Start retirement planning early: 55% saved too little for their ideal retirement

This article is a rewrite of a report from September 2012.

At a colleague’s retirement dinner, the small talk revealed many had no retirement date in mind and no personal reserves planned — a widespread pattern.

How much did Hongkongers think they needed to retire?

A Q2 2012 retirement survey found the median ideal retirement reserve was HK$6.04 million, with median desired monthly spending of about HK$13,000. After actuaries calculated each respondent’s position individually, 55% were projected to fall short of their own ideal; the shortfall group might need to delay retirement by 8.7 years on average to fund the lifestyle they wanted.

Asked what best protected retirement life, nearly 90% chose investing and saving, or working hard to earn — only 4% chose “relying on children”.

Why start retirement planning sooner rather than later?

Many assume retirement is far off and planning can wait. But the earlier, the better — including MPF voluntary contributions: a little extra each month, kept up consistently, lets compounding and dollar-cost averaging work harder.

A simple illustration: a 25-year-old earning HK$20,000, 40 years from retirement at 65, contributing HK$2,000 a month with the employer in mandatory contributions, at an assumed 2.5% annual return (ignoring pay rises, inflation and fees), would hold about HK$1.646 million at retirement. Adding HK$500 a month lifts that to HK$2.058 million — a HK$412,000 difference, or roughly HK$1,716 more monthly spending over 20 years of retirement.

What are MPF voluntary contributions?

Extra payments on top of mandatory contributions. No lump sum needed — a few hundred dollars a month, grown by time and compounding. For those who want to stand on their own feet, “sooner rather than later” is step one.