The HSBC Quality of Life Report explored views across nine different markets, revealing that many people want to retire earlier than their predecessors, but financial realities mean that it is unlikely.
Faced with increased longevity and greater economic pressures, more than half of 2,250 affluent and high net worth people around the world expect to work after retirement age in order to preserve their wealth, according to a new HSBC Quality of Life Report.
The study of people in nine different markets found that younger generations hope to retire earlier than their predecessors. But the financial implications of living longer and other headwinds led to 85 per cent of those surveyed citing financial concerns as the main reason to continue working – in whatever capacity – beyond retirement, the firm said.
Financial reasons included ensuring financial security, affording a comfortable lifestyle, and meeting financial obligations. Many also alluded to more holistic reasons such as staying engaged and active (70 per cent) or building skills and knowledge (51 per cent).
Despite most people having already saved for retirement, over half of respondents felt financially unprepared for this stage in their life, the firm continued. On average, there was a gap of 71 per cent between actual retirement savings and the amount needed. In Hong Kong, people anticipated needing $1.1 million to lead a comfortable lifestyle during retirement, followed closely by Singapore’s $936,000, mainland China’s $929,000 and Malaysia’s $829,000, the firm said. With the rising cost of living, this gap is growing. Inflation is a major concern for developed markets such as the US, Singapore and Hong Kong. Notably, respondents in Singapore and Hong Kong were more concerned about healthcare costs than any other market surveyed.
This study, while not unprecedented, adds fuel to the idea that people, including high net worth individuals, may have to re-think their expectations of when they could end working and when they could start to drawdown on long-term savings pots. Changing demographics, falling birthrates and moderating investment returns in recent years have sharpened people's focus on when it makes sense to stop working. This is a politically sensitive issue in countries such as France where a move by the government to increase the retirement age prompted public protests. In the US, the social security system of tax-funded retirement has been seen as the "third rail" of politics for a long time.
“The challenges and priorities shared by survey respondents on their retirement underscore the need to build awareness of financial planning solutions that address the key issues head on,” Lavanya Chari, HSBC’s global head of Investments and Wealth Solutions, Global Private Banking and Wealth, said.
“Contributing early to a pension plan is a good place to start, as is investing in a diversified portfolio including stocks and bonds to help counteract inflation. It is important to consult an expert who can help identify needs and tailor a personal plan,” Chari added.
Quality of Life Index findings
The Quality of Live Index is based on assessment against three key dimensions: physical wellness, mental wellness and financial fitness, all three of which are inextricably linked. Those who rated themselves as physically or financially fit were significantly more likely to score above average for mental wellness.
“In particular, the link between financial, physical and mental health is insightful, and reinforces the importance of systematically addressing all three aspects to improve overall personal wellbeing,” Chari continued.
The survey explored the financial goals, life decisions and expectations of individuals who want to future-proof their quality of life. Other key findings from the HSBC Quality of Life Report include the fact that, on average, Millennials aspire to retire seven years earlier than Boomers.
The impact of current economic uncertainty is also apparent, with 58 per cent of global respondents wanting to gain wealth for financial security in the present and near-term future as a top financial goal. At some point, one-in-four individuals plan to relocate in order to achieve a better quality of life, principally, Millennials and those from emerging markets.
Less than half of respondents have written a will and 20 per cent say that they are unsure how to start with legacy planning, the firm said.
The survey covered countries including mainland China, Hong Kong, India, Malaysia, Mexico, Singapore, the United Arab Emirates, the UK and the US. Out of those, 79 per cent are classified as "mass affluent" (investible assets of $100,000 to $2 million), 20 per cent are classified as emerging affluent (investible assets of $25,000 to $100,000) and 1 per cent are classified as high net worth and above (investible assets of $2 million and above).
Other banks and wealth managers have tracked attitudes about retirement and saving, often finding uncomfortable results. For example, last year, a study launched by St James's Place Asia found that 58 per cent of Singaporeans and Hongkongers aged between 45 and 64 have not planned for their retirement, and 64 per cent have not accounted for inflation in their financial planning. The report coincided with the retirement age in Singapore being raised from 62 to 63, as of July 2022, with plans to gradually raise it to 65 by 2030. Hong Kong, on the other hand, has an official retirement age of 65 years. See here.