Does a higher income guarantee early retirement?
At the age of 45, Richard works in a middle-management position at a telecommunications company. He co-owns his property with his wife and has five years to go before their mortgage is fully repaid. On top of this, he has around HK$3.8 million worth of current assets. Retiring at the age of 55 might seem like an achievable goal for him, but he has come across many challenges in the course of his retirement planning.
Among his assets, around HK$1 million is invested in British pounds. After Brexit and the subsequent depreciation of the pound, part of his asset value fell by 17%. Additionally, Richard had previously made an investment of HK$800,000 in stocks for a technology company. A change in technological requirements meant that his shares virtually evaporated overnight. The company was further barred from trading by the Securities and Futures Commission due to regulatory violations, and the share price fell by almost 70% after trading resumed.
As Richard's father suffers from chronic illness, HK$20,000 is set aside each month to cover his medical and nursing expenses. The unfortunate setback in investments has increased Richard's financial burden, delaying his plans for early retirement.
Luckily, Richard's wife Helen works as an experienced secondary school teacher with a stable monthly income of HK$57,000. Under normal circumstances, Helen should be able to work until the age of 60. With a cautious take on investment, Helen only holds shares in two major banking institutions. She has also purchased a life insurance plan with savings guarantees that offers long-term protection and reasonable returns.
Richard's case is a perfect example demonstrating how an individual with healthy finances could still be severely affected by wider economic conditions. Without children of his own, he has already been exempted from child-rearing expenses, but an unfortunate investment delivered a blow to his retirement plans. Fortunately his wife is a conservative investor who will receive a pension from her school's Provident Fund scheme.
Richard could have regularly evaluated his investment portfolio and made lower-risk investment decisions as his age increased, such as switching to a more comprehensive savings plan. He could also have purchased medical and hospitalization plans in advance to prepare for unexpected medical expenses. With all these checks in place, early retirement should not have been a problem.
Special thanks to the case study provider: Financial expert: Simon Lee (Co-Director, International Business and Chinese Enterprise (IBCE) Senior Lecturer, School of Accountancy)
|Property Value:||HK$9 million|
|Remaining Mortgage Value:||HK$1.65 million|
|Combined Current Assets Value:||HK$2.6 million|
|Combined Savings:||HK$1.2 million|
|Expected Monthly Expenses after Retirement:||HK$40,000|
There are many factors to consider when deciding on your retirement age: