After decades of work, the idea of retirement can be both exciting and daunting. You have to make numerous decisions regarding financial stability, how you want your retirement life to look like, healthcare, and more. This is more so true when it comes to Hong Kong where the cost of living is much higher and the retirement landscape continues to change.
The choices you make will directly shape your life in retirement. Concrete steps need to be taken to help make your dreams a reality. Starting early and understanding your needs can be a crucial starting point. In this post, we explore 8 smart tips you can follow to make your retirement life in Hong Kong a total success.
1. Understand your needs
Appreciating your needs is the first step towards an effective retirement plan. It is important you understand and list your worries, concerns, and questions. Do you currently support a family? Do you have ongoing medical expenses? Why is retirement planning on your mind right now? These are some of the questions that you need to answer. Hong Kong is one of the most expensive cities to live in (and you also need to account for inflation). Think about how much it might take to take care of both basic needs (e.g. food, shelter, transport, and healthcare) and discretionary needs (e.g. entertainment, vacation, hobby and sports-related expenses).
2. Start early
Now that you have a clear impression of what you might need and how you want your retirement to look like, you need to start early. Starting early means that your retirement savings will have more time and potential to grow (and you can take advantage of compound earnings). Create a plan and follow through with it so you will be more than ready when retirement age kicks in.
3. Figure out the finances
Finances are one of the most important aspects of retirement planning. You need to figure out how much you need to save. This can be influenced by factors such as age, current earnings, desired retirement age, lifestyle, health, and more. Make sure that you factor in both basic needs and additional expenses related to hobbies and other life pursuits.
There are two basic ways to accumulate your retirement fund in Hong Kong.
Mandatory Provident Fund (MPF) - this is an automatic retirement plan that employed people can opt-in for. The Employee Choice Arrangement (ECA) allows participants to move their benefits to a different scheme once per year so they can maximize growth.
Investments - another way to bankroll your retirement plan is to make personal investments. These may range from stocks and shares to annuities.
When amassing resources for retirement, it is important to factor in inflation. Census data from 2014 - 2015 showed that an average retired couple in HK spent about 20,000HKD per month. This figure can be expected to scale up over the coming years and decades. It is also important to keep in mind that Hong Kong residents are living longer (which can elongate your age and retirement duration beyond what you envisioned). Estimates show that life expectancy will rise to 84 for men and 90 for women by 2041.
4. Consider insurance protection
There are numerous insurance plans in Hong Kong that are suited for retirement protection. These are a great way to shield your Golden years from financial strain. You’ll be able to select a suitable plan based on your specific personal needs and the amount you need to accumulate in retirement funds. Options include deferred annuities (which require a lump sum or spread-out premiums in exchange for incremental retirement repayments) and retirement savings plans. Some plans (certified by the Hong Kong Insurance Authority) may be eligible for a tax deduction. Keep in mind that early planning is necessary to get maximum value out of your retirement insurance. Talk to your trusted Hong Kong insurance broker to learn what options may be available for you and/or your spouse or parents.
5. Take care of your health
Health is another important factor that should be at the top of your list when it comes to retirement planning. Our bodies become naturally frail with age and it is crucial that you engage in activities that can counteract this effect. Maintaining a healthy mind is also a top priority because retirees can be depressed when they are no longer part of the working world. Psychological changes associated with aging could also result in new anxieties and feelings of helplessness.
Below are a few tips that could help you improve your physical and mental health during retirement life in Hong Kong.
Adopt a healthy lifestyle - develop a healthy lifestyle that includes regular exercise, enough rest, and a balanced diet. Quitting smoking and heavy consumption of alcohol can also go a long way to maximize your health. Keep in mind that the earlier you adopt a healthy lifestyle, the better for your future health.
Go for regular health checks - elderly people are disproportionately affected by the common diseases of aging (e.g. cardiovascular disease, type 2 diabetes, high blood pressure, cancer, dementia, and chronic obstructive pulmonary disease). Attending routine health screens is a must-do in order to identify issues early on and successfully manage or treat them.
Strengthen relationships - a good relationship with the people who matter in your life (e.g. your spouse, parents, and children) can go a long way to improve your health. Cherish the opportunity to communicate positively so you can enhance the quality of these relationships and appreciate each other’s changing needs.
Engage in social activities - taking part in social activities can help strengthen existing friendships and foster that sense of community. Rather than choose a life of isolation, consider joining clubs, interest groups, or centers for the elderly.
Focus on the positives - retirement can be all scary with no income and a lost career identity. However, there are upsides to it. You can take this time to pursue your hobbies and interests, join social organizations, and enjoy leisure time with cherished family members or friends.
Practice mindfulness - practicing mindfulness is a common strategy for alleviating the stress and anxiety that might kick in during retirement. A 2009 study showed that meditation strengthens the hippocampus (a part of the brain that is important for memory) and other areas that help sustain attention. General guidelines suggest that you should meditate for about 10 - 20 minutes per day.
6. Don't worry about what you can't control
It is good to appreciate that you will not be able to control all aspects of your retirement life. That’s okay. Don’t sweat the small stuff. Focus your energy on big agenda items that really make an impact such as cultivating an annual savings culture and controlling your spending. This way, you’ll find that the details tend to fall in place.
7. Prepare for ups and downs
Just like anything else in life, ups and downs can be expected during your retirement life in Hong Kong. You may feel a bit lost or lonely at times. These feelings are quite normal. It is important that you don’t spend your Hong Kong retirement dwelling on your working days. You did all you could and now is the time to move on to the next phase of your life. Changes in your relationships or health may also scamper your plans on a temporary basis. Learn to accept what has happened and bounce back up to get your plan moving.
8. Expand your boundaries
One of the best things about retirement is that you now have enough time to expand your boundaries. Even simple changes such as trying out new recipes or trying different workout classes can go a long way to give you a new zest in life. Consider taking up a new project. You could do anything from mapping your family tree to gardening, joining a cycling group, volunteering, and more. Although there are stringent pet ownership rules in Hong Kong, housing a cat or dog in your home can have a positive impact on your health and wellbeing. That four-legged friend can give you greater control over your life and a renewed sense of belonging.
9. Get your estate planning right
Estate planning can be another important aspect of a comprehensive Hong Kong retirement plan. The key is to create a plan in advance. It should name people and organizations and include instructions for your care and financial affairs in the event of your incapacitation or death. You may need to work with different professionals such as lawyers, accountants, and Hong Kong life insurance agents to get this part right. A successful estate plan should help avoid an expensive and lengthy probate process.
Retirement refers to the period of your life when you choose to leave the workforce behind. It is absolutely important that you ensure a smooth transition into retirement by preparing accordingly. Many experts recommend that you start by investing in your personal relationships (especially at home). Creating networks beyond the office is another crucial step that can ease your switch from a worker to a retiree. You may engage in activities such as community volunteering, mentoring younger people, and enhancing your creative abilities.
There is no statutory retirement age in Hong. However, many companies require their employees to retire at about the age of 60 or 65 (just like civil servants). Retirees can apply for the retirement pension (MPF) once they reach the age of 65 or continue to work after that. As a retirement destination, Hong Kong is known for its outstanding attractions and comprehensive care services for seniors. Elderly welfare and benefits are well supported by aged care services providers, high-quality integrated services, and government sustainable planning.
The cost of living in Hong Kong is higher than the rest of the Greater Bay Area (Guangdong and Macau). For this reason, residents of Hong Kong can expect to pay more for retirement compared to the surrounding area. Surveys show that an upper-middle-income person would need about 19,000HKD per month to retire in the city. This is about double the cost of retirement in Guangdong and Macau.
Many retirement plans in Hong Kong are successful from a financial standpoint but unsuccessful when it comes to non-financial aspects. Financial security is not the only thing you need to secure a successful retirement life in Hong Kong. The best retirement life includes us doing the things that we care about. It should integrate hobbies and interests, optimal health, your legacy, and many of the items covered in this blog post.