How will my retirement plans be affected if I quit without a backup?
Tony, 45, and Michelle, 40, have a combined monthly income of HK$80,000, and the couple currently rents a 2-room flat for HK$28,000 each month. Tony has worked in finance since graduating from university. His company had undergone a restructuring recently, resulting in changes in both management and sales goals. Recently, Tony has begun feeling the pressure of his job, which has had an adverse effect on his health.
The couple has no children and has lives modestly. As they do not own any property, they do not have to bear the stress of a mortgage, although rent and living expenses take up a considerable portion of their monthly income. Tony is considering resigning from his job to take a break for one to two months. However, if he decides to quit, the couple would face a 60% reduction in income. Michelle's income would cover their rent, but their living expenses would have to come out from their savings.
To handle their daily expenses, Tony believes they should use their assets for investment. Their expenses could be easily covered if the investment has a return of 6%.
He has made a habit of saving and purchased life protection and critical illness protection plans when he first started working. Even without medical coverage from his company, he would still have adequate protection should illness strike.
Tony will also have to making sure he doesn't have any major outstanding liabilities, such as credit card payments, loans or fund contributions. If he quits, his priority will be to clear any outstanding credit card payments to avoid interest.
Losing a constant stream of income could mess up a couple's retirement plan. Thinking it through, making appropriate financial adjustments and securing hospitalization coverage will ease any impact on the future.
Special thanks to the case study provider: Financial expert: Simon Lee (Co-Director, International Business and Chinese Enterprise (IBCE) Senior Lecturer, School of Accountancy)
|Combined Current Assets Value:||HK$3.3 million|
|Monthly Income after Tony Resigns:||HK$33,000|
There are many factors to consider before you quit your job without a backup: