Life is a journey. Make it great.

Transcription

1 Life is a journey. Make it great.

2 Rewarding yourself with a blissful retirement A new beginning Retirement will be a significant new chapter in your life. A new beginning that will bring new opportunities, new freedom and new discoveries. Recent research indicates that nearly 70% of Chinese respondents what to spend more time with family and friends in retirement 1. To enjoy it fully you don t want to sacrifice the quality of your life with your family due to constrained finances. Your retirement life can be the exciting, enriching and empowering experience you want but only if you take the time to prepare for it properly. In recent years, the global economy has been quite volatile. This volatility along with the fact that we are all living longer, means that you need not only to start savings early for your retirement years, but also to protect your funds against the effects of inflation and other economic uncertainties Source: The 2013 HSBC Future of Retirement global survey 22

3 Managing the challenges A research shows that with the increasing life expectancy, Chinese people are expecting to live an average of twenty years after retirement (illustrated in the chart below), while their retirement savings will only last for 10 years, resulting in a 10-year shortfall. Regional comparison of retirement saving shortfall Expected length of retirement (ave.year) Shortfall of retirement saving (ave.year) Set your goals and take proper steps in planning your retirement To make sure you can enjoy the retirement you want, you need to start making plans now. Take a few moments to give clarity on YOUR NUMBERS: Your retirement numbers 1 Target retirement savings What is your desired age of retirement? What is your preferred retirement lifestyle? After setting your desired retirement age and projected monthly living expenses, your required monthly savings.from the chart below, a 30-year old client will need to save RMB 12,300 to support his post retirement living with monthly living expenses of RMB 20, Retirement savings period This is the number of years you have to plan for retirement. If your current age is 30 and you want retire at 60 years old, then you have 30 years to save for retirement. Delaying your savings plan for 10 years means you will need to save RMB 6,700 more per month to reach the living expenses after retirement. (See chart below) 0 Mainland China Canada Singapore Mexico US HK Malaysia India UK Australia Source: The 2013 HSBC Future of Retirement global survey The long life span and high expectation of living standard indicate the level of savings you will need to cover your living expenses during retirement. There are several specific challenges you need to think about. Not Asset Retirement Planning 2 Retirement savings period 4 Post retirement living expenses 3 Protection 1 Target retirement savings Surging Inflation In China, the inflation has been increasing in recent years and reached the peak 5.4% in With the government s macro-control these two years, the inflation is kept at 2.6% 3. However, in the past decades, people can obviously feel the growing price level with a weakening purchase power of money. If we wish to maintain our current lifestyle, we have to keep up with the ballooning price levels. Rising medical costs Many countries have experienced double-digit growth in medical costs and, in the vast majority (95%), the trend exceeded the rates of general inflation 4. The older one gets, the more one tends to need to spend on health care. Evolving family dynamics Given the smaller family size nowadays, parents may no longer expect to rely on their children to support them in their retirement. The need for you to be able to support yourself and maintain your financial independence after retirement is critical. 3 Protection This is the protection amount for your family e.g. How much do you need to support your family? And for how long? Would this amount be different if you are not around to support them? How much are your unpaid debts e.g. mortgage balance? What is the estimated reserve for your children s education? Start early Start late Retirement savings period Retirement income period Note: Please note that your savings returns may go down as well as up. The diagram and information shown are hypothetical and for illustration only. Please arrange a financial planning review meeting for professional advice. 4 Age Post retirement living expenses If you plan to live in your own property after you retire,then you have to reserve enough for basic overneads such as utility costs and management fee. Medical expenses may vary depending on how healthy your lifestyle is. Other living expenses such as food, leisure,transportation and clothing will largely depend on your desired lifestyle. 2 Source National Bureau of Statistics of China 3 Source National Bureau of Statistics of China 23 4 Source Tower Watson 2011 Global Medical Trends Survey Report 24

4 Delay can be expensive Waiting too long to start your retirement savings plan can have a huge impact on saving effort. A delay of just a few years may increase your monthly savings by thousands of dollars as the following table shows. How to select the products you need to meet your retirement needs Figuring out your needs in retirement planning will help you select the right products. Monthly savings required at your current age to maintain the same post retirement living standard of RMB20,000 until age 85 Your needs in retirement planning may include Current Age Desired Retirement Age Required Monthly Savings 11,700 17,100 29,200 88,100 Required Monthly Savings 8,700 12,300 19,000 38,600 Required Monthly Savings Required Monthly Savings 6,300 8,700 12,700 21,600 65,200 Assumption: (1) RMB20,000 is in today s value of expected post retirement monthly living expenses until age 85. (2) Assume return rate (5%) and inflation (2.6%) are the same before and after retirement. (3) All data shown are in today s value. The Retirement Monthly Saving amount rounded up to the nearest hundred. Note: (1) Average annual rates of change in the CPIs is 2.6% in 2012 and (Source: National Bureau of Statistics of China ) (2) All numbers shown are hypothetical and for illustration only. Please contact your Relationship Manager for professional advice. 4,400 5,800 8,200 12,700 25,800 Secured retirement income Enhance potential returns Extra protection Flexibility ou will want your savings to have guaranteed returns and provide a regular income flow throughout your retirement years. You need your money to work harder for you. You need your plan to provide extra protection to keep your family secured. You will need flexible payment and return ways to meet your needs at different times. For example, let s say your goal is to retire when you are 60 and maintain a monthly income for living expenses equivalent to RMB20,000 today. Delaying the start of your savings plan by, say, 10 years (from age 30 to 40-50) means you would have to save RMB19,600 more per month to reach the same target. So the earlier you start saving for your retirement, the less you will need to contribute monthly, and the more you can save with your wealth growing with compound interest over the long-run. 5 Investment involves risks. The income (if any) from investment choices may go down as well as up. Insurance policy owner shall take all the investment risk. 25 Note: This document is not provided for sales purpose. The information shown in this document is hypothetical and for illustration only. It is not intended to constitute a recommendation or advice to any customers and is not intended as a substitute for professional advice. You should not act on any information in this document without seeking specific professional advice. Please contact your Relationship Manager for addressing your wealth management needs. 26

5 Disclaimer: This document has been distributed by HSBC Bank (China) Company Limited (the Bank ). It is not intended for anyone other than the recipient and should not be distributed by the recipient to any other persons. It shall not be copied, reproduced, transmitted or further distributed. Whilst every care has been taken in preparing this document, neither the Bank nor any other HSBC Group member(s) makes any guarantee, representation or warranty or accepts any responsibility or liability as to its accuracy or completeness. Except as specifically indicated, the expressions of opinion are those of the Bank and/or the relevant HSBC Group member(s) only and are subject to change without notice. The information contained in this document has not been reviewed in the light of your personal financial circumstances. Neither the Bank nor any other HSBC Group member(s) is providing any financial or investment advice. The information is not and should not be construed as an offer to sell or a solicitation for an offer to buy any financial products, and should not be considered as investment advice. Some of the information in this document is derived from third party sources as specified at the relevant places where such information is set out. The Bank believes such information to be reliable but it has not independently verified. 33