Asian investors are overly optimistic about their retirement years, assuming they can continue working beyond the official retirement age while maintaining expenditure at around two-thirds of their current salaries, according to the latest Manulife Investor Sentiment Index survey*.
According to Manulife, investors are misjudging their
ability to work after they retire, the actual duration
of their retirement, as well as day-to-day expenditure during retirement. Life
expectancy data** shows that the survey respondents are likely to
live up to five years longer than they anticipate, leading to the likelihood that retirement savings will run dry during their lifetime.
"Sadly, many are eyeing the wrong target and realise the mistake late
in the day, so they end up delaying or trying to delay retirement,"
said Robert A. Cook, President and CEO of Manulife Financial in Asia.
"We see in the survey those in their twenties expecting to retire at 58
and that creeps up to 65 by the time they're in their sixties. As they
grow older, they realise they'll live longer.
"A large number of our
survey respondents - even those who have been actively investing for
retirement - also say they wish they'd started planning earlier or
saved more from the outset."
Saving for retirement stood out as a top priority for investors in all the markets covered in the survey, apart from in Malaysia,
with nearly two-thirds believing they certainly or probably will be
able to afford a desirable retirement. But, based on investors' own
estimates, a gap exists between savings and retirement expenditure
amounting to about six years.*
Survey respondents said they expect retirement expenses to average 64%
of their current income, but in reality they will likely be
much higher. This has not yet hit home with Asia
investors for whom retirement is seen as a time when they are free to
do what they want (48%), enjoy what they have earned in earlier
years (41%), and spend more time with family and friends (40%).
Attitudes towards retirement are predominantly positive, with old age and poor health only a top-three consideration
for investors in Indonesia (40%) and Hong Kong (34%).
Said Michael Dommermuth,
President, International Asset Management at Manulife Asset Management:
"I think we're all aware of it from personal experience with family or
friends, but the reality is that medical prices have risen in Asia
at about twice the rate of inflation over the past 10 years. In fact,
World Health Organization data*** shows health spending per person
in China has risen nearly six-fold in the last ten years. In Singapore, it's nearly four times higher and in Indonesia it's over five times higher. Healthcare is very expensive and you need more of it as you get older."
The Manulife survey also shows more than half (54%) of
investors expect to work full- or part-time after their official retirement, for
another six years, on average, until the age of 66. Singaporean
investors expect to continue working the longest, with another nine
years of 'post-retirement' work until age 70. Very
few say they have no choice but to work, but in reality they may not be
able to work whether they want to or not.
"Research reveals that elderly labour employment levels are generally
well below the level the survey findings point to," explained Dommermuth. "In North Asia, elderly labour participation ranges from 8% in Hong Kong and Taiwan to 20% in Japan****.
"This could be because although retirees want to work, they may be
increasingly selective about the jobs they take, waiting to find a
position that is line with their personal interests, offers a flexible
schedule and is less physically demanding. Or their ability to work may
be limited due to elderly-related health issues."
According to Manulife, the 65-plus age group has been shrinking as part of the workforce in Asia's developed economies. In Hong Kong, for example, it has dropped to about 40% of what it was 30 years ago.
Careful planning will help investors to deal with the
future, says Manulife. "When compared to their North American counterparts, Asian investors
tend to be better off in terms of wealth relative to current income,"
said Donna Cotter, Head of Asia Wealth
Management. "But they don't deploy their wealth as well as the Americans
-- an example being Asians' habit of hoarding excessive amounts of
cash, which loses value, instead of investing it. With attention and
planning, Asian investors can improve their retirement outlook in a
relatively painless way."
*Manulife's Investor Sentiment Index (ISI) has been measuring investor sentiment in Canada for the past 14 years, and extended this to its John Hancock
operation in the US in 2011.
it is a quarterly, proprietary survey tracking investors'
views across eight markets in the region on their attitudes towards key
asset classes and related issues. The Manulife ISI is based on 500 online interviews in Hong Kong, mainland China, Taiwan, Japan, and Singapore, and face-to-face interviews in Malaysia, Indonesia and the Philippines.
Respondents are middle class-to-affluent
investors aged 25 years and above who are the primary decision maker of
financial matters in the household and currently have investment
products. The Manulife ISI Asset classes taken into Manulife ISI
Asia calculations are stocks/equities, real estate (primary residence
and other investment properties), mutual funds/unit trusts, fixed income
investment and cash.
**Manulife Asset Management; UN Population Division; National Statistics, Taiwan.
***World Health Organization National Health Account database, 2011
****International Labour Organization, Q3 2013 Estimates (except Japan, which is 2012); National Statistics, Taiwan