Women face bigger shortfall than men when it comes to saving for retirement: JP Morgan survey

A JP Morgan Asset Management survey found that Hong Kong investors expect to save about HK$3.4 million, 17 per cent less than the HK$4.1 million required to maintain a comfortable lifestyle after they retire

PUBLISHED : Wednesday, 30 May, 2018, 6:34am
UPDATED : Wednesday, 30 May, 2018, 11:15am

Hong Kong women expect to save 29 per cent less for retirement than men and face a bigger shortfall in retirement costs even though their average life expectancy is longer, according to a JP Morgan Asset Management survey released on Tuesday.

Women still need 25 per cent more money than what they expect to have saved to maintain their current lifestyle through retirement, compared to a 14 per cent shortfall for men, the survey found. Over half of the survey respondents anticipate that their standard of living will be lower in retirement.

The average lifespan of a woman in Hong Kong is 87 years and 81 for men. Most women polled in the study also hope to retire at the age of 61 – two years earlier than men.

“Because women are living longer, they will ultimately become the financial decision-makers for their family. It is important for them to get involved with investment decisions early on,” Wina Appleton, retirement strategist for APAC at JP Morgan Asset Management, told the South China Morning Post.

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The survey, which polled 500 Hong Kong-based retail investors between the ages of 30 and 60, showed that they overwhelmingly relied on stocks and cash savings to provide enough for retirement. Individual stocks are more risky than a balanced portfolio and savings accounts are unlikely to generate enough returns, according to Appleton.

Heman Wong Kwong-ming, chief executive of the Pension Schemes Association, agreed that most people need a balanced portfolio to accumulate enough money for retirement and recommended that people educate themselves on economics to stay informed on market conditions.

“Unfortunately, most people in Hong Kong are biased towards having too much equity. 50 to 60 per cent personal equity is fine for a 40-year-old but too much for a 50-year-old, so I would recommend gradually reducing equity allocation,” said Wong. “When investing, never target the market’s top returns but aim for an average, reasonable return to reduce risk.”

Nearly 2.8 million Hong Kong workers currently take part in the Mandatory Provident Fund pension scheme, which has come under fire for high running costs and low returns. Investors lost an average HK$677 each from their pension pots in the first quarter of this year because of struggling financial markets.

The average amount that Hong Kong investors expect to save for their retirement is HK$3.4 million (US$433,000), 17 per cent less than the HK$4.1 million required to maintain a comfortable lifestyle, the report said.

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“For instance, a 40-year-old manages to save HK$3.4 million. By the time they retire, their money will be worth half, effectively halving their standard of living,” said Appleton.

Research by JPMorgan also found that people would need to save 6.7 times more cash with 0.5 per cent annual return from a savings account to achieve their retirement goal of HK$3.4 million, whereas an investor with a diversified portfolio that returned 9 per cent annually would only need to contribute HK$470,000 in savings.

Women also tended to be more cautious with investing for retirement, with only 70 per cent investing in stocks compared with 93 per cent of men, and 56 per cent investing in funds as opposed to 71 per cent of men according to the survey.

“Ironically, women need their money to last longer but are less willing to take on risk to grow their portfolio,” said Appleton. “I recommend that women should not be as conservative with investing. Another consideration is working longer, since research shows that engaging with society increases people’s happiness levels.”

Real estate is also another investment option for Hongkongers, as house prices have continued rising in the longest stretch for a property bull market in 25 years.

“Property is also a great source of income especially when it comes to retirement, but it’s not as liquid as other assets and often comes with maintenance costs,” said Appleton. “A lot of people choose to rent second properties out, but renting and selling is not guaranteed to be easy.”