As Asia’s population ages, younger generations are retiring later to save more.

 

As Asia-Pacific faces a significant demographic shift with nearly one in four over the age of 60 by 2050, new research by Sun Life Asia reveals challenges and opportunities for retirement planning across the region.

The research, titled “Retirement Reimagined: Facing the Future with Confidence”, surveyed over 3,500 respondents across mainland China, Hong Kong SAR, Indonesia, Malaysia, the Philippines, Singapore and Vietnam, about their aspirations and planning practices as they prepare for old age.

The research reveals a growing desire for independent financial security in old age as retirement plans shift from state pension schemes and reliance on the family unit to prioritise individual savings and investments. Saving for retirement was cited as the number one financial goal over the next 12 months across all age groups surveyed. However, many are ill-equipped to deal with financial realities as 59 percent will leave planning around retirement expenses until five years or less before retirement, and a worrying 14 percent will not plan for this at all.

While most respondents save at least 10 percent of their income for retirement, an alarming 23 percent do not. When asked about planned sources of income in retirement, the average expectation was for 25 percent of income to be drawn from cash savings, underscoring a potential missed opportunity to maximise retirement income through investments and ensure it keeps pace with inflation.

In a warning sign to future generations, 26 percent of retirees expressed that they had not planned their retirement expenses. This has led to 20 percent of retirees being caught off guard by higher-than-expected costs, a number that looks only set to grow as inflation continues to bite.

For those caught off guard by higher costs, the key factors are the general cost of living (76 percent) and healthcare expenses (51 percent). In response, many have been forced to cut spending (73 percent) and liquidate investments (29 percent).

Approximately 23 percent of retirees express regret over past financial decisions with the biggest reasons being not saving enough (66 percent), followed by not investing enough (52 percent), and not planning for healthcare costs (34 percent).

Interestingly, younger respondents are increasingly aware of the looming challenge and are adjusting expectations accordingly. Current workers anticipate retiring at an average age of 64, five years later than the average age that current retirees exited the workforce at age 59.

Similarly, 17 percent of non-retirees actively have postponed their retirement plans, compared to only eight percent of retirees who did the same, reflecting changing economic conditions and personal circumstances. The primary reasons for delayed retirement include the need to save more (61 percent), the desire to remain active (49 percent), enjoyment of work (46 percent), and increased living expenses (43 percent).

Those anticipating a later retirement age are more likely to cite increased living expenses (46 percent), compared to 19 percent among current retirees who delayed their exit from the workforce.

The survey also reveals stark differences between two distinct groups: the “Gold Star Planners” meticulously making retirement plans, and the “Retirement Rebels” who have none. The Gold Star Planners plan their expenses more than five years ahead of retirement, save more than 10 percent of their income for retirement, and are well-protected by insurance and pension products.

Comparing the Gold Star group to the Retirement Rebels, who have no insurance and pension protection, nor sufficient planning and saving around their later years, reveals interesting insights. Retired Gold Star planners are more likely to stay within their expected expenses (73 percent vs 31 percent) and less likely to regret post-retirement financial decisions (14 percent vs 40 percent).

The Gold Star group is far more likely to consult professional sources on retirement planning including financial institutions and independent advisers, and they are more confident about their health and financial well-being in their later years.

Across all groups, the number one aspiration for retirement is spending quality time with family and friends (35 percent), followed by the prospect of escaping the daily grind of work and relaxing (22 percent), and global travel (18 percent). The greatest concerns associated with later years are health issues and physical decline (59 percent), factors that could put these dreams at risk.

 

(** PHOTO CREDIT: Micheile Henderson/Unsplash)