Hong Kong, 9 June 2010 – Fidelity International (Fidelity) today announced the key findings of the Fidelity Retirement Readiness Index 2010. The study reveals that, in spite of improvements over the past two years, a significant gap remains between the predicted retirement needs of Hong Kong’s working population and the level of retirement income people will receive. The Hong Kong population’s expectations of required savings and resources in retirement remains unrealistically low, and individuals continue to be in danger of facing a strong decrease in spending power in retirement—a cut of more than 45%.
“Although there have been improvements over the past two years, a significant gap remains between retirement income expectations and the reality of retirement needs,” said Kerry Ching, Managing Director of Fidelity Hong Kong. “The need for financial institutions, regulators and the government to educate the public about retirement readiness remains of utmost importance. Fidelity is committed to helping people better prepare for the financial changes that take place at retirement, providing practical tips, education and expert guidance helping people to cope with this important transition in life.”
Fidelity Retirement Readiness Index (the Index) calculates the amount of income needed for a comfortable retirement and offers a measure of retirement readiness (pre-retirement income replacement) for the working population in Hong Kong. The Index utilises Fidelity survey results, current statistical data, and proprietary modelling developed by the Fidelity Research Institute to deliver its findings and conclusions.
The Fidelity Retirement Readiness Index 2010 delivered encouraging findings:
However, the Fidelity Retirement Readiness Index 2010 also reveals that a gap remains between expectations and the reality of retirement income:
As a result of the gap between expectations and the reality of retirement income needs, people may face a number of difficult situations and uncertainties after they retire:
Based on the findings and conclusions from its study, Fidelity offered recommendations to help people enjoy a retirement life that is financially more comfortable. The main recommendations include:
1. Know your Target Number, which is the amount of money that you will need for a comfortable retirement life. While this number is different for all individuals, Fidelity recommends a replacement ratio of 67% of the last income rate before retirement. If earning HK$ 30,000/month, for example, a man is predicted to need HK$3.81 million for retirement.
2. Save effectively and start investing early. Setting aside the same amount each month, MPF assets accumulate much faster when savings begin early in life.
3. Be conscious of the differences between the percentage mix of personal vs. pension savings. While personal savings may be more flexible, pension savings tend to carry more discipline with aims to beat inflation and achieve consistent return.
4. Manage your spending by delaying purchases of big ticket items and manage your debt levels (including credit card debt) to free up money for retirement savings.
5. Increase your financial literacy and seek sensible, objective investment guidance.
6. Don’t overestimate the amount of time that retirement savings will last. Starting to save at age 45 with a monthly contribution of HK$2,000 and invested at a 5% return will lead to savings that last only 42 months after the retirement age of 60.
7. Women should start saving earlier than men, as their life expectancy is longer.
Alternatively, they should save a larger amount of money than their male counterparts if starting at the same age. If they start saving at 45, for example, they will need to save 59% of their income, versus 48% for men to reach a comfortable retirement lifestyle.
“Knowing your target number, having a specific idea of how much you need to set aside each month for retirement and starting to save effectively at an early stage in life will go a long way towards successful financial planning for retirement,” said Kerry Ching. “Carefully managing spending and debt, as well as using expert advice from professionals who understand the financial implications of retirement is crucial for a comfortable lifestyle when income shifts from working to retirement.”
Fidelity defines some of the most important attributes for smart retirement savings management as the “3Qs”, which refer to Intelligence Quotient, Emotional Quotient and Will Quotient. Through a holistic approach to smart investing, Fidelity offers the following list of easy steps that individuals can start taking today for more successful retirement planning with help from an investment professional:
“Fidelity’s 3Qs to Smart Retirement Savings Management – IQ, EQ and WQ”
(1) A few hundred per month could be future’s big bucks
(2) Remember – MPF and personal investments together
(3) Three keys – background, performance and fees
(4) Sweet talks and offers, think twice before you fall over
(1) Invest with a vision, control your emotions
(2) Market ups and downs, don’t get panic and stay calm
(3) Forget the sunk loss, future prospect values more
(4) Invest for long term, avoid frequent churn
(1) Monthly savings to persist, retirement goals won’t be missed
(2) Long lives the ladies, so save more monies
(3) Start saving at 46, may be a little late
(4) Manage spending to save more, comfy retirement after all
ABOUT FIDELITY INTERNATIONAL
Fidelity International is an affiliate but separate company to Fidelity Investments and provides investment products and services to individuals and institutional investors outside of the Americas. Fidelity international has been in Asia for 40 years with offices in Japan, Korea, Australia, Hong Kong, Taiwan, Singapore, China. Fidelity International manages US$215.9billion Assets Under Management (as at 31st March 2010), has over 6 million customer holdings and manages 937 funds. Fidelity International has one of the largest proprietary research teams in the world, providing insights into around 90% of the world's stock markets (as measured by the Morgan Stanley Capital International World Index, 31 March 2008).
In Hong Kong, FIL Investment Management (Hong Kong) Limited currently offers more than 80 mutual funds to investors directly and through over 100 distributors, including retail banks and insurance companies. Fidelity in Hong Kong is the largest provider of the ORSO (Occupational Retirement Schemes Ordinance) Member Choice Defined Contribution Scheme and is also one of the top ten MPF (Mandatory Provident Fund) scheme providers in Hong Kong and has been awarded Asia Asset Management’s “Best of the Best Country Awards: Winner award for Hong Kong Best Client Servicing for MPF” in 2004, 2005, 2007 and 2008. In 2010, Fidelity was named “Hong Kong MPF Schemes Provider” by Asian Investors as well as winning “Best Equity Pension Group” and Best Mixed Asset Pension Group” over three years in Lipper Funds Awards.
Tel: 852 2629 2800
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.Source: Towers Watson Manager Watch, as at 31 December 2009.
.Source: Towers Watson MPF Performance Book, as at 31 December 2009.