Rate over the years, this amount isn’t real enough for retirement anymore. The newest statistics result of 2018 from the Hong Kong Census and Statistics Department indicated that the average Life Expectancy for females is 87.5 years old, and for males is 82 years old.
Therefore, if you would like to retire at 60 years old, then it’s not a problem that you can live more than 20 years after age 60. For example, Mr. Chan is 30 years old now and expects to retire at age 60, according to the average Life Expectancy (Age 82), then there will be more than 22 years in his retired life.
The living quality of retired life
The retired life could be simple and ordinary or luxurious and rich. It depends on what your needs are. However, please notice what kind of retired life you want will affect how much you should prepare for monthly costs after retirement.
As mentioned above, you can calculate the amount directly based on your monthly income nowadays. But, you should deduct directly some costs such as children’s education fees, mortgage, car loan, and Insurance premium… etc. which will not arise after retirement.
In Hong Kong, for example, the average Inflation Rate is 3.03% from 2009 to 2018. Don’t forget to calculate the Inflation Rate as well when speculating monthly retired life costs.
For example, Mr. Chan wants to maintain the monthly cost of USD 1,500 after retirement. According to the Inflation Rate of 3.03%, the monthly cost should be USD 3,675 after 30 years. 1,500 x 3.03* = 3,675 (USD)
*Based on the Inflation Rate of 3.03% per year, it will be 2.45 times after 30 years
The amount for retirement
We can easy to evaluate the amount for our retired life according to the above factors. Mr. Chan plans to get retired 30 years later and expects to exist for more than 22 years after his retirement. If he spends USD 1,500 every month now, the total amount he should prepare for retirement is USD 970,200. (22 x 12 x 3,675 = USD970,200)
Start to prepare the retirement fund
In that case, how can Mr. Chan gain nearly USD 1 million within 30 years? He may have two solutions to get the huge amount. Solution 1, Mr. Chan should pull in his belt for saving money for USD 2,695 per month. However, even if he does this effectively, it’s not necessary that he can have USD 1 million. Or Solution 2, choose a nice regular small savings plan with USD 795 per month with a 7% return to let him achieve the goal quickly.
Assumed there will be USD1,500 per month for living expenses after retirement at 60.
Remaining Years
from now to retired |
Living years
after retirement
（Age 82, the Life Expectancy for males） |
Amount of retirement pay* (USD) |
Amount of monthly savings# (USD) |
| 40 |
22 |
1,306,800 |
498 |
| 30 |
22 |
970,200 |
795 |
| 20 |
22 |
720,720 |
1,384 |
| 10 |
22 |
534,600 |
3,089 |
* Inflation Rate assumed 3.03 % yearly
# Return on Investment (ROI) assumed 7 % yearly
Conclusion
The earlier you draw up a retirement plan, the more profit you’ll get. If you are 30 years old now, you just have to invest USD 795 per month. However, if you start investing 10 years later, the amount of investment monthly will become USD 1,384. It’s because Time is the key to profits of investment, just start your retirement plan as soon as possible.
Metis HK provides various innovative and flexible trust plans. They are easy to understand, and execute and can help you achieve your retirement plan easily.
─ To Plan Retirement Earlier, the more happiness you will have in your elderly life. ─
Important Note:
The above information is for reference only and does not represent Metis Global Limited in providing any investment recommendation or offer. No liability in respect of any errors or omissions (including any third-party liability) is accepted by Metis Global Limited. No guarantee is given that the content of that information (including any such information) will be error-free. The information should not be relied on by anyone as investment advice. Please seek professional advice from your financial adviser.
