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Thinking about early retirement?

Tips for retirement
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Retirement Planner

Author: Mr Chin13/07/2021

As we approach middle age, we may start to think more about our retirement, and some might even be considering early retirement. But the sooner we retire, the more retirement savings we will need. The amount that is needed for retirement will have a direct impact on when we are able to start our next chapter in life.

Retirement expenses calculator

Input your expected retirement age, expected monthly retirement expenses and other information to work out the total amount:

How much do I need for retirement?

The below calculation is based on monthly expenses and does not consider non-recurring items. It assumes the capital will be all used up at the end of the retirement period. The calculation result is for reference only.

Present age
Expected retirement age
Life expectancy
Expected retirement monthly expenses (today's value)
Expected inflation rate
Expected post retirement return rate (p.a.)
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Six retirement budget calculation tips:

1. Anticipate longer life expectancy

The life expectancy of people in Hong Kong is amongst the highest in the world, with an average of over 80 years. Along with healthcare and medical technology advancements, life expectancy is likely to be higher. Therefore, the more we are able to set aside for our retirement, the more financially sound we can be during retirement years.

2. Monthly expenses during retirement

Everyone has different expectations of their retirement lifestyle. Are you looking for something close to your current standard of living? Or are you willing to keep a simple and basic lifestyle? You can project your future retirement monthly expenses based on spending on clothing, food, accommodation, transport, social activities, entertainment, personal care, medical fees, and other expenses (such as taking care of other family members). In addition, if you plan on renting a private property during retirement, which can be costly, you should start planning as early as possible.

3. Budget for medical expenses

As we age, medical expenses will go up too. If you have already purchased critical illness insurance and medical insurance, the premium should be included as part of your monthly expense. Do note that the older one gets, the more expensive the medical insurance premiums. You can refer to the premium table of your medical insurance company to get a picture of how much it will cost in the future (Reference: Flexi Plans and Standard Plans of Voluntary Health Insurance Scheme. Note that the premiums are the current rate for different ages now; they do not represent future fees). If you have not or do not plan to purchase insurance, do set aside some money as a medical reserve.

4. Do not overlook non-recurring expenses

Retirement can last for some 20 to 30 years, or even longer. Big ticket expenses such as home renovation or major maintenance of your building, etc., may occur during this period. As such, it is necessary to have a post-retirement contingency fund for non-recurring expenses, as well as expenses for funeral and burial services.

5. Inflation is a key risk of retirement

As at March 2020, Hong Kong’s average annual inflation rate in the past decade stands at 3.2%. Based on this figure, an expense of HK$ 10,000 will become HK$ 13,702 ten years later, or HK$ 18,776 twenty years later - that is a 37% and 88% increment from now. The longer your retirement period, the stronger the impact inflation will have. So do take inflation into account when working out your retirement expenses.

6. Reduce investment risk after you retire

Whether your retirement savings are in a bank or if you have an investment portfolio catered to your risk appetite, the retirement capital can bring in a certain level of return. But as a general rule of thumb, investment portfolio for retirees should be more conservative and risk-averse; thus it would be unrealistic to anticipate high returns. It is also important to consider the liquidity of your investments, and whether you can cash out from them easily.

Retirement planning is more than working out your retirement expenses. To make your retirement planning a comprehensive one, take advantage of the retirement planner to project the amount of your capital at retirement, and find out whether additional capital is needed.

Learn more: Pros and cons of early retirement


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