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.
In Asia 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
