Let’s talk about retirement; particularly your finances once you set sail into your sunset years.
For today’s youth, thinking about saving for retirement seems unnecessary because we think we have more working years left to earn money. “Why not spend your hard-earned cash on things and experiences that you can enjoy while you’re still young and able, right?” argues a twenty-something professional.
While that person, which could be us in one way or another, is right, we have also been told time and again by older folks to start investing for our future while we’re young. And they might be right.
According to a recent study of an insurance company, millennials in the Asian region are at substantial risk of a cash crunch during their later years.
Millennial investors, surveyed as part of the Manulife Investor Sentiment Index (MISI), revealed very mixed expectations about the quality of their financial futures. Despite optimism about their retirement—nine out of 10 said they expect to be able to maintain or improve their standard of living in retirement—nearly one third or 30 percent expect to run out of money later on in life.
“Millennials may have been led to feel a sense of optimism for an improved post-retirement living standard, which is potentially misplaced,” says Michael Dommermuth, head of Wealth and Asset Management-Asia for Manulife.
Today’s young generation expect challenges that will threaten their financial security later in life. Four in 10 or 38 percent are expecting to take on the responsibility of financially supporting both their parents and children at the same time.
They are also concerned about the impact of health on their finances, with 39 percent expecting healthcare to become too expensive during retirement, and 43 percent foreseeing their health to deteriorate to the point where they can no longer work.
In addition, majority or 71 percent of millennials anticipate working past their retirement age.
“It’s sobering to see how many investors, especially young people, recognize that there are risks to their retirement. Longer lifespans and later retirement will place increasing demands on investment funds,” says Dommermuth.
With these findings, he emphasizes that younger generation should plan strategically to begin accumulating wealth at an early life stage.
A common rule of thumb is to accumulate around 25 times the amount you expect to spend in your first year of retirement.
To ease you up in your saving, you can sett aside P1,000 monthly for retirement, by doing this you can have P480,000 sure money once you retire after working for 40 years. You can augment this by adding more to your retirement fund and investing in real estate and other investment options.
Manulife officials however opine that millennials investing in emerging Asian countries will likely fare better than those buying a home in maturing Asia where slowing growth and aging population can dampen real estate markets.
“They owe it to themselves to consider every option available to them in order to plan more effectively for their future,” says Dommermuth.
At the end of the day, the best time to save is now. As Manulife president and CEO Roy Gori puts it, “Young people today will need to start saving and investing sooner rather than later. Otherwise they face a retirement of anxiety, not adventure.”